Baku Stock Exchange celebrates first anniversary

Baku’s fledgling stock exchange, known as BSE, has recently celebrated its first anniversary noting increasing trading volumes and the establishment of important correspondent relationships with large, well-known European and American exchanges such as in London and Istanbul.

The Baku Stock Exchange trades short-term treasury bonds, common stocks (primarily from former state-owned enterprises that have been privatized, including food and beverage, construction and banking companies), and foreign currency futures – a completely new instrument for Azerbaijan. Trading volume during the first six months of operation reached 4,294,615,023 manats, or about $920,000.

The exchange was established as the result of the initiative of a group of prominent Azerbaijani bankers and businessmen. Some 18 shareholders each own 300 common shares in the closed joint stock company.

BSE began operations with the first general meeting of its shareholders in February 2001. The general shareholders’ meeting is the supreme authority of the exchange.

The BSE management includes the president, Oulvi Gadjiev, two vice-presidents, Salim Kriman and Orhan Mastanov, and the financial officer, Elchin Gouliyev. Eldar Garibov, president of "MBank", heads the supervisory council.

The shareholders of BSE are local and foreign banks, investment and consulting companies and one stock exchange. BSE shareholders are entitled to participate in the management of the exchange in the order determined by the "Law and the Charter of the Exchange," receive information about the operations of the exchange from the supervisory council, financial control committee, management board, and other divisions of the exchange.

The exchange is dedicated to ensuring full transparency of its operations, and regularly published information bulletins highlighting its activities.

The information also includes macroeconomic indicators on the country, and financial and economic indicators of investor-attractive, joint-stock companies. This information is available on the exchange’s web site at www.bse.az.

In order to provide timely information, the exchange has completed negotiations with Reuters to have the agency carry on-line streaming quotes of BSE trades, and for publishing the economic research materials prepared by BSE staff. Negotiations are underway with Russian news agency ITAR-TASS for the same purpose.

During the past year the senior management of the BSE has been actively involved in the training program run by the State Committee for Securities. BSE officials delivered lectures to local businessmen on the main characteristics of stock markets throughout the world, raising capital through the issue of securities, hedging business risks through the operations on the open market and so on.

With the help of foreign experts from the European Union’s TACIS (Technical Assistance to the CIS states) program, the BSE staff is currently reviewing the regulatory base for Azerbaijan’s securities market and proposing numerous amendments and changes to the official documents. In the course of analyzing the regulations, TACIS experts acknowledge that the recently prepared draft laws on securities and on joint-stock companies are fully in accordance with international standards.

The second stage of the TACIS project is to provide technical assistance in improving the main mechanisms for running the Azerbaijan securities market, including an effective tax regime for the market. The estimated cost of this two year project is 1.3 million euros (about US $1.4 million).

BSE’s Main Objectives
• To identify bottlenecks in market development
• To identify and reach a certain positive profit level and progressively increase it
• To develop and promote new instruments to be traded on the Baku Stock Exchange
• To interact with small-scale investors and conduct training for increased awareness
• To promote contacts with the world stock exchanges
• The market share objective is to become a leading stock exchange in the region with extensive involvement of small and large scale private and corporate investors
• To increase the number of Exchange member firms

To provide for distance trading and Internet trading for Exchange members and their clients.

BSE and the National Bank of Azerbaijan (Azerbaijan’s central bank) has reached preliminary agreement regarding the launching of REPO trading on the exchange. To prepare, BSE has upgraded its trading system to allow for the trading of REPO agreements on treasury short-term bonds. BSE will begin operations in this market sector as soon as an online communications channel between BSE and the central bank is in place.

Baku Stock Exchange specialists have also worked out the mechanism of holding public placements of securities through BSE. BSE will communicate this possibility to companies that issue share or debt capital to raise funds.