Federation of Euro-Asian Stock Exchanges
Fall 2012
Exchange Connectivity: Panacea or Pandora’s Box?
Connectivity and Linkages: ‘The Only Game in Town’ Linking Post Trade Participants Developing Inter-Market Connectivity and the Importance of Custodian’s Role Country Focus: Bulgaria
Federation of Euro-Asian Stock Exchanges / Fall 2012
In this issue... 3 FEAS Perspective Mustafa Baltaci, FEAS Secretary General Message 4 Connectivity and Linkages Ali Coplu, Executive Vice Chairman Chief Information Officer, IMKB Fehmi Kaya, Director, IMKB 6 Connectivity and Linkages: ‘The Only Game in Town’ Philippe Carré, Global Head of Connectivity, SunGard’s Capital Markets Business 8 Linking Post Trade Participants Yousaf Hafeez, Director, Capital Markets Development Global Banking and Financial Markets, BT Global Services 12 Country Focus: Bulgaria 12 Bulgarian capital market has a modern and efficient infrastructure. 15 Scarlatov: The Privatization of the BSE is Definitely a Step Forward Ilian Scarlatov, CEO, KBC Securities Bulgaria, Developing Inter-Market Connectivity 17 Developing Inter-Market Connectivity and the Importance of Custodian’s Role Gunsel Topbas, Ph.D, Cluster Head for Middle East, Pakistan, Turkey Direct Custody and Clearing Citi Transaction Services 20 Creating Links Johan Rudén, Senior Vice President, Transaction Services Nordic NASDAQ OMX Clearing 24 Interlinking OIC Member States’ Stock Exchanges: Proposing a Model Abolfazl Shahrabadi, Finance Deputy, Parsian Investment Bank Ghorban B. Adabi, Expert, International Dept. Tehran Stock Exchange 28 FEAS Region Statistics
FEDERATION OF EURO-ASIAN STOCK EXCHANGES (FEAS) I.M.K.B Building, Emirgan 34467 Istanbul, Turkey Tel: (90 212) 298 2160 Fax: (90 212) 298 2209 E-mail:
[email protected] Web address: www.feas.org Contacts Mr. Mustafa Baltaci, Secretary General Ms. Ege Adalioglu, Deputy Secretary General Mrs. Susan Gogus, Deputy Secretary General Ms. Aydan Bal, Coordinator
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Your gateway to the markets of tomorrow... The Federation of Euro-Asian Stock Exchanges (FEAS) was established with its headquarters in Istanbul on 16 May 1995 with 12 founding members, and it has grown to 34 members and 15 affiliate members in 28 countries as a not-for-profit organization. Membership in the Federation is open to exchanges in Europe and Asia as affiliate membership is available for post trade institutions and dealer associations in the same region. FEAS Organizational Structure is formed by General Assembly, Executive Committee, Working Committee and the FEAS Secretariat. The mission of FEAS is to help create fair, efficient and transparent market environments among FEAS members and in their operating regions. FEAS aims to minimize barriers to trade through the adoption of best practices for listing, trading and settlement. Federation also supports promoting linkages among members for cross-border trading.
MEMBERS
AFFILIATE MEMBERS
• Abu Dhabi Securities Exchange • Amman Stock Exchange • Bahrain Bourse • Baku Interbank Currency Exchange • Baku Stock Exchange • Banja Luka Stock Exchange • Belarusian Currency and Stock Exchange • Belgrade Stock Exchange • Bucharest Stock Exchange • Bulgarian Stock Exchange • Damascus Securities Exchange • Egyptian Exchange • Eurasian Trade System Commodity Exchange (ETS) • Georgian Stock Exchange • Iraq Stock Exchange • Istanbul Gold Exchange • İstanbul Menkul Kıymetler Borsası • Karachi Stock Exchange • Kazakhstan Stock Exchange • Kyrgyz Stock Exchange • Lahore Stock Exchange • Macedonian Stock Exchange • Moldova Stock Exchange • Mongolian Stock Exchange • Montenegro Stock Exchange • Muscat Securities Market • NASDAQ OMX Armenia • Palestine Exchange • Sarajevo Stock Exchange • Tehran Stock Exchange • Tirana Stock Exchange • “Toshkent” Republican Stock Exchange • Turkish Derivatives Exchange (TurkDEX) • Zagreb Stock Exchange
• Arab Federation of Exchanges (AFE) • Association of Certified Capital Market Professionals (ACCMP), Jordan • Central Registry Agency Inc. • Central Securities Depository of Iran • Macedonian Central Securities Depository • Misr for Clearing, Settlement & Central Depository • MSM Brokers Association, Oman • National Depository Center of Azerbaijan • Securities and Exchange Brokers Association of Iran (SEBA) • Securities Depository Center (SDC) of Jordan • Swiss Futures Options Associations (SFOA) • Takasbank - ISE Settlement and Custody Bank, Inc. • Tehran Securities Exchange Technology Management Company (TSETMC) • The Association of Capital Market Intermediary Institutions of Turkey (TSPAKB) • The South Asian Federation of Exchanges (SAFE)
Federation of Euro-Asian Stock Exchanges / Fall 2012
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FEAS Perspective enhance knowledge, capability and increase our competitive advantage.
Mustafa Baltaci FEAS Secretary General
Dear Friends, We are pleased to publish the Fall issue of INTERFEAS magazine with a focus on connectivity and linkages. As you may recall, in the previous issue of INTERFEAS, we focused on literacy for the financial markets with articles sourced from our members, academicians, finance experts and companies. We are proud to note that the INTERFEAS magazine attracted further interest and was once again recognized by many investors as a key source of information for the Euro Asian Region. We have co-operated with a variety of different sources again for this issue in order to be able to reflect how the topic of connectivity and linkages is developing in the market in different arenas. As a result of compiling a wide range of views we have brought to the forefront key aspects of this topic which aim at pointing out the differing advantages and challenges. Inherent in the issue of connectivity and linkages is the actual systems used to establish connectivity and the ever expanding possibilities technology brings to us in order to continuously
In this issue, you will find articles addressing connectivity and linkages from many unique perspectives. We thank our members, Tehran Stock Exchange and Istanbul Menkul Kiymetler Borsasi who have shared their views and experiences on this topic.
This fall the General Assembly of FEAS takes place in Sofia, as hosted by Bulgarian SE. As a tribute we have included special country coverage for Bulgaria in the INTERFEAS Fall issue. Within the pages of this issue, you will find the country profile as well as an interview with Mr. Ilian Scarlatov, a well-known financial analyst and currently the CEO of KBC Securities Bulgaria.
Philippe Carré from Sungard contributed with an article on the drivers of enhanced connectivity, the
Last but not least, our sponsors deserve to be recognized for their continued support. Finans Asset
Inherent in the issue of connectivity and linkages is the actual systems used to establish connectivity and the ever expanding possibilities technology brings to us in order to continuously enhance knowledge, capability and increase our competitive advantage. implications of today’s enhanced connectivity and connectivity on Stock Exchanges themselves. Johan Rudén from Nasdaq OMX has written an article on the role of IT in connectivity and also their “real-life” experiences on several projects.
Management, Is Investment, Nasdaq OMX, and Tayburn have donated their valuable time and consideration in order to make this publication possible. Our website has a contributor section at www.feas.org which presents advertorial pieces of the sponsors.
Yousaf Hafeez from BT has contributed an extremely relevant piece on Post Trade Connectivity Options and Post Trade Technology Service Requirements.
In closing, please allow us to thank you again for your support and interest as we hope you will find the Fall 2012 issue of the INTERFEAS magazine enjoyable.
And finally from Citibank, Gunsel Topbas contributed to this issue an article detailing the role of custodians in connectivity by sharing their experiences as a custodian in the market place that has established actual linkages.
Sincerely, Mustafa Baltaci Secretary General
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Connectivity and Linkages
Ali Coplu Executive Vice Chairman Chief Information Officer, IMKB
The trend of connecting exchanges from different countries became popular in the past few years. Each exchange is looking for opportunities to open up a direct channel between their own systems and other exchanges in search for different revenue sources and different business models. In that regard, IMKB wishes to connect its markets and members to foreign exchanges, who are mostly the part of FEAS network. Current cross-border trading flow is typically routed through broker-tobroker relationship network. Main target is to offer members with more convenient, reliable, and low-cost access to trading in the counter markets. Foreign investors would trade the IMKB listed stocks or ETFs through the current local brokers who would connect to the Exchangeprovided facility. Investors, especially the retail investors and proprietary trading participants who do not have direct access to the counter market, will enjoy enhanced convenience of trading the products in counter markets. The underlying assumption is that market quality improves from
the additional liquidity based on the theory of ‘supply creates demand.’ and through invigoration of intermarket arbitrage trading. Securities market industry is expected to gain global competitiveness with extended business opportunities and experiences in overseas markets. This will pave the way for further linkages with other exchanges in the future. Currently IMKB does not belong to any global trading connectivity network. However, it has a growing potential in terms of investment and liquidity volumes in the region. Execution phase and post-trade are two major components of the trading lifecycle which should be provided to establish connectivity between exchanges. Execution phase is relatively easier to implement compared to the post-trade since second one includes bilateral agreements between financial and governmental institutions while execution remains mainly as a technical implementation task. On the post-trade side Global Custodians are able to provide global communications network operating
and cover the entire process until settlement. Clearing house notifies the settlement instructions to the Global Custodian. Global Custodian completes local clearing operations and reports back. Clearing house notifies the local broker about settlement. Clearing house should agree with local members to give international settlement services and review collateral policies. Also they share credit risk with Global Custodian and may need to restructure custodian fees. Another post-trade solution option is direct agreement between clearing institutions. This solution is an alternative to the Global Custodian model where the connection between clearing institutions will be built by connecting exchanges. Clearing institutions on both sides build a connection and protocol to execute clearing operations directly. This will require matching technical, financial and regulatory infrastructures on both exchanges. The model goes as follows: The clearing institution directly sends the settlement instruction to the counter clearing & settlement institution and settles the trades
Each exchange is looking for opportunities to open up a direct channel between their own systems and other exchanges in search for different revenue sources and different business models.
in many countries achieving delivery of orders with custodial and clearing services. They offer execution to custody solution service access to international markets serving from creating an order through execution
of the local brokers in the other exchange. This direct link solution depends on the bilateral account relationship between the central post trade institutions. The local brokers enter into contractual relationship with
Federation of Euro-Asian Stock Exchanges / Fall 2012
central clearing institution instead of the global custodian. The central clearing institution then acts like the global custodian and safe keep the securities of the local brokers in the accounts with the foreign central post trade institution. On the execution side there are two main solution alternatives. First one is using global financial networks which provide infrastructure to distribute orders between connecting exchanges. Investors are able to access multiple trading venues from a single point without the limitations of geographical distance. Orders,
Second execution solution is establishing Exchange-To-Exchange connections. This is an alternative to the Global Financial Networks where a direct connection between exchanges is built by connecting exchanges. The business model is an Exchange-To-Exchange model, where clients connect to foreign brokers via exchanges. From the technical point of view of the model, Turkish Members will send order flow to IMKB; IMKB will route these orders to connectivity engines, each Turkish broker having its own. These engines will be connected to a dedicated network, leveraging implemented connectivity;
With a possible connectivity between a foreign exchange and IMKB in the near future, connected exchanges are expected to have increased incoming flow and volumes on both sides, facilitation of trading order flow and connectivity. market data and other related financial information is distributed through all member locations in such networks and accessible for all connected exchanges. This makes multilateral trading connectivity possible as well as bilateral connections. Both connecting exchanges are required to be member of the same global financial network.
orders will be routed to relevant foreign exchange. This solution can be provided by independent trading software and connectivity vendors which eliminates possible disadvantages of depending on a global network provider having many similar member exchanges. IMKB is also building a new FIX engine which would facilitate receiving orders from its Turkish members and then route those to foreign members.
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Fehmi Kaya Director, IMKB
With a possible connectivity between a foreign exchange and IMKB in the near future, connected exchanges are expected to have increased incoming flow and volumes on both sides, facilitation of trading order flow and connectivity. Such an example could create evidenced success for connectivity which would drive more members into the model.
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Connectivity and Linkages: ‘The Only Game in Town’
The second part of the above title is a very well-worn phrase – a cliché, even. But like most clichés, it attempts to express a vital truth: the quality of the connectivity that a business has to its market is just as important to success as the quality of its product. In fact, every business today, and not just those in the fields of technology or finance, stands or falls by its connectivity - how widely, deeply and rapidly it can reach clients and suppliers, both current and potential. Moreover, one could read practically every technological milestone of the last 30 years as an advance in connectivity between individuals, communities or institutions. In the context of connectivity in financial markets, I see three main swathes of development, which, appropriately for the subject of this article, happen to be themselves rather interconnected.
The Drivers of Enhanced Connectivity First and foremost is, of course, the unrelenting technological progress, particularly in computing power and telecommunications. Moore’s Law that computer processing power (or rather the number of transistors on computer chips) doubles every two years still holds as it did when first expressed in 1965. Associated telecommunications measures, such as network capacities and data throughput, have increased at a similar rate. This progress has affected every aspect of life: how did we ever do without mobile phones and the Internet? It has had just as profound an effect on facilitating access to financial markets. Once upon a time, the prime means of access to prices was through newspapers, telex and phone. Trades were booked on multi-part deal slips and bargains recorded in manual ledgers. It might sound like the Dark Ages, and in some ways it was, but this was only 20 or so years ago.
The third development, which is linked to technological advances, has been the trend towards the automation of every phase of the trade lifecycle. The automation of processes and the reduction of manual intervention has simplified and streamlined workflow. This has made not only real-time risk management possible but also optimal trade execution via smart routing across multiple venues and algorithmically controlled order management. Philippe Carré Global Head of Connectivity, SunGard’s Capital Markets Business
As important as processing power and data speed can be, connectivity also requires a means of communication. Financial markets acquired such a means with the emergence of the FIX protocol. FIX started 20 years ago as a bilateral framework to support trading but, being open, free and, most importantly, industry-driven, it has in the FIX organization’s own words become “a common, global language for the automated trading of financial instruments.” You could argue that FIX is the most widely-used language - in its broadest sense, the Esperanto of the financial world. Without a globally accepted protocol, messaging – the exchange of data instructions – requires conversion and
The Implications of Today’s Enhanced Connectivity Driven by these three broad trends, connectivity has thrived, and the world – particularly the financial world – has become a much smaller, more integrated place. The impact of this connectivity is not confined purely to geography but also encompasses access to both markets and information: in short, the financial world has become much more democratic. Where there were once solitary national stock exchanges operating within strict boundaries, there are now global and regional exchanges, broker pools, multi-lateral trading facilities and many other forms of matching facilities and trade venues. Where investment opportunities were once limited to one’s own national
Connectivity is steadily eroding the once strict demarcation between the buy side, sell side and exchanges, and we have begun to see the emergence of new matching facilities in a variety of asset classes. translation, and the effective speed of connectivity is vastly reduced. Without FIX, we would not have connectivity as we know it today.
stock market or the savings accounts offered by the local bank, every investor, from the sovereign wealth fund to the apocryphal Belgian dentist, can now not only access equity markets across the globe but
Federation of Euro-Asian Stock Exchanges / Fall 2012
THE ASEAN TRADING LINK: A PRIME EXAMPLE OF THE DRIVE TO INCREASE CONNECTIVITY The ASEAN trading link is the most recent high-profile example of the important role that connectivity is playing investment destinations’ drive to be competitive in the global marketplace. In fact, it makes it quite obvious that without connectivity there is no “global.” Once Bursa Malaysia and Singapore’s SGX are connected, they will be joined by the Stock Exchange of Thailand, at which point markets representing approximately 70 percent of the ASEAN region’s equity and derivatives volumes will be linked. This will provide wider horizons for local capital investment and also enable local brokerage houses to compete on a more equal footing with bulge bracket players. But even more importantly, it will better establish the ASEAN nations as an investment and trading bloc capable of attracting further foreign investment to the region. Leveraging its experience in the region, SunGard plays a key role in the development of the ASEAN trading link by providing the technology infrastructure. Investors will be able to route orders to ASEAN exchanges and receive market data from each of them through a central point of connectivity, hosted by SunGard. The ASEAN trading link will be connected to the SunGard Global Network, opening the region to global brokers and investors. also the markets of practically every other asset class, from commodity derivatives to corporate bonds to foreign exchange. Where access was once an obstacle course of intermediaries – bankers, brokers and jobbers – we now have Direct Market Access. Connectivity is steadily eroding the once strict demarcation between the buy side, sell side and exchanges, and we have begun to see the emergence of new matching facilities in a variety of asset classes.
Connectivity on Stock Exchanges The democratization of participation in financial markets is not only a story of equality among investors but one of equality among markets themselves. Just as asset classes are converting to electronic access, so too markets, hitherto impervious to outside participation, are actively seeking foreign investment, listings and members. It might be difficult to build a sufficient critical mass on your own, so linking up with like-minded partners makes a lot of sense. The exchanges of the ASEAN trading link (see box)
are a case in point, but the same observation also applies to European (NYSE Euronext, CEESEG) and South American markets (MILA). While mergers may be off the agenda for a little while, the successful exchanges will be those that can resolve a complex equation: develop their product offering (more asset classes under one roof, new
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functionalities, new market segments, etc.), generate a strong culture to attract local and foreign listings and on-board new participants (remote membership, cross-border trading facilitation, etc.), and give their existing constituents more opportunities.
A More Personal Perspective on Connectivity Having worked at SunGard (and GL Trade) for the last 15 years, I have seen the connectivity story unfold in real time. SunGard has played a pivotal role in the march toward increased connectivity, having established its first electronic trading network as early as 1995. Connectivity hubs – local points of presence – today number around 30 and link Santiago to Hong Kong, Istanbul to Tokyo, and New York to Sydney. In addition, our “trading cloud,” which is supported by hundreds of telecom links, continues to expand, with more than 530 brokers and 120 trading venues leveraging its connectivity to reach a community of more than 2,500 financial institutions. Together, these assets are key to achieving SunGard’s mission to efficiently and cost-effectively connect its customers to wherever they execute their business.
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Linking Post Trade Participants
Market Data
Ever increasing regulation and changes to industry practices are forcing the pace of change in the services offered and how they are operated in both the trade and post trade markets. This is placing significant pressure on key services providers to adapt their operations and infrastructures to support new processing and connectivity requirements e.g.
Order Entry
• Trade repositories (required in each legal operating domain = new venues)
Many firms have started to realise STP, and in particular Post Trade, is way of adding value to their customers and a source of competitive advantage. Many FEAS members have already recognised.
Trade Processing
Yousaf Hafeez Director, Capital Markets Development Global Banking and Financial Markets BT Global Services
Trading
Post Trade: A Source of Competitive Advantage
Matching
It’s been said that you can trade all day but if you can’t settle those trades then all of your work has been for nothing. Trading itself is just part of an overall set of processes that begins with market-moving data and ends with successful delivery into a client’s portfolio. This ‘StraightThrough Processing’ (STP) is a never-ending goal of every investment firm in order to increase operational efficiency, bring down costs and serve clients better. But to achieve STP – a seamless, automated trade from beginning to end – an investment firm has to rely on many different counterparties and service providers.
Confirmation
Clearing
Settlement
Custody
Post Trade Technology Service Requirements The key market infrastructure providers are today presented with both a challenge and an opportunity to change the way they provide services to existing and target members.
• OTC derivatives clearing (introducing a new asset class to trade / post trade and many new members to support) • Clearing Services - increasing numbers of Central Counterparty Clearing Houses CCPS (e.g. one per region) • Collateralisation (requiring interconnection of CSDs (Central Securities Depository) / International Central Securities Depository (iCSDs) for optimisation etc) The technology currently at the heart of many post trade systems was implemented many years ago, and for a very different trading environment. In the US and Europe, despite new regulation new trading strategies and the growth of multi venue and multi asset class trading, the investment in post trade technology by many trading firms has remained relatively low. This has resulted in piecemeal on piecemeal upgrades, which is complex and costly to manage. In contrast we have seen many Exchanges increase their investment in Post Trade Services.
Federation of Euro-Asian Stock Exchanges / Fall 2012
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The key market infrastructure providers are today presented with both a challenge and an opportunity to change the way they provide services to existing and target members. Indeed the world’s leading exchanges are looking to expand their roles in clearing to encompass a wider range of assets (including OTC Derivatives, FX etc) and a wider range of services with those assets (i.e. collateralization). This is a result of reduced trading volumes and an expected loss of monopolies for clearing of their national securities in addition to tightening market regulation. Therefore in addition to changes in domestic securities trading landscape, all market participants will probably need to engage multiple ICSDs and CCPs to clear more asset classes (i.e. FX, commodities, etc.) to enable members to collateralize more assets (more trading power) and for the exchanges to earn revenue from the clearing (and collateralization) of those additional asset classes. The challenge to these major services providers, and to industry as a whole, is to how best provide the many new linkages with the new venues e.g. trade repositories, the ICSDs and growing number of CCPs. This needs to be done in a way which both lowers costs and enables competition and ease of venue access by its members. Traditional doctrines have resulted in many host-to-host style network connections tailored to each specific venue. However emerging best industry practise would suggest a cloud based solution that enables a B2B (provider-to-provider) community
that includes a customer-site device capable of sending messages/files of any format to multiple iCSDs and CCPs so that exchanges are not encumbered with the centralization of the instructions from multiple clearing, settlement and collateralization sources. If we look at what corporates are doing in the treasury / cash management world these days we see declining subscriptions to bankspecific platforms in favour of sending instructions (not just for clearing, but for standard netting, bridging, etc.) over Financial Messaging Networks and indeed over other clouds. It’s more expensive, but it empowers the corporate to be independent of a particular bank (and their platform) and it’s seen to mitigate risk. But also the corporates seek connectivity solutions which are not just limited to the core financial services operated by their banks (e.g. e-invoicing / remittances etc).
For example, BT operates a secure messaging technology to communicate instructions to multiple iCSDs and CCPs. Known as the BT Radianz Messaging service is used by SettleNET and Euroclear. The platform supports SWIFT and ISO (15022 and 20022) messages. The platform can also support other industry (e.g. FIX, FpML) and proprietary message formats, and thereby supports migration to a developing messaging standard for the entire post trade market (e.g. ISO 20022). Whatever the particular solution, the key characteristics that are most sought-after in the post-trade environment tend to be reliability, security, integrity and non-repudiation. Low latency is becoming more important from a compliance and risk management perspective in Post Trade. However, perhaps the key to a good post-trade system is the ability to connect to participants in the most efficient and effective way e.g. that supports the needs of the entire STP chain / community and the multiple messaging standards that they currently use (e.g. ISO, FIX, FpML).
Private Networks Sell-Side
Community Cloud
Execution
Sell-Side Custody
Buy-Side Content Provider
Depository
Content Provider
Depository Custody
Buy-Side Sell-Side
Execution
• Point-to-point connections • Closed user communities • Slow time-to-market for new services • Proprietary cost structure • Limited economies of scale • Complexity
Execution Custody
Buy-Side
Depository
Content Provider
Depository
Content Provider Buy-Side
Custody Sell-Side
Execution
• Access to an open Community • Faster time-to-market for new services • Shared cost structure = economies of scale • Shared cost structure = economies of scale • Simplicity and reduced management cost • Interconnectivity between users
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Post Trade Connectivity Options Major infrastructure providers need to build out new links to other venues and also to provide efficient and effective access to existing and new members.
By selecting a vendors who had all key participants already connected they were able to connect to participants faster and reduce the time it took to launch their service as well a lower cost compared to alternative solutions.
Connectivity for post trade services is therefore becoming a critical component in the development of the trade and post trade securities markets and the major venues and supporting services. One option for building this connectivity is to continue to install point-to-point leased line circuits between each possible participant and each venue. This is complex and can be very expensive, particularly in some FEAS member countries. The alternative is to use a cloud based service that provides simple access to all key participants plus security and integrity of data and messages, and provides non-repudiable proof of delivery for the financial services community whose business is founded on trust. The major benefit being a leading cloud provider will have a very high percentage of customers already connected to its cloud both with the FEAS member country and globally. The importance of connectivity can be illustrated by an example: a large bank said that for a new service that they were developing they would need to connect to all of the national central banks in the European Union and other major economies – and almost every one of those central banks was already connected to their selected vendor.
Some of the largest post trade service providers in the world already use Cloud based services to link to their clients. Over these links they may also add services such as secure messaging and encryption services to provide extra assurance of strong authentication, integrity and confidentiality and non repudiation services. An important feature when selecting a cloud connectivity vendor is to ensure they are standards agnostic and can support standards such as ISO 20022 and FIX Protocol to best accommodate the impending changes in post trade services developments.
Globalisation of Trading Under the weight of regulation and industry initiatives, the STP chain is extending in all markets, both regionally and globally to encompass more venues and asset classes. Monopolies are increasingly being challenged in regions, and competition being promoted and developed by the Regulators.
We are increasingly operating in a global market, and need to connect with many global participants in the STP chain, with the Post Trade processes serviced increasingly on global services platforms as a way to achieve economies of scale and also manage risk. Connectivity for post trade services is therefore becoming a critical component in the development of the trade and post trade securities markets and the major venues and supporting services. The ability to easily connect to these dispersed participants is crucial if the full benefits of automation of these processes is to be achieved, and for competition to be delivered and maintained in the market place. To most effectively support the market developments, connectivity providers must therefore ideally possess a global foot-print, be neutral in terms of the venues supported, flexible in terms of the connectivity services offered (e.g. VPN, Encryption, Secure Messaging), and also present a platform which will not restrict membership or in any way discourage participants from joining its Cloud (e.g. it must be multi-purpose / application).
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Country Focus: Bulgaria
Bulgarian Capital Market Has a Modern and Efficient Infrastructure Country Profile In 2011 Bulgaria has pulled itself out of recession on the back of strong growth in exports; however, domestic consumption has remained weak and the government has persisted in its austerity. The budget deficit fell from 4.3% in 2009 to 2.1% in 2011. Cautious fiscal policy over the last decade has left the country with a government debt to GDP of 16.7% as of the end-June 2012, among the lowest in the EU. Fiscal discipline and low debt levels have been achieved despite low taxes. Currently, taxes in Bulgaria are among the lowest in Europe. The country offers 0% tax on capital gains for transactions in securities on a regulated market; 10% flat corporate income tax, currently among the lowest in the European Union; 10% flat personal income tax; 5% tax on dividends for individuals. The state relies mostly on the 20% VAT and import duties for most of its revenues. As imports and consumption has fallen in recent years, the budget was strained; however, the government has remained firmly committed to fiscal discipline. Bulgarian banking system has remained stable, well capitalized and liquid throughout the global financial and economic problems in the recent
years due to the conservative policy of the Bulgarian National Bank. Total capital adequacy ratio was 17.75% in December 2011, well above the regulatory minimum of 12% in Bulgaria and 8% in the EU which ranks the local banking sector 5th in the EU by that indicator. None of the banks that operate in the country has needed any state aid since the beginning of the crisis. Bulgaria was expected to join the Euro in 2013 but enthusiasm for the euro has cooled recently due to the turmoil in the Eurozone. Bulgarian Lev is pegged to the Euro under a currency board system, which
requires all money in circulation to be covered by hard currency in the vaults of the central bank. In 2011 Moody’s raised Bulgaria’s rating to Baa2 (stable outlook) taking into consideration the low debt burden, the small budget deficit, the improved institutional capacity and the strong liquidity that protects the economy from regional volatility. Bulgaria remained one of the few countries during this period of financial turmoil to have its credit rating increased. In the beginning of July 2012 the Bulgarian government successfully placed a EUR 950 mln 5-year Eurobond issue with a 4.25% annual coupon which was oversubscribed with a final order book topping EUR 6 bln.
Federation of Euro-Asian Stock Exchanges / Fall 2012
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Country Focus: Bulgaria
BSE-Sofia market capitalization and market cap/GDP ratio reached their peaks in 2007 as a result of the increased number of local and foreign investors, higher market prices of the Bulgarian public companies and improving business environment in the country. However, the world financial and economic crisis has led to a sharp decrease in the indicators of the stock exchanges all over the world, incl. Bulgaria. Market capitalization and market cap/GDP ratio decreased by nearly 60% between 2007 and 2011. Strong macroeconomic fundamentals have done little to attract investors’ interest, to date. Institutional investors, both foreign and domestic, stay aside of the market due to its lack of liquidity. Thus, the market has been left to unsophisticated retail investors. This lack of institutional interest created pockets of deep value in several sectors. Managements in a number of public companies have been quicker in recognizing the value in their stocks and moved to buy-back own stock promptly.
Bulgarian Stock Exchange Profile Bulgarian Stock Exchange–Sofia (BSE-Sofia) was officially licensed by the State Securities and Exchange Commission to operate as a stock exchange on October 9, 1997 and is currently the only functioning stock exchange in Bulgaria. BSE-Sofia is majority-owned by the Bulgarian government through the Ministry of Finance which holds some 50.05% as of June 30, 2012. Other shareholders include brokerage firms and banks, institutional investors, other legal persons and individuals. Since
The legislative framework regulating the capital market activities in Bulgaria is fully harmonized with the corresponding EU Directives. MiFID was transposed in the local legislation in the end of 2007 and introduced numerous changes and new principles such as the “single passport” principle to the local market making it more accessible for foreign investors. The following financial instruments are traded on the markets of BSE-Sofia: stocks (common and preferred), corporate and municipal bonds, units
The legislative framework regulating the capital market activities in Bulgaria is fully harmonized with the corresponding EU Directives. January 2011, the Bulgarian Stock Exchange-Sofia has been a public company. Bulgarian capital market has a modern and efficient infrastructure. All traded financial instruments are dematerialized and registered at the National Central depository and the trading on the regulated market is fully electronic. In June 2008 BSESofia successfully launched the Deutsche Boerse electronic trading platform Xetra®, which is one of the most powerful trading platforms for cash market securities and is a synonym for high performance and internationalization of securities trading. The Bulgarian Stock Exchange’s decision to implement Xetra® was based primarily on its desire to become more open to foreign investors from leading capital markets.
of UCITs, compensatory instruments, subscription rights and warrants. The number of financial instruments admitted to trading on the markets of BSE-Sofia amounted to 507 in end-June 2012 and the total market capitalization reached some EUR 5 bln.
BSE-Sofia Main Priorities As a part of its mid-term strategy, BSE-Sofia has set a few strategic priorities related to market infrastructure development which primary purpose is to improve liquidity. Not all initiatives depend entirely on the regulated market but need also an effort from more than one institution. The initiatives are marked as highly important by the Bulgarian market participants and can be outlined as follows:
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Country Focus: Bulgaria
• National level clearing separation of the clearing system from the central securities registry. This process is currently ongoing at the Bulgarian central depository and upon completion will provide a relative independence of both systems and will open space for additional infrastructure enhancements as improved securities lending, remote membership, etc; • Margin trades and short-sales improvements on the clearing side will make margin trades and short sales much easier to settle and the cost associated to them is expected to decrease as long as less account transfers will be involved. Combined with appropriate legislative improvements, short sales are expected to become an essential part in the product portfolio diversification; • Cross border clearing and settlement - along with all national level clearing enhancements, Bulgaria is becoming more and more internationally oriented in terms of cross border securities trading and settlement. Better utilization of the existing depository links is expected in the next couple of years which can diversify the traded products as long as instruments domiciled outside Bulgaria can be traded on BSESofia. In May 2012 Bulgarian and Romanian central depositories signed cooperation agreement, thus establishing a direct link between the two institutions. The link enables dual and cross-listing of financial instruments at low cost and is to facilitate execution of trades on both markets with the option for potential cross-border settlement. Bulgarian central depository is currently working on establishing direct links with other European depositories, incl. the Polish and Austrian institutions;
• Settlement guarantee - as a second step after the separation of the clearing part comes settlement guarantee thus effectively turning the clearing institution into a viable CCP and opening space for a much broader product portfolio; • New instruments - expected improvements on the clearing and settlement side will enable BSESofia to offer many new products like structured products and ETFs; • Constant improvement of the IT infrastructure - the operation of a state-of-the-art trading platform which is constantly being improved by its service provider ensures full compatibility with all new trends in securities industry;
• Attracting issuers and investors - Over the last few years BSE-Sofia has put serious efforts towards attracting new issuers as well as increasing investor awareness. The stock exchange, together with other stock market institutions organized a series of roundtables and workshops dedicated to the popularization of the opportunities the capital markets provides. As long as BSE-Sofia believes that such process must be systematic and continuous even through turbulent times, it will continue with its efforts to bring a wider range of investors and listed businesses to the market; • Privatization deals - The forthcoming privatization of the Government’s stake in the Bulgarian electricity distribution companies EON Bulgaria and CEZ Bulgaria is expected to be one of the most significant events for the Exchange in 2012. The privatization is expected to have a strong positive impact on the development of the local capital market and is likely to attract substantial local and foreign investment interest.
Federation of Euro-Asian Stock Exchanges / Fall 2012
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Country Focus: Bulgaria
Scarlatov: The Privatization of the BSE is Definitely a Step Forward Q - What is the role of the capital market in a country with a relatively small GDP like Bulgaria? A - The capital market is a vital instrument for any country’s economy. In Bulgaria, where privatization has been rolling for the past 20 years, the floor of the stock exchange has proven to be the best and most transparent instrument to privatize and achieve best prices for state owned companies. On the other hand, the primary market is the best platform for fueling companies with capital through issuing of equity or debt instruments, while the secondary market is an indicator of how the investment society evaluates the corporate governance, the potential and the perspectives of each company, always bearing in mind the wider political and economical environment in which these companies operate. Theoretically, the capital market is the mirror image for an economy. Unfortunately practice does not always comply with theory, especially in the case of Bulgaria during the past three years. Since 2010 the macroeconomic environment of the country has been in a very good shape, compared to most EU27 countries. The majority of the public companies have been sustaining their revenue levels despite the pressure on profit margins, while adjusting their business models to the new market reality; at the same time market valuations continue to be depressed, and some companies are taking steps to become private. Q - What do you believe is the reason for this divergence? A - In order to give a satisfying answer we have to look at what actually happened during the last years in Bulgaria.
The crisis hit the Bulgarian Stock Exchange in late 2008 when the main market index SOFIX suffered a dramatic fall by approximately 84%. This performance secured Bulgaria the second position in “the worst performing markets chart” trailing the leader - Iceland. If the capital market was really a mirror image of the Bulgarian economy this should mean that GDP is shrinking, budget deficit and state debt are both unmanageable, or if we look at the leader in the above mentioned chart – in bankruptcy.
Ilian Scarlatov CEO, KBC Securities Bulgaria
Actually, the picture is exactly the opposite - Bulgaria is the only EU27 member with raised credit rating during the last two years, its GDP growth is positive and expected to be positive in 2012, budget deficit is slightly negative although in line with the Euro convergence criteria (less than 3% of GDP), and debt to GDP ratio is the second lowest in EU27 (16% of GDP). Obviously there is something wrong with this picture. After the fire sale we saw in late 2008, the low liquidity led to almost 90% drop in market capitalizations of most companies and the overall stock exchange market cap to GDP ratio shrank to barely 9%. One year
later most capital markets (including Bulgaria’s closest peers) recovered a big portion of what they had lost but this never happened with the Bulgarian market. The investors’ behavior had changed. The existing investment model of value investors and growth investors was altered. A new variable with significant weight was added to the equation of decision making procedures - liquidity. Investors from mature markets would not look at a company no matter how great value and/or growth potential it offers if liquidity is not sufficient. That is why Bulgarian stocks never had the chance to recover – liquidity was never sufficient enough. With no market depth, wide spreads and low liquidity the efficient market mechanism was broken, so were the fair valuations of the listed companies. A bigger problem stemming from this broken secondary market mechanism turned out to be the negative impact it had on the primary market. With suffering primary market local companies are not in a position to obtain the growth capital they need. In the end of the day this directly affects the real economy. Q - What about the local investors? Aren’t they in a position to improve liquidity? A - Local investors are in a very awkward situation. Out of the three main groups of local players – individual investors, mutual funds and pension funds, only one is active and big enough to make a difference. Retail or individual investor’s base is relatively small - less than 1.5% of the Bulgarians invest in equities or equity related saving products. Mutual
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Country Focus: Bulgaria
funds are more or less in the same position since the main flow of money comes from individual investors. Therefore, pension funds are the only market player with constant monthly cash inflows which could fuel equity investments. Unfortunately, pension funds already hold a significant amount of their portfolios in Bulgarian equities and they prefer to invest fresh funds in more liquid markets to achieve a better geographically balanced portfolio. Although they are the largest player for block trades, however block trades do not provide day-to-day liquidity and do not create an effective market. The largest local market participants have repeatedly stated that they would become more active once liquidity has improved. This actually creates a vicious cycle - local players expect foreign ones to invest in Bulgarian equities and boost liquidity. At the same time foreign investors expect the local ones to become more active and improve liquidity in order for them to invest. Q - What do you believe is the solution to this problem? How will Bulgaria exit this vicious cycle? A - No matter how much value and/ or growth opportunities the Bulgarian equities offer, and how good the macro frame is foreigners will not invest in Bulgaria until the market is deep enough for them. Today they prefer to invest in markets they know better and which are more liquid. This means that liquidity has to come from within - with more active retail investors, mutual and pension funds. The right way to do this is by initiating new products allowing investors to leverage their money, and get back “in the game”. On one hand, trading on margin and access to certificates
which allow investing in indexes is a very good start. On the other hand, initiating short sales will make the bears more active and will provide additional liquidity to the market. These three simple instruments will take local players to a whole new level of investing and will improve the liquidity on the stock exchange. This will not happen overnight but over a period of 18 to 24 months I believe that the results will be surprisingly good. Q - If the solution is so simple why hasn’t it been implemented in the past three years? A - Things are never that simple even if they sound so. In order to make these instruments available to investors, certain infrastructure has to be in place. The most important piece of that infrastructure is the clearing house which does not exist currently. The good news is that the management of the BSE and the CSD have been working intensively during the last two years to provide that infrastructure. After implementing the SWIFT system last year on CSD level, the launch of the new operating system of the CSD is expected to be finalized by the end of September 2012. This will allow the CSD to act as a clearing house. Hopefully this will make margin trading and short sales available to the public by the end of this year. In regards with the certificates on local indexes, the problem for the foreign houses providing structured products was that the Bulgarian market was closing at noon London time. This meant that they would not be able to react to any significant market changes in Western Europe or the US for most of the day. This is now solved by the management of the BSE after
expanding the trading session until 3:00 pm London time starting July 1st, 2012. It is expected that such products will also be launched by the end of 2012. Q - What about the privatization of the BSE together with the CSD which was announced for 2012, will it contribute to the development of the market? A - The privatization of the BSE is definitely a step forward. Today BSE is a small market on the border of the EU and is visible to a specific investment audience focused on small emerging markets. Becoming part of a larger stock exchange, or a group of stock exchanges, will make the Bulgarian capital market more visible to investors. All the good practices which will be implemented by the potential buyer along with his reputation will improve the overall market environment for foreign investors. Things become even more interesting when we take into account the fact that currently the management of the CSD is working intensively on the implementation of Target 2 Securities, which will make transborder settlement an easy and a low cost operation. Ideally, BSE should be acquired and operated by a large foreign exchange which will implement best practices and will make the Bulgarian market more popular abroad. And all post trading activities will be handled directly by the CSD through T2S in a fast, easy and cost effective way. This is the only way for us to become a fully-integrated and liquid European capital market.
Federation of Euro-Asian Stock Exchanges / Fall 2012
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Developing Inter-Market Connectivity and the Importance of Custodian’s Role Further to the financial crises of 2008, structure of global financial system is now taking a new look. The developed markets used to drove the world growth and the emerging markets followed on. This is not necessarily the case anymore. Emerging country growth no longer depends on the growth in developed economies. Part of the reason is that, as emerging countries mature, they increasingly trade with one another and not fully depend on linkages to the developed world. Changes in technology are also revolutionizing expectations and enabling changes in business models with brand new capabilities. The immediate results are sourced and reflected in the shift of commercial trades and the rise of middle class in the emerging world: First of all, commercial trade within the emerging markets—transactions that never cross an EU or G7 border— has risen sharply, from 6% of total world trade to 13% since 1995. The advanced economies’ share of global trade is now 65%, down from 79% in 1995. Secondly, around the globe,
their members’ trade orders, to route these orders to the respective stock exchanges to be further delivered to the local brokers for trade execution in the other market.
Gunsel Topbas, Ph.D Cluster Head for Middle East, Pakistan, Turkey Direct Custody and Clearing Citi Transaction Services
Another major trend reshaping our industry is digitization. Using advanced technologies and implementing straight-through processes displacing any manual mechanisms is of great value. Stock exchanges are among those that apply state of the art technology for trading purposes; and they provide seamless and fastest connectivity to their members. SWIFT is the major means of such connectivity between banks around the globe, hence important means for posttrade instructions and reporting. FIX
Changes in technology are also revolutionizing expectations and enabling changes in business models with brand new capabilities. millions of people rise above poverty and enter the middle class every year. According to an estimate, by 2020, three-quarters of incremental consumer spending will come from emerging markets. Similar opportunities are true for the capital markets and portfolio investments as well. We observe more and more emerging market based investors becoming interested with other emerging markets.
protocol serves similarly brokerage houses and is used for trade order receiving and sending purposes. FIX is increasingly used by the stock exchanges as well, for their members’ connectivity for trading purposes. Implementing these standards and employing advanced technology is another opportunity for the emerging markets to enable cross-market reach with other emerging markets. In this respect, stock exchanges may implement FIX hubs to receive
By and large, this kind of technological solution for trade order routing is perceived as a pre-requisite for market connectivity. However, when we look further in detail, we can see that availability of post-trade services are of vital importance especially for intraemerging market securities flows. For the newly emerging financial institutions of the emerging markets, it may not be so easy and straightforward to finalize securities transactions in other markets, compared to the long standing well known names of the financial industry. This factor only should be one of the reasons why we have yet not observed a trend of intra-markets activity, especially within FEAS zone. International best practices -adopted to the specific needs of these markets- might be a remedy, while enabling markets connectivity and overcoming post-trade limitations. What does that mean for FEAS markets? For stock exchanges, for broker/dealers and for investors? The answer is clear: Increased liquidity & competitiveness, incremental volumes & revenues, new investment & diversification opportunities. Markets that will succeed in this new environment will be the ones that search and adopt these best practices and that cooperate with each other to mobilize flows.
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Reaching out to other markets and concluding securities transactions in another market for the local broker dealers, would require the availability of post-trade securities services capabilities in each local market that would ensure consistency for securities clearing, settlement, custody and asset servicing. The proposed model is based on directing post-trade flow through local CSD infrastructure, and serving the intra-market piece via globally consistent custody and clearing services complemented with a wide network of local market presence. Hence, a potential international service provider for this purpose, should understand the emerging markets, understand the unique needs and challenges, and be able to help the markets navigate these new opportunities, while acting as a catalyst for efficiency. Below, we discuss, the basic reasons why today the intra-market activity is limited among the emerging, including those of FEAS, and present a solution which is also currently to be implemented in a number of market initiatives. Today, any broker in any country can open a trading account with any broker in another country
Trade Execution Stock Exchange (Country A)
Direct Connection between Exchange via FIX
Broker 1 (Country A)
Broker 1 (Country B)
Post Trade Solution CSD (Country A)
Global Custodian Bank
CSD (Country B)
Custody & Clearing Broker 1 (Country A) Broker 2 (Country A) Broker 3 (Country A)
Broker 1 (Country B)
Local Custodian Bank
Local Custodian Bank
Country A Local Custody Clearing and Settlement
Country B Local Custody Clearing and Settlement
Broker 2 (Country B) Broker 3 (Country B)
Source: Courtesy to Citi
Therefore, foreign brokers may prefer to use more than one local broker. As per international best practices, local brokers serve only for trade execution; hence, foreign brokers settle their trades through local custodians, and receive intraday funding, clearing, custody and asset services from the custodian banks. This eliminates taking counterparty risk of the local brokers for the foreign brokerage house, and vice versa. As the capital size and cross-border trading volume of emerging market brokers are relatively low compared to international broker dealers, it is not practical or possible for them to have
Markets that will succeed in this new environment will be the ones that search and adopt these best practices and that cooperate with each other to mobilize flows. (unless prohibited by the respective jurisdictions). In general, a foreign brokerage house needs research facilities in any given market provided by the local brokerage houses and may employ trading strategies.
Stock Exchange (Country B)
custody and clearing accounts directly with the custodian banks, and where possible it will be too costly.
Today, lack of such post-trade services set up, is one of the major reasons that prevent local brokerage houses from engaging in trading in other emerging markets. Citi’s suggestion as an effective and efficient post-trade solution includes stock exchanges and CSDs in the picture where possible, while Citi may act as a hub for CSDs to serve settlement and custody (which may also be replicable with other markets through Citi’s own branches in +60 markets, in total over +100 countries including agents). Respective CSDs may, in turn, provide custody and clearing services for their members in the local market. This model also enables stock exchanges and CSDs to have an oversight on cross-border trading activities of their members. Above diagram outlines the proposed model. For the sake of easiness, we use “CountryA” and “CountryB” to represent the different markets, and “Global Custodian Bank” as global custody provider, and “Local Custodian Bank” as the local agent of
Federation of Euro-Asian Stock Exchanges / Fall 2012
Capabilities of the local CSDs to serve their members for this purpose and be able to establish global custody relationship is essential to give a start in the relevant markets when the interest is specified. the global custodian (which is ideally the local bank or branch belonging to the same group with the global custodian for the proposed model). Therefore, enabling the brokers in one market to reach out the other market via post-trade solution is possible, regardless of the method of trade order routing. Trade order routing is ideally to be over FIX in between stock exchanges as outlined in the diagram, however it may well be directly in between the brokers of each country. Citi is currently engaged in and partnering with a number of exchanges for the implementation of this model, subject to certain criteria; and serves as both global custodian and local custodian in the value chain of the process.
© 2012 Citibank, N.A. All rights reserved. Citi and Citi and Arc Design is a service mark of Citigroup Inc., used and registered throughout the world.
In order to have a business case for any market to engage in such connectivity with another market, needless to say, it is key to have a general marketing approach that would create awareness and get feedback from the market players for the process and for the potential markets of interest. Capabilities of the local CSDs to serve their members for this purpose and be able to establish global custody relationship is essential to give a start in the relevant markets when the interest is specified. One last item to highlight would be the local regulations, and how they would require the public disclosure to be made to local investors by the other/ foreign market issuers. As this would be one particular item of difficulty, at
The right to use this documentation is vested with Citibank A.S. and may not be used without prior authorization. Our Bank does not act as a legal, tax or accounting advisor. We advise you to consult such experts at a satisfactory level in order to discuss and assess the legal, tax-related or accounting risks. Investment information, comments and recommendations stated here, are not within the scope of investment advisory activity. Investment advisory service is provided in accordance with a contract of engagement on investment
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the outset it is important to let only professional/institutional investors to engage in these activities and have responsibility to acquire relevant information. In any case, it will also be required to have regulators in the loop and have their support to be able to implement this market-to-market reach and connectivity. Once such connectivity is established, we should expect increased liquidity & competitiveness for stock exchanges, incremental volumes & revenues for broker dealers, new investment & diversification opportunities for investors; hence where both markets will better off. Successful examples will set the tone for other implementations, which will result in more intraemerging market securities flows.
advisory concluded between brokerage houses, portfolio management companies, non-deposit banks and clients. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations.
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Creating Links Since the initial cooperation, NASDAQ OMX Nordic has been striving to link markets together for both cash and derivatives. Today, NASDAQ OMX Nordic runs exchanges in seven different European jurisdictions on a single trading platform.
The never ending quest to create a more liquid market has lead many exchanges around the world to focus on enhancing their post-trade services. This is particularly relevant among many FEAS members who are grappling with how to create foreign access while ensuring that liquidity stays in their home market. Brokers in most markets must currently go outside their home exchange to trade foreign securities. At the same time, foreign investors have no direct way to buy securities on the instrument’s home market. Traditionally, this has been due to regulatory barriers and member firms aiming to protect the market, particularly with regards to post-trade processing. To solve this and promote growth and efficiency in their capital markets, some exchanges are establishing regional cross-border collaborations. Seven Asia-Pacific exchanges, for example, have formed the ASEAN Exchange alliance, which will allow for more seamless trading when fully set up. Similar efforts are underway to create regional integration in Latin America. In Europe, the European Union has addressed this issue with new regulations that will open up the access between post-trade providers. Central cross-border clearing services are, therefore, now being established among cash equities markets. In the Nordic and Baltic region, NASDAQ OMX was successful in creating the technical and regulatory infrastructure to bring together the Nordic and Baltic markets. Work
Johan Rudén Senior Vice President, Transaction Services Nordic NASDAQ OMX Clearing
began as far back as 1995 when a close cooperation between the Swedish and Finnish derivatives exchanges led to providing investors with the ability to trade Nordic derivatives – including Swedish, Danish, Finnish, Icelandic and Russian -- on a single market. It continued a few years later with links established to Oslo Bors and later also to EDX/London Stock Exchange. A key factor in the Nordic success story was our ability to be a first mover and innovate with creating post-trade linkages between different markets. The clearing link between NASDAQ OMX and LCH was the first of its kind in the world. Equally important were the contractual and regulatory relationships between the various markets that established the terms and conditions of working together.
Toward that end NASDAQ OMX Nordic implemented CCP clearing on its cash equities markets in Stockholm, Helsinki and Copenhagen in 2009. Concurrently NASDAQ OMX Nordic upgraded its trading platform to INET technology. This dual effort has attracted additional remote membership, leading to increased order flow to our markets. Since 2009, remote members’ market share in terms of turnover almost doubled from 35% to 65%. Today, CCP clearing encompasses large cap companies listed in Stockholm and Copenhagen and all companies listed in Helsinki. Norwegian shares traded in Stockholm and ETFs listed in Stockholm and Helsinki are also CCP cleared. From a technical perspective, setting up post-trade service for cash equities is fairly straightforward. The key is to align the interfaces with international standards, generally recognized as those followed by the leading financial centers. Common protocols, like FIX, ISO 15022 or ISO 201, should be used. This way all the CCPs that want to connect to a particular market can
Brokers in most markets must currently go outside their home exchange to trade foreign securities.
Federation of Euro-Asian Stock Exchanges / Fall 2012
do so on an equal basis. Once technical access is created for one CCP, establishing future connections becomes a configuration, not development, issue greatly simplifying the process. It can get more complicated for options which require more sophisticated data feeds,
the exchange requires? Can the system generate the data needed for the CCP to process certain instrument types? The trading platform and CCP must have a common understanding of all CCP-eligible instruments and the members who may trade on those instruments. There should be no
Commercial and regulatory considerations can vary greatly among markets and are generally more challenging to harmonize. especially if activities need to be coordinated across time zones. Commercial and regulatory considerations can vary greatly among markets and are generally more challenging to harmonize. As with technology, rules and regulations should be aligned with international standards. In addition, legal agreements generally have to pass muster with each entity’s home regulator, and requirements can vary greatly by market jurisdiction.
Lessons from the Nordic Exchange NASDAQ OMX Nordic established a set of criteria which it used in the cash CCP selection and implementation process. Broadly speaking, the criteria and the actual implementation fall into three basic categories: connectivity & IT, legal and regulatory, and member readiness and communication. Across all, there has to be a common understanding of the rules and procedures among stakeholders.
Connectivity & IT As a first step, exchanges and CCPs need to ensure that their interacting technical systems are aligned. What message protocols and technical specifications are to be used? Is the CCP able to clear all instrument types
discrepancies between exchange and CCP databases. This ensures that the CCP receives only valid trades from valid members. From an operational perspective, procedures, technical assistance and contingency planning must be coordinated. Communication procedures for adding new members and other changes need to be established.
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Other operational issues include system speed and capacity (i.e. the number of trades per second the CCP can handle), the CCP’s ability to handle non-standard settlement cycles and -- critically important -- its risk management capabilities. A key risk management consideration is how often the system recalculates total exposure for all clearing participants. Ideally, this should be as close to real-time as possible.
Legal & Regulatory An important consideration here is whether existing exchange rules need to be adapted to ensure they are coordinated with the CCP rules. Prior to starting this process, for example, NASDAQ OMX Nordic rules did not recognize the existence of a CCP; hence, we needed to adapt those to incorporate the CCP framework. The approval of home country regulators is also imperative. The process will vary by jurisdiction. Some countries, for example, require that CCPs obtain a license, necessitating a formal approval process. At NASDAQ OMX Nordic, we converted three exchanges in three different jurisdictions to a CCP post-trade service simultaneously. For NASDAQ OMX Nordic, it was also important for the CCP to become a member of the local CSDs. This way, the CCP becomes a direct participant in settlement, creating a more efficient process and safeguarding a commitment to the local market.
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Member Readiness and Communication While members generally want to reap the risk and cost reduction benefits of CCP processing, the switch from bilateral to central clearing means a total change in members’ trade flow processing. Systems and procedures must also be aligned on the member side, often requiring extensive changes to member systems that handle post-trade settlement. The exchange facilitates the post-trade services from the CCP, and members look to the exchange for advice and communication. The CCP is often not locally based and representatives
Cross-border clearing capabilities are critical to improving market liquidity and to continuing to attract remote members. might not be fluent in the local language. So the exchange plays a central role in the coordination between all stakeholders. In addition to establishing an extensive communications plan, NASDAQ OMX Nordic managed a series of local working groups where all stakeholders – including members, CCP and the local CSDs– worked together to address any changes needed in local market settlement practices.
KEY LINK INTERFACES AND PROCESSES FOR DERIVATIVES While the basic process for establishing CCP clearing in derivatives markets is similar to equities, derivatives have more complex needs. From a technical perspective, some additional considerations for derivatives include: • Administration of reference data • Trades • Amendments (cross clearinghouses) • Reconciliation • Prices for margining, variation margin and expiration/exercise • Cross clearinghouse exercises (for options) • Statistics (i.e. open interest) • Settlement and collateral arrangements (if applicable – also for physical delivery) • Fees and fee splits • Time offsets in clearing cycle between parties • Corporate actions/capital adjustments (if applicable) • Long position reporting • Cross-border give-ups/amendments For derivatives markets, however, the greatest challenges have more to do with process, risk management and regulation than technology. The main issue for CCP clearing is interoperability between clearinghouses. The two parties settle trades at different clearinghouses, creating the need for detailed processes outlining responsibilities and how the two clearinghouses will work together. The risks are much greater for derivatives, so putting together the appropriate legal framework for how to handle the risk between clearinghouses is critical.
Finally, member testing is critical to success. We worked with the CCP and CSDs, to create an extensive online test environment prior to launching central clearing.
Conclusion Cross-border clearing capabilities are critical to improving market liquidity and to continuing to attract remote members. CCP clearing addresses this issue while improving efficiency and risk management for members. The process of setting it up and establishing connectivity, however, can be arduous and requires good cooperation and communication among all stakeholders.
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Federation of Euro-Asian Stock Exchanges / Fall 2012
Interlinking OIC Member States’ Stock Exchanges: Proposing a Model their physical, institutional and legal frameworks and policies and sharing their investor base.
Abolfazl Shahrabadi Finance Deputy, Parsian Investment Bank
This article is a summary of a threeyear research and studies of authors about interlinking OIC Member States’ Stock Exchanges. In response to the increased competition prevailing in the international financial markets and acceleration in the international trade and financial flows, national stock exchanges around the world recently made various attempts to upgrade their cooperation and improve their integration. The global economy witnessed an increase in the pace of integration. This process of globalization is most evidently observed in the capital and financial markets. Those attempts took often the form of coalitions, common trading platforms, mergers, associations, federations and unions. Like others, the OIC countries have recently intensified their efforts to promote cooperation among their stock exchanges with a view to developing and consolidating a mechanism for a possible form of integration among themselves. Some experiences of various stock exchange alliances established at international levels and draw some lessons for the OIC countries’ stock exchanges in terms of the need for harmonizing
In addition, following to the global financial crisis in recent years, appetite for Islamic financial products is growing in the world as not just a secure products but a leading performance. As the world starts to question the increasingly speculative nature of conventional investment products, the relatively conservative nature of Islamic products is starting to gain attraction. Islamic finance is one of the key areas the government has identified to move the economy forward. We think integration of Islamic countries’ exchanges will serve these financial needs and contribute to the wider economic development of Islamic countries.
History of Studying on OIC Capital Market Linkage The idea of promoting investments among the OIC member countries goes back to 1974 when the Fifth Islamic Conference of Foreign Ministers (ICFM) (Kuala Lumpur, 21-25 June 1974) recommended for consideration the encouragement
Later on, in different meetings of COMCEC the subject was pursued and improved. The idea of establishing an Islamic Securities Exchange dates back about 10 years ago. The first proposal for this market was stated by the executive manager of IDB about 10 years ago. This idea presented in some meeting but was not tracked by any country or organization until March 2005 on which a meeting was held in Istanbul on 28-29 March 2005. The Meeting made pertinent recommendations to promote cooperation among the stock exchanges of the OIC member countries. Finally, in the second meeting of the OIC member states’ stock exchanges forum, 18-19 October 2008, following to the decision of OIC countries for intensifying their efforts to promote cooperation among their stock exchanges with a view to developing and consolidating a mechanism for a possible form of integration among themselves, Tehran Stock Exchange presented this proposal again and after discussion, the members ratified that. The special task force with the title of “studying the feasibility of an Islamic securities
The OIC countries have recently intensified their efforts to promote cooperation among their stock exchanges with a view to developing and consolidating a mechanism for a possible form of integration among themselves. of a joint ventures or investment by individual Muslim countries in other Muslim countries, the relaxation of controls on the movement of investment capital, and conclusion of agreements on the avoidance of double taxation, guarantees for remittances of such investment and adequate safeguard for all investments.
exchange” was established. In The meeting September 2010, the name of task force changed to “capital market linkages” (CML). In meeting September 2011, the task force ended his studies with converted into a project group of volunteering exchanges and post-trade institutions.
Federation of Euro-Asian Stock Exchanges / Fall 2012
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E-Trading Link provides market access to the home country exchange for foreign brokerage houses. Members of such project group will endeavour to realize bi-lateral and/ or multi-lateral linkages, including trading, post-trade services, technological infrastructure, and so forth. The project group will cooperate with the forum of regulatory bodies with regard to the legal framework.
Goal and Scope of the Capital Markets Linkage Increasing liquidity and cross-border capital flows are the most essential elements for a strong link between stock markets. Possible benefits associated with regional integration of exchanges are:
• To create awareness among the OIC Member Countries on benefits and costs of market linkages.
Proposing a Model for OIC Capital Market Linkage The CML task force examined various alternatives of cooperation for OIC stock exchanges. During the discussions, the following proposals regarding the points of interest in cooperation with the attending Exchanges were made: 1. Establishment of a Data Centre which will include the data of the respective stock exchanges
• To make a more efficient and competitive markets;
2. Creating a common index for Islamic countries’ stock exchanges
• To reach lower costs and higher returns;
3. Creating Islamic Depository Receipts
• To provide investors with access to a broader range of shares;
4. Cross-listing and crossmembership
• To provide Issuers with access to a larger number of investors;
5. Creating a Common Trading Platform
• To reduce the risk of market volatility due to increase in the size of the markets;
6. Promoting the harmonization of market rules and procedures and best practices for stock exchanges, and
• To provide local investors in the OIC Member Countries with easy access to other OIC members’ capital markets in terms of operational efficiency, cost effectiveness, technological developments; and
7. Training programs for the staff of the exchanges.
Ghorban B. Adabi Expert, International Dept. Tehran Stock Exchange
The project of creating a common index was finalized. S&P group was selected as a partner, in September 2011 meeting, for providing a joint index composed of OIC member states’ stock exchanges. About establishing a trading linkage, CML task force sent a questionnaire to members for assessing their market situation in term of regulation and infrastructure. The main points that can be extracted from the replying exchanges are: • Almost all of replying exchanges have DMA capabilities. DMA is a prerequisite and infrastructure for any international trading linkages. • There is no restriction for foreign ownership especially strategic ownership except for Kyrgyz in strategic ownership and Saudi Arabia that impose some restriction on non GCC investors.
26
Federation of Euro-Asian Stock Exchanges / Fall 2012
• Most of replying exchanges announced that currently, they don’t have a trading linkage but may set a plan for joining to a market link in the future.
E-Trading Link provides market access to the home country exchange for foreign brokerage houses. Other main specifications and features of the proposed model include:
• There is no restriction (such as repatriation of principle and profit) on foreign investment by the replying members except Tadawul, even some of them offer encourages to attract foreign investors.
• No cross-membership is required.
• Almost all of replying exchanges have desirable capabilities in the data dissemination through their web site or the data vendors.
• Regulatory authorities and exchanges keep their enforcement power and status. Each participant is subject to its own regulations.
• With few exceptions, OIC countries have not participated in the global consolidation waves and are still pursuing a ‘made at home’ strategy in developing their own stock exchanges1.
• It does not cause any conflict of interest among exchanges because of independent management structure.
• The task force with regarding the results of the survey and after considering all trading link and exchanges’ consolidations in the world decided to propose the E-Trading Link as an initiative for interlinking the OIC’s member exchanges.
1
www.oicexchanges.org
• Bilateral agreements among intermediaries have a vital role. For this reason, the requirements of brokerage firms should be clarified and addressed.
• No changes to the current set-up and no need for a new system development for the post trade services • Local brokerage house signs an agreement with a brokerage house which is a member of another OIC member stock exchange in which the trade is executed
• Local brokerage house executes clearing & settlement of all its trades in that exchange through bilaterally agreed brokerage house • Opening bilateral correspondent accounts and setting up a linkage among CSDs between CSDs would facilitate more efficient post trade operations
Strategic view There are a number of strategic points around this model that should be considered: • Electronic links may first be established between the relatively developed exchanges, and then could be expanded by the participation of the other OIC members’ stock exchanges. • Each participant exchange is expected to allow blue-chip stocks to be traded through this platform. • The list of selected stocks could be made available on data vendors, preferably in real-time. • The management of the IT infrastructure should be carried out by an independent technology provider.
Federation of Euro-Asian Stock Exchanges / Fall 2012
Challenges For making any trading linkage, it is needed to plan and invest, particularly in infrastructure development, and associated policies. The blow challenges and barriers were identified in linking OIC member’s exchanges that should be managed:
27
3. An Islamic financial system needs sound and mutual-accepted accounting procedures and standards. Western accounting procedures are not adequate because of the different nature and treatment of financial instruments.
1. A uniform regulatory and legal framework supportive of an Islamic financial system has not yet been developed;
4. Islamic institutions have a shortage of trained personnel who can analyze and manage portfolios, and develop innovative products according to Islamic financial principles.
2. The pace of innovation is slow. For years, the market has offered the same traditional instruments;
5. There is lack of uniformity in the religious principles applied in Islamic countries.
6. The absence of large and active domestic institutional investors; 7. Grey areas of legislation due to inconsistencies in the legal and regulatory framework; 8. Poor or non-existent corporate governance standards; 9. Political inconsistency among some of OIC members
The Proposed Model Country X Stock Exchange X
Investor X
through brokerage house X
Brokerage House X order router
Gateway
Country Y
Brokerage House Y
Stock Exchange Y
Investor Y
through brokerage house Y
Risk management Once the participant identified, the order is submitted to risk analysis, conducted by Brokerage House Y
Agreement
The order routing system recognizes that it is an order related to the Stock Exchange Y market and routes it to the Stock Exchange Y
order book
Clearing&Settlement Brokerage House X signs an agreement with a brokerage house Having passed the risk criteria, from Country Y, all trades via the e-link is cleared the order is included in the & settled through order book Brokerage House Y.
28
FEAS Region Statistics
Federation of Euro-Asian Stock Exchanges / Fall 2012
Federation of Euro-Asian Stock Exchanges / Fall 2012
29
Statistical Comparison 2008 THRU YTD 2012 / FEAS REGION Category
2008
# Companies Traded Market Capitalization (US$ Millions) Total Volume (US$ Millions-Stocks) Total Volume (# Shares Millions-Stocks) Average Daily Volume (US$ Millions-Stocks) Average Daily Volume (# Shares Millions-Stocks) Total Volume (US$ Millions-Bonds) Total Volume (# Shares Millions-Bonds) Average Daily Volume (US$ Millions-Bonds) Average Daily Volume (# Millions-Bonds) Total Volume (US$ Millions-Other) Total Volume (# Millions-Other) Average Daily Volume (US$ Millions-Other) Average Daily Volume (# Millions-Other)
2009
Statistics 2010
2011
YTD 2012
11,298 10,261 10,504 9,716 9,581 559,951.0 756,336.7 866,664.0 693,072.1 761,652.9 562,159.6 480,548.1 528,779.2 496,631.1 241,015.7 452,445.8 643,070.6 666,820.0 848,330.7 451,355.5 2,269.1 1,921.8 2,126.6 1,978.1 1,617.4 2,306.7 3,196.3 2,741.7 3,555.3 3,198.6 453,592.0 330,879.4 337,498.9 317,633.5 129,989.8 222,225.0 131,256.0 194,525.4 564,840.4 87,040.5 1,819.7 1,319.1 1,360.7 1,260.3 880.6 892.6 527.3 801.1 2,286.7 609.9 2,284,445.1 2,075,692.5 2,715,695.7 2,385,919.7 2,382,286.9 4,142.5 8,454.4 6,334.6 3,952.4 1,064.5 9,146.2 8,247.4 10,986.1 9,451.9 15,914.5 17.23 34.09 25.81 16.40 7.52
YTD 2012 % Change over 2011 2010 2009 2008 -1.4% 9.9% -51.5% -46.8% -18.2% -10.0% -59.1% -84.6% -30.1% -73.3% -0.2% -73.1% 68.4% -54.1%
-8.8% -12.1% -54.4% -32.3% -23.9% 16.7% -61.5% -55.3% -35.3% -23.9% -12.3% -83.2% 44.9% -70.9%
-6.6% 0.7% -49.8% -29.8% -15.8% 0.1% -60.7% -33.7% -33.2% 15.7% 14.8% -87.4% 93.0% -77.9%
-15.2% 36.0% -57.1% -0.2% -28.7% 38.7% -71.3% -60.8% -51.6% -31.7% 4.3% -74.3% 74.0% -56.4%
1995-2012 YTD YE Market Capitalization (US$ millions) 761,653
2012 YTD 2011
693,072
2010
866,664
2009
756,337
2008
559,951
2007
1,065,337
2006
688,867
2005
638,041
2004
377,280
2003
229,310
2002 2001
138,160 109,411
2000
139,593
1999 1998
201,341 100,183
1997 1996 1995
139,714 101,804 69,779
30
Federation of Euro-Asian Stock Exchanges / Fall 2012
Dow Jones FEAS Indices Dow Jones FEAS Benchmark Composite Index Performance (in US$) $160
$5K
$138
$4K
$116
$3K
$94
$2K
$72
$1K
$50
$0K 1/1/09
15/5/09
22/9/09
8/1/10
28/4/10
Dow Jones FEAS Composite
13/8/10
12/6/10
31/3/11
Dow Jones Global
19/7/11
29/11/11
22/3/12
30/8/12
Dow Jones Emerging Last Updated Thursday, 30/08/2012
Dow Jones FEAS Titans 50 Equal Weighted Index Performance (in US$) $1.6K
$5K
$1.5K
$4.2K
$1.4K
$3.4K
$1.3K
$2.6K
$1.2K
$1.8K
$1.1K
$1K
9/11/11
5/12/11
25/12/11
12/1/12
1/2/12
Dow Jones FEAS Titans 50
20/2/12
19/3/12
Dow Jones Global
13/4/12
11/5/12
14/6/12
18/7/12
30/8/12
Dow Jones Emerging Last Updated Thursday, 30/08/2012
1. The Dow Jones FEAS IndexesSM are calculated, distributed and marketed by Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC, pursuant to an agreement with the Federation of Euro-Asian Stock Exchanges. “FEAS” is a service mark of the Federation of EuroAsian Stock Exchanges. “Dow Jones®”, “Dow Jones Indexes” and “Dow Jones FEAS IndexesSM” are service marks of Dow Jones Trademark Holdings, LLC. “CME” is a trademark of Chicago Mercantile Exchange Inc. All content of the Dow Jones FEAS Indexes © CME Group Index Services LLC 2011.
Federation of Euro-Asian Stock Exchanges / Fall 2012
31
2012 Annualized Return on Index
MOSTE/Montenegro
99.8
ISE 100/Istanbul
40.2
Egyptian SE Egypt
33.4
LSE 25/Lahore
24.6
B.I./Macedonia
23.7
KSE 100/Karachi
21.8
ADX/Abu Dhabi
4.3
Bahrain
-0.3
BET/Romania
-3.0
KSE Index/Kyrgyz
-3.6
Belarusian C&SE Belarus
-4.1
Muscat SM Oman
-5.9
Amman SE Jordan
-7.1
CROBEX/Zagreb
-7.3
Al Quds/Palestine
-7.3
BSE/Bulgaria
-7.51
Tehran SE Iran
-8.3 -14.2
Kazakhstan Iraq/Iraq
-16.0
SASX/Sarajevo
-17.2
BIRS/Banja Luka
-19.4
DSE Weighted Index/ Syria
-19.5
Belex15/Serbia
-26.3
Indices are adjusted for currency fluctuations. (Formula: 1+(return)=((1+%chg. index)/(1+%chg. currency))
32
Federation of Euro-Asian Stock Exchanges / Fall 2012
Eurasian Trading Systems (ETS) Gold Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12
Futures Market (US$)
171,282,083 224,696,531 216,255,555 128,253,025 40,389,873 6,146,093
Silver
Oil
106,885,075 105,417,053 99,762,514 47,580,882 16,200,642 185,532
132,080,323 166,516,843 155,148,593 68,876,159 22,526,428 4,731,691
Spot Market Data (US$) Agricultural Trade Petroleum Trade Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12
31,358,545 57,422,214 20,213,400 49,110,506 8,581,280 15,913,086
Industrial Trade
27,494,444 35,169,087 29,018,312 20,535,697 14,839,183 1,306,833
20,672,308 16,646,356 21,923,973 16,791,261 17,017,436 16,716,219
Turkish Derivatives Exchange - Open Interest – TurkDEX (Number of Contracts Traded) Feb 2012 ISE-100 Index Futures ISE-30 Index Futures ISE 30-100 Index Spread U.S.Dollar Futures EURO Futures Euro/USDollar Cross Currency T-Benchmark Futures Cotton Wheat Gold USDollar/Ounce Gold Base Load Electricity Physically Delivered Live Cattle Futures TURKISH DERIVATIVES EXCHANGE (TurkDEX)
Equity Equity Equity Foreign Foreign Foreign Interest Agriculture Agriculture Precious Metal Precious Metal Energy Agriculture
397 5,007,661 108 1,169,656 59,560 100,980 4,316 78,749 120 6,421,427 6,421,427
Mar 2012 373 4,480,220 163 962,841 68,557 118,327 4,539 119,917 139 5,755,076 5,755,076
Apr 2012 439 4,622,382 243 1,090,563 46,941 87,433 4,772 83,399 198 5,936,370 5,936,370
May 2012 415 4,477,918 191 1,113,205 29,009 76,847 6,276 133,868 53 5,837,782 5,837,782
Jun 2012
Jul 2012
911 4,004,425 239 1,141,063 37,893 99,093 4,714 116,092 39 5,404,469 5,404,469
54 216,194 58 97,812 6,477 8,903 610 8,952 56 339,116 339,116
Istanbul Gold Exchange: Official 12 Month Statistics Gold Transactions - Istanbul Gold Exchange Volume (US$) Avg. Daily Volume (US$) Total Volume (kg) Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12
827,804,750.0 1,065,988,777.0 1,276,696,103.00 2,185,062,933.00 2,098,675,032.00 2,246,894,588.00
39,419,273.8 48,454,035.3 63,834,805.15 99,321,042.00 99,936,906.00 102,131,572.18
14,699.0 19,778.0 24,041.00 42,823.00 41,029.00 43,799.00
Silver Transactions - Istanbul Gold Exchange Volume (US$) Avg. Daily Volume (US$) Total Volume (kg) Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12
67,318,158.0 40,903,776.0 38,496,057.0 27,464,232.0 24,280,728.0 23,676,437.0
3,205,626.6 1,859,262.5 1,924,802.9 1,248,374.0 1,156,225.0 1,076,201.7
61,195.0 38,720.0 38,139.0 29,660.0 26,879.0 26,123.0
Avg. Daily Volume (kg) 700.0 899.0 1,202.05 1,947.00 1,954.00 1,990.86
Avg. Daily Volume (kg) 2,914.0 1,760.0 1,907.0 1,348.0 1,280.0 1,187.4
Federation of Euro-Asian Stock Exchanges / Fall 2012
33
Monthly Stock Volume vs Market Capitalization 820,000
45,000
800,000
40,000
780,000
35,000
760,000
30,000
740,000
25,000
720,000
20,000
700,000
15,000
680,000
10,000
660,000
5,000
640,000
0 Market Capitalization (US$ Millions)
Volume (US$ Millions)
Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 Jan-2012 Feb-2012 Mar-2012 Apr-2012 May-2012 Jun-2012 Jul-2012
1995-2012 YTD Traded Companies 11,298
12,000
10,318
10,000
8,849
9,794
80,000 6,210
60,000 40,000
4,075
9,498 7,300
7,319
7,653
2001
2002
2003
8,003
8,348 8,232
2004
2005
10,261 10,504
9,716
9,581
5,074
20,000 0 1995
1996
1997
1998
1999
2000
2006
2007
2008
2009
2010
2011 YTD 2012
2006
2007
2008
2009
2010
2011 YTD 2012
1995-2012 YTD Volume by Type 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Stocks
1995
1996
1997
1998
1999
2000
2001
2002
Bonds
2003
2004
Other
2005
34
Federation of Euro-Asian Stock Exchanges / Fall 2012
Average Daily Trading Volume-Stocks YTD 2012 vs YTD 2011 Members over US$ 12.5 (US$ millions) YTD 2012
Members from US$ 1.4-10.0 (US$ millions)
YTD 2011
YTD 2012
1,327.58 Istanbul SE
1,962.42 90.24
Egyptian Exchange
94.55
Karachi SE Abu Dhabi Securities Exchange Amman SE
7.09 12.11 6.67 5.87
Iraq SE
61.92
Bulgarian SE
3.08 3.14 2.42 3.74
53.54
2.40
Zagreb SE
23.91 33.28
Bahrain Bourse
11.51
Palestine Exchange
18.81
YTD 2012
5.02 1.56 1.01 1.19 1.66
Members under US$ 0.2 (US$ millions)
YTD 2011
YTD 2012
1.19
Sarajevo SE
YTD 2011
0.18
Damascus Securities Exchange
0.29
0.92
1.00
Belgrade SE
1.63
Moldovan SE
0.16 0.06
0.72
Baku SE
0.69 1.05 0.27 0.27 0.29 0.22 0.09
0.22 0.11
Montenegro SE
0.17
Toshkent Republican SE
0.14
Macedonian SE
0.69
Lahore SE
Kyrgyz SE
14.64
Muscat Securities Market
96.03
Members from US$ 0.2-.95 (US$ millions)
Belarusian Currency & SE
9.45
Bucharest SE
Kazakhstan SE
64.27
Tehran SE
YTD 2011
0.33 0.09
Banja Luka SE
Georgian SE
0.23 0.07 0.01
Federation of Euro-Asian Stock Exchanges / Fall 2012
35
Average Daily Trading Volume-Bonds YTD 2012 vs YTD 2011 Members over US$ 500 (US$ millions) YTD 2012
Members from US$ 2.2-45.0 (US$ millions)
YTD 2011
YTD 2012
768.49
Istanbul SE
1,331.84
YTD 2011
40.02
Kazakhstan SE
39.27 26.67
Egyptian Exchange
25.96
Belarusian Currency & SE
23.05 33.67 16.87
Baku SE
Bucharest SE
Members from US$ 0.18-0.50 (US$ millions) YTD 2012
Abu Dhabi Securities Exchange
YTD 2012
0.45 0.20
YTD 2011
0.18 0.15
Muscat Securities Market
0.43
0.16 0.11 0.11
Macedonian SE
0.13
0.38 Tehran SE
0.16
0.10 0.00 0.05
Toshkent Republican SE
0.32
Banja Luka SE
0.24
0.41
0.04 0.05
NASDAQ OMX Armenia
0.25 Bulgarian SE
0.46
Belgrade SE
0.52
Karachi SE
2.92
Members under US$ 0.19 (US$ millions)
YTD 2011
Zagreb SE
9.97
0.50
Kyrgyz SE
0.01 0.01
36
Federation of Euro-Asian Stock Exchanges / Fall 2012
Average Daily Trading Volume-Other YTD 2012 vs YTD 2011 Members over US$ 650 (US$ millions) YTD 2012
YTD 2011
YTD 2012
15,206.39
Istanbul SE
Kazakhstan SE
Members from US$ 8.9-121.0 (US$ millions)
7,637.69
YTD 2011
125.79
Belarusian Currency & SE
60.26
459.87
55.48
Baku SE
769.63
32.65
50.50
NASDAQ OMX Armenia
Egyptian Exchange
Members under US$ 1.0 (US$ millions) YTD 2012
YTD 2011
0.93 Bucharest SE
0.32
0.06 Bulgarian SE
Tehran SE
0.02
0.02 0.08
30.12
10.80 12.48
Federation of Euro-Asian Stock Exchanges / Fall 2012
37
Stocks
Member Stock Exchange Abu Dhabi Securities Exchange UAE Amman SE Jordan Baku Interbank Currency Exchange Azerbaijan (1) Bahrain Bourse Bahrain Baku SE Azerbaijan Banja Luka SE Bosnia & Herzegovina Belarusian Currency & SE Belarus (2) Belgrade SE Serbia Bucharest SE Romania Bulgarian SE Bulgaria Damascus Securities Exchange Syria Egyptian Exchange Egypt Georgian SE Georgia Iraq SE Iraq Istanbul SE Turkey Karachi SE Pakistan Kazakhstan SE Kazakhstan Kyrgyz SE Kyrgyzstan Lahore SE Pakistan Macedonian SE Macedonia (3) Moldovan SE Moldova Montenegro SE Montenegro Muscat Securities Market Oman (4) NASDAQ OMX Armenia (5)
Same Same Same Period Period Period Previous Previous Previous Avg. Daily Previous Previous Year Volume Month Year Volume Month Year Change (#) Change Change ($) Change Change (%) (Millions) (%) (%) (Millions) (%) (%)
Avg. Daily YE 2011 Volume Change (#) (%) (Millions)
Previous Month Change (%)
Same Period Previous Year Change (%)
YTD 2012 Change (%)
Volume ($) (Millions)
Previous Month Change (%)
290.0
-14.2
-34.5
694.7
-13.1
-32.7
12.6
-29.1
-40.2
-28.1
30.2
-28.2
-38.5
10.6
193.6
4.2
-41.7
194.6
24.9
-40.1
8.4
-9.4
-46.8
-38.8
8.5
8.6
-45.3
-47.4
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
6.7
-94.8
-41.6
11.0
-95.2
-66.0
0.3
-95.5
-46.7
54.6
0.5
-95.8
-69.0
28.1
31.0
201.7
93.7
1.4
149.8
26.6
1.9
239.4
142.2
4.3
0.09
181.1
58.2
-61.1
1.4
47.0
-21.8
24.5
462.8
251.8
0.06
33.6
-25.3
-61.6
1.1
411.6
235.8
-46.1
3.3
-57.8
23.3
1.45
-55.2
310.8
0.2
-53.6
29.5
62.6
0.1
-50.7
331.4
1,419.7
60.0
677.8
290.9
7.1
612.5
427.4
2.7
642.5
273.1
-38.9
0.32
580.1
403.4
-5.4
138.6
-29.2
-51.8
935.0
13.7
-38.0
6.3
-35.6
-54.0
-35.5
42.5
3.4
-40.9
-22.4
70.5
70.2
207.4
81.7
33.1
312.1
3.2
62.5
193.4
-35.4
3.7
27.1
293.4
-34.5
0.4
-65.1
-96.5
0.3
-14.5
-90.5
0.03
-70.1
-94.7
-80.9
0.02
-26.7
-85.7
-5.0
1,295.7
48.1
-10.1
3,287.2
108.2
90.2
61.7
34.0
-14.3
-4.6
156.5
88.4
81.1
24.5
0.03
-99.3
-81.6
2.24
417.1
84.5
0.003
-99.34
-81.6
361.3
0.17
417.1
84.5
3.8
74.9
32.3
76.2
69,159.3
13.7
91.6
3.4
14.3
60.1
-1.9
3,143.6
-1.8
74.1
20.6
24,629.5
-6.4
-3.0
12.7
-0.6
-99.9
15,743.6
1,155.9
162.8
-32.3
0.6
-5.1
-99.89
-99.9
941.6
22.1
22.9
2,494.0
-12.0
48.7
42.8
16.6
17.3
15.7
113.4
-16.0
41.9
85.0
55.8
170.6
440.3
205.8
-5.63
117.6
2.7
170.6
414.6
13.7
9.8
-5.6
107.2
28.8
25.9
13,600.4
1,601.2
155.1
5,622.6
2,011.3
1.18
12,977.7
1,523.8
141.6
7.1
5,362.5
1,915.3
-34.4
8.3
32.5
-36.2
44.3
14.5
-13.6
0.4
26.5
-39.1
-33.7
2.0
9.2
-17.6
27.1
1.9
-3.9
-42.9
0.2
39.5
90.0
0.1
-12.7
-45.5
-34.6
0.01
26.8
81.4
8.6
16.2
244.3
1,114.8
0.9
-73.6
-87.8
0.74
228.7
1,059.6
179.3
0.04
-74.8
-88.4
-55.6
2.8
64.8
-68.8
30.5
1,267.5
324.3
0.13
64.8
-73.3
-67.5
1.5
1,267.5
263.7
27.6
128.3
-41.6
39.0
250.9
-45.6
166.4
5.8
-49.6
26.3
-41.4
11.4
-53.0
142.2
20.8
0.0
-93.7
-99.4
0.00
-93.7
-99.4
0.0
-93.7
-99.4
-25.3
0.0000005
-93.7
-99.4
731.8
Palestine Exchange Palestine
7.8
-53.4
-64.6
5.4
-95.6
-51.4
0.3
-61.5
-67.7
-27.9
0.2
-96.3
-55.6
53.4
Sarajevo SE Bosnia & Herzegovina(6) Tehran SE Iran (7) Tirana SE Albania Toshkent Republican SE Uzbekistan Zagreb SE Croatia
1.5
-29.0
-76.1
0.3
-49.2
-76.1
0.07
-32.2
-77.2
-59.8
0.01
-51.6
-77.2
-56.1
TOTAL
1,051.6
32.5
-47.2
5,844.5
20.8
5.5
45.7
3.7
-51.8
-33.1
254.1
-5.5
-3.7
-9.8
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
-100.0
-100.0
0.0
-100.0
-100.0
0.0
-100.0
-100.0
-8.1
0.0
-100.0
-100.0
-39.4
39.4
48.3
-42.1
6.0
211.1
136.2
1.8
21.3
-44.7
-52.1
0.3
154.6
125.5
125.2
29,076.7
-3.2
-6.3
83,451.2
14.2
40.3
15,946.2
1,002.5
154.6
-30.0
3,787.6
-1.4
29.6
-10.2
1. In total trades of BBVB on US dollar in June, 2012 has taken part 10 banks. For the given month were carried out 44 trading sessions and were made 45 deals. The total amount of trades in currency section of BBVB in last month has made 68.583 million AZN, and in a dollar equivalent of 87.336 million. It is necessary to note, that average US$/AZN rate has made in June 0.7853 AZN for 1 US$. 2. * “Other” instruments refer to currency and futures market (only turnover), and OTC market registration totals (purchase and sale of bonds and stocks of open JSC) in a dollar equivalent ** Number of companies includes number of Issuers of both stocks and bonds. 3. As from March 01, 2012, BSE-Sofia has introduced new market segmentation and has started to operate two markets – Main BSE Market and Alternative BaSE Market. In this reference, from now on, we shall present as “listed” the companies, whose shares are traded on the BSE market, while as “registered” we shall present the companies, whose shares are traded on the BaSE market. 4. The market capitalization includes the closely held companies. 5. Since the Central Bank of Armenia does not disclose information on the “buy” exchange rate of AMD to the US$, official exchange rates were used in calculations. Value traded for Bonds
and Stocks include values of the trades concluded through manual trades mechanism. “Bonds” includes trading statistics of Corporate and Government Bonds markets. “Other” includes trading statistics of FX market, Credit Resources market and Repo agreements statistics. Starting from 2011 Market capitalization calculation includes only stocks traded through continuous two-way auction. 6. The Sarajevo SE is now publishing the data of its SASX (primary) index rather than the BIFX index (secondary). 7. Abyek Cement Co. is prelisted but not listed. 8. % change calculations on indices do not take into account currency fluctuations on this table. See Charts - Adjusted Return on Index. 9. Currency depreciation against the dollar is represented as a positive number, appreciation as negative. 10. Companies are those available for trading via both listed and unlisted or registered markets. * Statistics provided herein are as reported by the Members and are not audited by the FEAS Secretariat.
38
Federation of Euro-Asian Stock Exchanges / Fall 2012
Market Cap.
(US$ Millions)
Member Stock Exchange
Index
Same Period Market Previous Previous Y/E Cap. Month Year 2011 ($) Change Change Change Millions) (%) (%) (%)
Index
Exchange Rate (US$ 1)
Companies
Same Same Same Period Period Period Previous Previous Previous Previous Y/E Y/E Comp. Previous Previous Y/E Month Month 2011 2011 Listed/ Month Year 2011 Year Year Change Change Change Exchange Change Change Change Unlisted Change Change Change (10) Rate (%) (9) (%) (8) (%) (8) (%) (9) (%) (%) (%) (%) (8) (%) (9)
ADX UAE
75,493.8
0.9
-1.4
5.84
2,506.2
2.4
-4.3
4.3
3.7
0.0
0.0
0.0
52.0
-22.4
-20.0
-22.4
Amman SE Jordan
25,682.6
-0.8
-9.4
-5.5
1,852.5
-1.6
-11.1
-7.1
0.7
0.0
0.0
0.0
245.0
-0.4
-2.0
-0.8
BBVB Azerbaijan
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.8
-0.01
-0.1
-0.1
43.0
-2.3
-2.3
-2.3
Bahrain SE Bahrain
16,013.4
-2.9
-14.7
-3.7
1,139.8
1.2
-11.8
-0.3
0.4
0.0
0.0
0.0
26.0
-3.7
-7.1
-7.1
Baku SE Azerbaijan
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.8
0.0
-0.1
-0.1
2.0
0.0
0.0
0.0
Banja Luka SE Bosnia & Herzegovina
2,176.8
-2.8
-22.6
-9.9
500.2
-3.7
-30.5
-14.1
1.6
3.00
16.3
6.6
837.0
0.2
-3.5
-2.6
Belarusian C & SE Belarus
4,424.9
1.3
#N/A
#N/A
66.5
-1.9
-31.2
-5.3
8,250.0
-0.8
66.7
-1.2
2,455.0
-0.1
8.8
1.5
Belgrade SE Serbia & Montenegro
6,366.0
-2.1
-41.3
-23.9
435.4
-0.1
-38.9
-12.7
95.8
4.0
34.5
18.5
1,178.0
-2.1
-17.9
-12.0
Bucharest SE Romania
21,242.7
-1.6
-42.9
0.2
4,693.4
3.6
-12.2
8.2
3.7
5.3
25.5
11.5
81.0
0.0
3.8
2.5
Bulgarian SE Bulgaria
6,734.9
8.9
-17.1
-17.8
313.6
7.03
-24.8
-2.6
1.6
1.4
16.4
5.3
395.0
0.3
1.0
0.5
Damascus SE Syria
1,211.8
-3.9
-38.2
-18.6
826.0
-2.1
-17.8
-5.0
65.5
2.0
39.3
18.0
22.0
0.0
10.0
4.8
Egyptian SE Egypt
55,989.4
-0.1
-13.2
15.0
4,862.5
3.3
-3.4
34.2
6.1
#N/A
1.9
0.7
426.0
#N/A
100.9
108.8
Georgian SE Georgia
859.8
-0.1
-17.2
8.1
86.3
-10.7
-19.5
9.4
1.7
1.1
0.3
-1.2
133.0
0.0
-2.2
-1.5
3,291.4
-6.4
-19.8
-19.9
114.2
-1.58
-19.8
-16.0
1,200.0
0.0
0.0
0.0
69.0
7.8
25.5
23.2
Istanbul SE Turkey
279,003.5
9.0
2.7
38.1
2,094.7
3.9
-3.4
32.5
1.8
-1.1
6.8
-5.4
392.0
2.3
10.1
8.0
Karachi SE Pakistan
39,327.8
5.3
5.7
19.9 14,577.0
5.6
19.6
28.5
94.7
0.5
9.4
5.46
592.0
0.3
-7.2
-7.2
Kazakhstan SE Kazakhstan
35,864.9
-1.2
-34.2
-17.2
960.3
-2.1
-37.1
-13.1
149.9
0.5
2.6
1.3
109.0
0.0
0.9
-4.4
Kyrgyz SE Kyrgyzstan
159.1
0.2
8.7
-3.6
215.3
0.0
14.9
-2.2
47.1
-0.2
5.7
1.4
31.0
-20.5
-16.2
-8.8
Lahore SE Pakistan
36,767.5
6.1
2.8
17.7
3,659.2
6.3
18.6
31.0
94.5
-0.1
9.2
5.1
460.0
0.2
-7.3
-7.3
2,144.0
-2.6
-27.5
-14.4
1,797.0
-3.3
-28.2
30.7
50.2
1.2
16.3
5.7
68.0
4.6
-5.6
-2.9
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
12.5
2.3
10.0
7.1
1,012.0
-0.3
-0.9
-0.5
3,322.8
-0.1
-21.4
0.0
8,280.1
-6.1
-26.3
94.1
1.2
-2.2
-13.7
-2.9
40.0
-24.5
-23.1
-27.3
28,332.2
-2.0
7.70
5.5
5,358.3
-5.8
-7.7
-5.9
0.4
0.0
0.0
0.0
115.0
-50.0
-3.4
0.9
Iraq SE Iraq
Macedonian SE Macedonia Moldovan SE Moldova Montenegro SE Montenegro Muscat SM Oman Armenian SE Armenia
145.2
2.6
6.3
4.0
0.0
#N/A
#N/A
#N/A
407.6
-2.5
12.1
5.7
11.0
0.0
0.0
0.0
Palestine Xchange Palestine
2,637.6
-0.8
-6.7
-5.2
442.3
-0.4
-10.6
-7.3
0.7
0.0
0.0
0.0
48.0
2.1
4.3
4.3
Sarajevo SE Bosnia & Herzegovina
-8.9
686.7
2.5
-32.2
-13.2
1.6
0.65
15.5
4.9
172.0
-0.6
-71.9
12.4
-2.3
-2.1
0.7
12,260.0
0.0
16.3
9.8
341.0
0.3
-0.9
-1.7
2,643.0
3.1
-52.4
Tehran SE Iran
90,907.1
-6.7
-14.2
-15.2 24,584.0
Tirana SE Albania
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
112.0
1.9
14.0
4.1
0.0
#N/A
#N/A
#N/A
Toshkent RSE Uzbekistan
0.0
-100.0
#N/A
-100.0
0.0
-100.0
-100.0
-100.0
0.0
#N/A
-100.0
-100.0
0.0
#N/A
-100.0
-100.0
20,911.0
-1.0
-21.3
-6.9
1,698.2
0.3
-21.9
-2.4
6.1
2.5
17.8
5.2
226.0
-0.4
-5.8
-3.0
756,016.2
1.9
-8.8
9.6
9,581.0
-3.0
-8.28
-4.65
Zagreb SE Croatia TOTAL
Federation of Euro-Asian Stock Exchanges / Fall 2012
39
Bonds
Member Stock Exchange Abu Dhabi Securities Exchange UAE Amman SE Jordan Baku Interbank Currency Exchange Azerbaijan Bahrain Bourse Bahrain Baku SE Azerbaijan Banja Luka SE Bosnia & Herzegovina Belarusian Currency & SE Belarus
Volume ($) (Millions)
Same Period Previous Previous Month Year Volume Change Change (#) (%) (%) (Millions)
Same Same Period Period Previous Previous Avg. Daily Previous Previous Month Year Volume Month Year Change Change ($) Change Changes (%) (%) (Millions) (%) (%)
YTD 2012 Change (%)
Same Period Avg. Daily Previous Previous Volume Month Year (#) Change Change (Millions) (%) (%)
YTD 2012 Change (%)
10.5
41.9
530.8
0.4
37.8
-73.9
2.6
183.7
43.4
122.7
0.11
175.6
43.4
-25.8
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
233.9
30.9
8.9
1.35
6.4
-0.4
19.5
9.1
24.5
69.2
0.1
-11.4
24.5
84.9
3.8
185.8
-83.5
14.7
243.1
94.4
0.2
185.8
113.8
-22.3
0.7
243.1
113.8
36.3
639.3
3.0
-33.8
17.8
30.1
-53.1
29.1
-1.7
-53.1
-31.5
0.8
24.1
-53.1
-28.4
Belgrade SE Serbia
2.4
241.1
29.4
2.2
251.4
50.9
0.11
241.1
58.1
17.2
0.1
251.4
58.1
39.8
Bucharest SE Romania
74.7
272.1
2,946.4
0.026
278.6
117.8
6.2
303.1
281.1
540.3
0.002
310.2
281.1
-56.2
Bulgarian SE Bulgaria Damascus Securities Exchange Syria Egyptian Exchange Egypt
8.25
80.1
-32.1
0.009
141.5
5.4
0.39
71.5
10.4
-50.9
0.0004
130.0
10.4
19,067.6
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
942.3
-15.0
98.6
5.4
-15.2
84.4
49.6
-1.5
113.6
2.7
0.3
-1.8
113.6
242.1
Georgian SE Georgia
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
Iraq SE Iraq
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
Istanbul SE Turkey
18,380.0
52.8
-15.9
0.02
-0.3
-23.6
875.2
60.1
-20.0
-42.3
0.001
4.5
-20.0
-32.4
Karachi SE Pakistan
7.4
-32.0
-44.6
0.2
-25.7
-29.0
0.4
-28.7
-25.6
131.9
0.01
-22.2
-25.6
178.2
Kazakhstan SE Kazakhstan
768.5
-21.8
2.3
8,406.9
-46.0
-94.7
36.6
-21.8
-94.5
1.9
400.3
-46.0
-94.5
-82.5
Kyrgyz SE Kyrgyzstan
0.19
102.3
728.2
0.008
123.9
3,735.7
0.009
102.3
3,918.4
-7.4
0.0004
123.9
3,918.4
355.5
Lahore SE Pakistan
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
Macedonian SE Macedonia
3.8
-9.6
390.8
3.4
-9.6
453.2
0.2
-5.1
480.8
-16.2
0.2
-5.1
480.8
-11.0
Moldovan SE Moldova
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
-100.0
0.0
#N/A
#N/A
-100.0
Montenegro SE Montenegro
0.0
-85.4
-88.1
0.2
-28.0
-61.8
0.00
-86.8
-60.0
-61.0
0.01
-34.8
-60.0
-52.1
Muscat Securities Junket Oman
1.3
-34.6
1,184.8
0.4
-89.5
363.0
0.1
-15.0
872.3
40.4
0.04
-86.3
872.3
6,234.52
NASDAQ OMX Armenia
0.4
-56.9
99.2
1.7
-52.4
478.9
0.02
-59.0
506.4
-14.0
0.1
-54.7
506.4
604.2
Palestine Exchange Palestine
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
Sarajevo SE Bosnia & Herzegovina
0.7
-26.0
-67.0
1.4
-46.6
-68.4
0.03
-26.0
-66.8
-56.7
0.07
-46.6
-66.8
-60.5
Tehran SE Iran
0.3
-95.7
#N/A
0.000004
-100.0
#N/A
0.02
-99.3
#N/A
139,677.2
0.0000002
-100.0
#N/A
44,330.0
Tirana SE Albania
0.0
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
Toshkent Republican SE Uzbekistan
5.9
#N/A
#N/A
0.01
#N/A
#N/A
5.9
#N/A
#N/A
-78.9
0.01
#N/A
#N/A
-78.1
Zagreb SE Croatia
9.3
84.4
-52.2
7.8
-24.6
-70.6
0.5
125.3
-67.3
-16.0
0.44
-7.9
-67.3
30.0
21,092.9
40.7
-13.5
8,463.9
-45.8
-94.7
982.0
47.1
-94.5
-39.0
403.3
-45.8
-94.5
-82.1
TOTAL
1. The TSE is trading debt instruments only at this time, but there is no volume to-date. * Statistics provided herein are as reported by the Members and are not audited by the FEAS Secretariat.
40
Federation of Euro-Asian Stock Exchanges / Fall 2012
Others
Member Stock Exchange Abu Dhabi Securities Exchange UAE Amman SE Jordan Baku Interbank Currency Exchange Azerbaijan Bahrain Bourse Bahrain Baku SE Azerbaijan Banja Luka SE Bosnia & Herzegovina Belarusian Currency & SE Belarus Belgrade SE Serbia Bucharest SE Romania Bulgarian SE Bulgaria Damascus Securities Exchange Syria Egyptian Exchange Egypt Georgian SE Georgia Iraq SE Iraq Istanbul SE Turkey Karachi SE Pakistan Kazakhstan SE Kazakhstan Kyrgyz SE Kyrgyzstan Lahore SE Pakistan Macedonian SE Macedonia Moldovan SE Moldova Montenegro SE Montenegro Muscat Securities junket Oman NASDAQ OMX Armenia Palestine Exchange Palestine Sarajevo SE Bosnia & Herzegovina Tehran SE Iran Tirana SE Albania Toshkent Republican SE Uzbekistan Zagreb SE Croatia TOTAL
Volume ($) (Millions)
Same Period Previous Previous Month Year Volume Change Change (#) (%) (%) (Millions)
Same Same Same Period Period Period Previous Previous Avg. Daily Previous Previous Avg. Daily Previous Previous Month Year Volume Month Year YTD 2012 Volume Month Year Change Change ($) Change Change Change (#) Change Change (%) (%) (Millions) (%) (%) (%) (Millions) (%) (%)
YTD 2012 Change (%)
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
102.7
3.7
1.3
0.1
3.7
1.3
5.4
14.6
6.6
-16.0
0.005
14.6
6.6
-16.0
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
1,008.6
-15.2
133.7
7.9
-15.2
132.9
53.1
-6.3
133.7
69.9
0.4
-6.3
132.9
68.8
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
-100.0
0.0
#N/A
#N/A
#N/A
2,827.8
-4.5
138.6
2.0
35.6
-99.0
128.5
-8.8
138.6
108.7
0.1
29.4
-99.0
-93.9
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
16.9
-35.3
62.5
2.1
-42.7
138.1
0.8
-28.8
70.6
192.6
0.1
-37.0
150.0
262.3
0.8
-29.2
78.6
5.0
16.6
211.9
0.04
-32.6
87.1
197.0
0.2
11.0
226.8
-61.0
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
214.1
100.3
-60.1
126.6
72.7
-30.6
11.3
131.9
-53.8
-13.5
6.7
100.0
-19.6
-57.8
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
319,401.6
2.1
125.1
0.1
-6.9
71.0
15,209.6
7.0
135.9
99.1
0.005
-2.4
79.1
62.6
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
14,266.0
885.8
-9.1
0.0
#N/A
#N/A
679.3
885.8
-4.7
-40.2
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
-100.0
0.0
#N/A
#N/A
-100.0
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
1,712.4
1,035.7
106.5
79.9
0.7
27.0
81.54
981.6
116.3
67.7
3.8
-4.1
33.1
-7.7
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.38
1,662.0
-92.1
0.00002
185.7
-98.3
0.188
4,305.1
-24.9
-72.2
0.00001
614.3
-84.0
-76.5
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
0.0
#N/A
#N/A
#N/A
339,551.3
6.5
111.3
223.8
30.4
-51.4
#N/A
11.52
121.3
86.2
11.3
38.1
-46.0
-52.0
1. “Other” instruments refer to the OTC market registration totals (purchase and sale of bonds and stocks of open JSC) in a dollar equivalent. Number of companies includes number of Issuers of both stocks and bonds. 2. EGX other volume this month stands for OTC and funds. 3. MSM carries out OTC transactions for closely held companies, which primarily transfers ownership between family members.
4. Other instruments include FX and repo agreements with corporate bonds. Since the Central Bank of Armenia does not disclose information on “buy” exchange rate, official exchange rates were used in calculations. * Statistics provided herein are as reported by the Members and are not audited by the FEAS Secretariat.
Federation of Euro-Asian Stock Exchanges
Fall 2012
Exchange Connectivity: Panacea or Pandora’s Box?
Connectivity and Linkages: ‘The Only Game in Town’ Linking Post Trade Participants Developing Inter-Market Connectivity and the Importance of Custodian’s Role Country Focus: Bulgaria
