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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2007ARMENIAN STOCK EXCHANGEYermonya VardevanyanChairman of the Observers’ BoardIn April 2007, the OMX Group, the leadingexpert in the exchange industry, the CentralBank of Armenia and the Government ofArmenia signed a letter of intent regardingacquisition of the Armenian Stock Exchangeand the Central Depository of Armenia.The first half of 2007 was made remarkable byone of the most significant events in thehistory of Armex. In April, 2007, the OMXGroup, the leading expert in the exchangeindustry, the Central Bank of Armenia and theGovernment of Armenia signed a letter ofintent regarding acquisition of the Armex andthe Central Depository of Armenia. Armex andthe Central Bank of Armenia have beenworking together with OMX for over a year andwe believe that this acquisition is an importantstep towards achieving our long-term goals forthe Armenian capital market.In the first half of 2007 the equities tradingvalue was US$ 0.94 million, while thecorporate bonds market reflected - US$ 0.27million. In H1 2007 the issuers’ increasinginterest in the corporate market was noted:early in 2007 listing of new corporate bondstook place, with one of them at the highestbonds listing tier (A-bond). Besides, severallarge companies of the Armenian businesssphere also expressed a willingness to issuecorporate bonds and Armex already startedcooperation with them.In H1 2007 a long-anticipated market-makerinstrument was introduced to the exchangetrading and two of the Armex members weregranted the market-maker status of corporatebonds. That allows us to assume that thesechanges will contribute toward the furtherdevelopment of exchange trading and theincreasing of its liquidity.The FX market remains the most active inArmenia. Starting from the beginning of thisyear until present a value equal to US$ 259million and EUR 0.958 million was traded. Thisdata once more proves that Armenia has greatpotential for capital market development andthat Armex has a crucial role in this process.Armex sees the introduction of the secondarytrading in government securities as one of itsprimary goals for 2007. Collaboration with thestakeholders of the process, including banksand licensed dealers, is currently underway,and the task is scheduled for completion byearly Q4, 2007.Of course, Armex will carry on with its effortsaimed at facilitating further development of theexchange market. These include improvementof the structure and accessibility of corporateinformation disclosed to the public, as well asthe fostering of corporate governancepractices among listed companies. Bearing inmind the significant 13% economic growth thatArmenia demonstrated in 2006, Armex intendsto do its best to have the local capital marketplay an efficient and sustainable role in thefuture development of the country.HISTORY AND DEVELOPMENTArmenian Stock Exchange (Armex) is thesuccessor of the Association of SecuritiesMarket Participants, which was established inArmenia in 1997. In December 2000, it wasrenamed as the Armenian Stock Exchange,and on 13 February 2001 officially registeredby the Securities Commission of the Republicof Armenia as a self-regulatory organizationpursuant to the Law of the Republic of Armenia“On Securities Market Regulation”.Armex is the only stock exchange registered inArmenia. As a voluntary association of broker(dealer) companies and a self-regulatoryorganization, Armex approves rules andregulations covering its core activities,including listing, trading, informationdisclosure, as well as rules of professionalethics. The self-regulation principle provideseach member company with equal rights toparticipate in the management of the stockexchange. The supreme management body ofArmex is the General Meeting of Members,which elects the Observers’ Board. The latterelects the Chairman and appoints the ChiefExecutive Officer of the Exchange.Armex is subject to regulation by the state. TheSecurities Commission of the Republic ofArmenia has been the competent stateauthority to regulate the activities of the capitalmarket, including the stock exchange, inArmenia. Starting 1 January 2006, theregulatory and supervisory powers of theCommission were transferred to the CentralBank of Armenia.Since 15 November 2005, foreign currencytrading was introduced on Armex, which isconsidered to be an important step towardsthe further development of the exchangemarket in Armenia. On 14 December 2005, thefirst publicly traded corporate bonds werelisted at Armex, which considered to stimulatethis market segment and expand thediversification of instruments traded at Armex.The Armenian Stock Exchange and the CentralBank of Armenia has been working togetherwith OMX Group, the leading expert in theexchange industry, for over a year and on 27April 2007, OMX Group, the Central Bank ofArmenia and the Government of Armeniasigned a letter of intent regarding acquisition ofthe Armenian Stock Exchange and the CentralDepository of Armenia. This acquisition is animportant step towards achieving our long-termgoals for the Armenian capital market.FUTURE OUTLOOKIn 2007, Armex plans to:• Complete the demutualization process andchange its status to a joint-stock company;• Fully integrate into the OMX Group throughthe acquisition of Armex’s 100% shares by theOMX and in perspective become a part ofdesigned NASDAQ OMX Group;• Introduce trading in government bonds;• Introduce new enhanced mechanisms forclearing and settlements in FX market;• Expand regional and internationalcooperation, and;• Develop and introduce capital adequacyrequirements for exchange membercompanies.Ameria InvestArmex member, business consultingand law firmwww.ameria.amPAGE 34