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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
BULGARIAN STOCK EXCHANGE
George Draychev
CEO
2004 has definitely been a good year for the
Bulgarian Stock Exchange (BSE) and for the
capital market as a whole. If we take into
consideration the SOFIX (the official index of
the BSE-Sofia), 2004 has seen a very good
performance. Starting at 454 points at the
beginning of last year it reached over 625
points at year’s end. Market capitalization
has grown significantly, reaching US$ 2
billion at the end of 2004, comprising 8% of
GDP. Currently there are 331 companies
listed or admitted for trading on the
Bulgarian Stock Exchange, 31 of which are
on the Official Market and 300 on the
Unofficial Market.
The positive development of the stock
market is the result of the overall stabilization
of the Bulgarian economy. We are seeing a
positive impact from the government’s
commitment to develop the capital market
and to use this market as a public and
transparent mechanism for privatization.
The Exchange is currently working on
HISTORY AND DEVELOPMENT
The first Stock Exchange Act was adopted
in 1907 and regulated the structure and
operations of stock and commodities
exchanges. The Securities, Stock
Exchanges & Investment Intermediaries Act
was adopted in July 1995, which led to a
process of stock exchange consolidation. In
July 1997, the present Bulgarian Stock
Exchange-Sofia was established. In
accordance with the requirements of the
new law, a Securities & Stock Exchange
Commission was set up.
On 9 October 1997 the Commission
officially licensed the BSE-Sofia. The first
trading session on the regulated market
took place on 21 October 1997. By the end
of 1999 there were 32 companies listed on
the Official Market and about 1,000
companies admitted for trading on the Free
(OTC) Market as a result of the mass
privatization program. On 6 December 2001
the Commission officially licensed the BSE-
Sofia to organize an Unofficial Market, which
replaced the Free Market and set clear rules
for regulation of all companies traded on the
Exchange.
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We are seeing a positive impact from the
government’s commitment to develop the
capital market and to use this market as a
public and transparent mechanism for
privatization.
enhancing the existing information disclosure
framework. The BSE-Sofia, the Central
Depository and the Financial Supervision
Commission have established a joint project
for the development of an integrated
electronic system for disclosure of
information called EXTRI. This new system
will enable issuers to disclose information
simultaneously to the country’s three main
securities institutions - BSE-Sofia, the
Depository and the Commission. The system
will accommodate the processing of both file
transfers and paper documents for
disclosure of price-sensitive and other
information required by the market.
As a web-based system, each EXTRI user
will be registered and submitted documents
will have to be signed via electronic
signature. The official launch of the system is
scheduled for 2005 and a number of positive
effects are anticipated as a result of its
implementation.
In December 1999 a new Public Offering of
Securities Act was adopted by the
Parliament. The law is aimed at providing
protection for investors and creating
prerequisites for the development of a
transparent capital market in Bulgaria with
criteria similar to those of the European
Union.
The Securities & Stock Exchange
Commission was first renamed the National
Securities Commission, but in March 2003 it
was replaced by a new supervisory body -
the Financial Supervision Commission
(FSC). More than just a name change, the
move pulled together the regulation of a
number of financial (non-banking) sectors
under one body. The regulatory changes
during the year directly improved conditions
for investors and issuers, as well as
underlined the government’s commitment to
encourage wider overall development of the
capital markets.
Steps will be taken to stimulate market
liquidity and increase the attractiveness of
the markets on the BSE-Sofia. The main
objective is to attract more companies for
listings and more issuers to the stock
exchange.
The BSE intends to broaden the spectrum of
financial instruments traded on the
exchange. This includes the establishment of
a derivatives (futures & options) market.
Recently a new index was introduced – the
BG 40. The reason for the introduction of the
BG 40 is to give an alternative measure of
overall market performance with a broader
base and different method of calculation.
The launching of the new index is considered
to be part of the long-term plans to introduce
index-based derivatives in the market.
FUTURE OUTLOOK
In 2005 the Bulgarian Stock Exchange (BSE)
will continue to improve the operational
efficiency of its trading system, the market
surveillance and the disclosure framework.
The BSE, the Central Depository and the
Financial Supervision Commission will
launch an integrated electronic system for
disclosure of information called EXTRI. This
new system will enable issuers to disclose
simultaneously to the three securities
institutions in Bulgaria. As a web-based
system, each EXTRI user will be registered
and submitted documents will have to be
signed via electronic signature. Thus we will
have a standardized reporting system which
will also facilitate data processing. We
expect the amount of current paperwork to
be reduced by at least 90%.