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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006
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 2004 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.
As to the future, the Georgian capital market
has an opportunity to intensify its
development through the recently resumed
privatization process. GSE has 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.
Progress of the capital market, in many
respects, depends on the soundness of
corporate governance in Georgia. Thus, good
corporate governance is one of the top
priorities on our agenda. In 2003, the GSE
established a corporate governance training
program for corporate representatives, legal
professionals and the mass media. The
leading professionals of the National
Securities Commission of Georgia, the GSE,
Central Securities Depository, and other
capital market institutions prepared and
distributed the Corporate Governance
Manual. In parallel, we have initiated the
establishment of the Georgian Corporate
Directors Association and the development
of the National Corporate Governance Code
on this basis.
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
the policy to encompass all different sectors
of the Georgian capital market, and we will
gladly cooperate with all actors, 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 marketoriented
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 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.
FUTURE OUTLOOK
In 2005 the GSE plans to:
• make important changes in its trading
system and trading rules so as to increase
the efficiency of the treasury bills trading on
the stock exchange;
• intensify the trading process. In particular,
the trading sessions will be conducted on
daily basis and an additional trading session
will be introduced during the trading day;
• increase the efficiency of trading
• increase the liquidity of the market;
• introduce partially guaranteed trading of
securities;
• remove the day-trading restriction on the
GSE; and
• launch a new website for the GSE, which
along with traditional statistics will provide a
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, semiannual
and current reports which is required
by law and thus improve disclosure
standards and corporate transparency.
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