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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006<br />
BULGARIAN STOCK EXCHANGE<br />
Bistra Ilkova<br />
CEO<br />
In the first half of 2006 the market<br />
capitalization of the BSE rose to EUR 5<br />
billion, accounting for 21 % of Bulgaria’s<br />
GDP.<br />
The Bulgarian Stock Exchange performed<br />
well in the first half of 2006. The turnover<br />
reached EUR 600 million, which is a 30%<br />
increase compared to the same period of<br />
2005. The market capitalization of the BSE<br />
rose to EUR 5 billion, accounting for 21 % of<br />
Bulgaria’s GDP. Both our indices–SOFIX and<br />
BF 40–held their upward trend and set new<br />
records.<br />
All market participants are happy with these<br />
developments and hope that the dynamic<br />
will be preserved in the next 6 months.<br />
We expect new listings and this will be a<br />
major task for us in the coming months–to<br />
attract good-performing private companies<br />
to the Exchange. This is part of our Action<br />
Plan that focuses on our preparation for the<br />
country’s forthcoming entry into the EU<br />
(January 1st, 2007).<br />
In the second half of the year we will<br />
continue to work on several major projects.<br />
Our experts just completed the work on the<br />
new Corporate Governance Code, which will<br />
come into effect in the third quarter of 2006<br />
and will be mandatory for all companies<br />
listed on the Official market of the BSE.<br />
We hope to be able to finish by the end of<br />
the year the work on the electronic system<br />
EXTREE for the dissemination of information.<br />
It will give the opportunity to all issuers to<br />
disseminate financial reports, corporate<br />
news, ad hoc information through electronic<br />
means and using an electronic signature and<br />
send it simultaneously to the BSE, the<br />
Financial Supervision Commission and the<br />
Central Depository.<br />
Our aim is also to continue to develop our<br />
international relations and contacts to<br />
individual exchanges or alliances of<br />
exchanges. We are in the process of<br />
deliberating on the future of the BSE and the<br />
role it can play in a pan-European<br />
environment. We also give great importance<br />
to our membership in <strong>FEAS</strong>, because it gives<br />
us the possibility to acquire important<br />
knowledge and exchange views with our<br />
partners.<br />
HISTORY AND DEVELOPMENT<br />
The first Stock Exchange Act was adopted<br />
in 1907 and regulated the structure and<br />
operations of stock and commodities<br />
exchanges. The Securities, Stock<br />
Exchanges & Investment Intermediaries Act<br />
was adopted in July 1995, which led to a<br />
process of stock exchange consolidation. In<br />
July 1997, the present BSE was established.<br />
In accordance with the requirements of the<br />
new law, a Securities & Stock Exchange<br />
Commission was set up.<br />
On 9 October 1997 the Commission<br />
officially licensed the BSE. The first trading<br />
session on the regulated market took place<br />
on 21 October 1997. By the end of 1999<br />
there were 32 companies listed on the<br />
Official Market and about 1,000 companies<br />
admitted for trading on the Free (OTC)<br />
Market as a result of the mass privatization<br />
program. On December 6, 2001 the<br />
Commission officially licensed the BSE to<br />
organize an Unofficial Market, which<br />
replaced the Free Market and set clear rules<br />
for regulation of all companies traded on the<br />
Exchange.<br />
In December 1999 a new Public Offering of<br />
Securities Act was adopted by the<br />
Parliament. The law is aimed at providing<br />
protection for investors and creating<br />
prerequisites for the development of a<br />
transparent capital market in Bulgaria with<br />
criteria similar to those of the EU.<br />
The Securities & Stock Exchange<br />
Commission was first renamed the National<br />
Securities Commission, but in March 2003 it<br />
was replaced by a new supervisory body–<br />
the Financial Supervision Commission<br />
(FSC). More than just a name change, the<br />
move pulled together the regulation of a<br />
number of financial (non-banking) sectors<br />
under one body. The regulatory changes<br />
during the year directly improved conditions<br />
for investors and issuers, as well as<br />
underlined the government’s commitment to<br />
encourage wider overall development of the<br />
capital markets.<br />
FUTURE OUTLOOK<br />
After having registered good results for a<br />
fourth consecutive year, the BSE plans to<br />
continue its dynamic development in 2006.<br />
Among the technological innovations that<br />
will be implemented at the beginning of next<br />
year is the new electronic information<br />
disclosure system X3. Through this system<br />
the issuers will disseminate all the relevant<br />
company and price sensitive information<br />
continuously and simultaneously to the BSE,<br />
the Financial Supervision Commission and<br />
the Central Depository, using the electronic<br />
signature.<br />
At this stage of the development of the<br />
Bulgarian capital market it is becoming more<br />
and more important to have new listings,<br />
attract a larger number of small and<br />
institutional investors, as well as increase<br />
liquidity. The Marketing Strategy for 2006<br />
and onwards, which was approved by the<br />
Board of Directors, will be a useful<br />
instrument in pursuing this goal. In view of<br />
the EU accession of Bulgaria in 2007 many<br />
private firms show interest in becoming<br />
publicly listed companies and in having a<br />
better exposure in the pan-European<br />
environment.<br />
The BSE will also follow closely the process<br />
of integration, the mergers and alliances<br />
between stock exchanges in Europe.<br />
The debate on the different models of cooperation<br />
will continue and the final decision<br />
will take into consideration the interest of all<br />
participants on the Bulgarian capital market.<br />
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