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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
GEORGIAN STOCK EXCHANGE
George Loladze
Chairman of the Supervisory Board
It is our strong belief that the principles of
transparency and disclosure underlying the
operation and development strategy of the
GSE, are the unquestionable guaranty of
our success.
The year 2006 was a landmark one for the
Georgian Stock Exchange (GSE), due to the
unprecedented increase of the basic trade
figures compared with previous years, reflecting
the overall revitalization of the economy in the
wake of the “Rose Revolution” of 2003.
The Georgian capital market has an opportunity
to intensify its development through the recently
resumed privatization process. GSE has a rich
experience in organizing privatization auctions,
as well as, in providing the necessary legislative
and IT support.
Undoubtedly, through sustainable conducting
of privatization the Georgian capital market will
continue on its path of sound growth and
development.
In the end of November 2006, the Bank of
Georgia (GSE: BOG), a company listed on the
GSE since 2001, concluded their successful
IPO at the London Stock Exchange Main
Market and through issuance of GDRs raised
circa US$ 160 million. The bank is the first
Georgian company ever and the second bank
from the CIS since 1999 listed on the London
Stock Exchange.
It is our strong belief that the principles of
transparency and disclosure underlying the
operation and development strategy of the
GSE are the unquestionable guaranty of our
success. The GSE will continue promoting a
policy to encompass all different sectors of the
Georgian capital market, and we will gladly
cooperate with all players, who strive for the
economic development of Georgia.
HISTORY AND DEVELOPMENT
Equity securities first appeared in Georgia in
1991 after the declaration of independence
that signaled the beginning of market-oriented
reforms. A vast majority of the newly
established joint-stock companies were
owned by a rather small number of private
shareholders and trading in these shares was
relatively inactive. With the launching of the
Mass Privatization Program in 1994,
approximately 1,300 state-owned enterprises
were organized as joint-stock companies,
creating about half a million individual private
shareholders. However, during a five-year
period (1994-1999), the lack of an appropriate
legal framework and organized market
infrastructure seriously impeded the
secondary trading of these shares and any
over-the-counter market activity was nearly
nonexistent.
The Georgian Stock Exchange (GSE) was
founded in 1999 by a group of Georgian
securities market professionals, leading
banks, investment and insurance companies.
Today it is the only organized securities
market in Georgia. Designed and established
with the assistance of the United States
Agency for International Development (USAID)
and operating within the legal framework of
corporate and securities laws drafted with the
assistance of American and German experts,
the GSE can assert that it is designed and
operated to comply with “global best
practices” and offers an attractive investment
environment to foreign investors.
To promote the concept of self-regulation, the
GSE membership adopted new rules. After
approval of these rules by the National
Securities Commission of Georgia, the GSE
was officially recognized as a self-regulatory
organization (SRO) and received a stock
exchange license in January 2000.
The GSE utilizes an automated trading facility.
Thousands of securities can be traded by its
members from the workstations at the GSE
floor or remotely from their offices. The GSE
adopted the platform employed by the
Russian trading system (RTS) in Moscow.
However, RTS–as an excellent informationalcommunication
system–was significantly
modified to ensure those requirements
outlined under the GSE trading rules reflected
the peculiarities of Georgian securities market.
Official trading at the GSE began in March
2000. The number of companies admitted for
trading at the GSE trading system increased
gradually and by the end of 2004 reached
277. Practically all of these companies are
former state owned and operated companies
transformed into joint-stock companies and
then privatized. The growing but still low trade
volumes reflect the nascent stage of the
Georgian capital market and the level of
development of the Georgian economy.
In 2002, as a result of active cooperation with
the National Securities Commission and the
Ministry of State Property Management, the
Special Privatization Auctions commenced at
the GSE. In 2003 the GSE started trading
government securities.
2004, was a landmark year for the GSE, due
to the unprecedented increase in basic
trading figures compared with previous years,
reflecting the overall revitalization of the
economy in the wake of the “Rose Revolution”
of 2003.
In the end of November, 2006 the Bank of
Georgia (GSE:BOG), the company listed at
the GSE since 2001, concluded their
successful IPO at the London Stock Exchange
Main Market and through issuance of GDRs
raised circa US$ 160 million. The bank is the
first Georgian company ever and the second
bank from the CIS since 1999 listed on the
London Stock Exchange.
FUTURE OUTLOOK
In 2007, the GSE plans to:
1. Make important changes in its trading
system and trading rules so as to increase the
efficiency of trading and increase the liquidity
of the market:
• intensify the trading process. In particular,
the trading sessions will be conducted on a
daily basis and/or time period of the trading
sessions will be extended;
• implement remote trading system for
brokerage companies;
• establish electronic links between securities
market participants (stock exchange, central
depository, brokerage companies, banks,
securities registrars)
• increase the efficiency of the government
securities trading on the stock exchange;
• introduce partially guaranteed trading of
securities;
2. Launch a new web-site for the GSE, which
along with traditional statistics will provide
corporate reports database for the companies
who are admitted to the trading system. In
addition, the creation and publication of a
company database will allow companies to
publish their annual, semi-annual and current
reports which are required by law and thus
improve disclosure standards and corporate
transparency.
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