Southeast Europe stock exchanges team up to encourage investment

By bne IntelliNews August 18, 2014

Clare Nuttall in Bucharest -


Southeast Europe’s small and fragmented capital markets have been slow to develop. Now three regional exchanges – in Bulgaria, Croatia and Macedonia – plan to set up a common platform to facilitate cross-border trades and attract more international investors.

The three exchanges have agreed to set up a joint order routing platform, which will allow brokers registered with any of the three exchanges to access the others with no need to register or pay additional fees. International investors already active on one of the exchanges will gain the same benefits.

SEE Link was set up by the Bulgarian Stock Exchange (BSE), the Macedonian Stock Exchange (MSE) and the Zagreb Stock Exchange (ZSE) in May, with each of the exchanges holding an equal share in the new company. Detailed plans for the project are due to be completed by September, and the platform is expected to go live in mid-2015.

The aim of the project is to overcome the obstacles resulting from the region’s small and fragmented markets. “Stock exchanges were launched in all the new countries after Yugoslavia split in the early 1990s. Being part of small economies, these were small markets, and we all struggled with liquidity,” explains Ivana Gazic, CEO of the ZSE.

Plans for a regional platform for the exchange of orders have been under discussion for several years. Similar projects have been initiated in Asia, Latin America and Scandinavia. However, with all the former Yugoslavian exchanges involved, negotiations dragged on, and eventually the Skopje- and Zagreb-based exchanges decided to launch the project alone, later asking the BSE to join.

Lack of liquidity

Ivan Takev, CEO of the BSE observes that while they vary in size, all exchanges in the region face the common problem of lack of liquidity, which hinders them from carrying out their functions of capital raising and price formation. “Each of the markets in Southeast Europe is under-developed, but at the same time certain groups of investors – especially institutional investors – are growing quite fast, and their home markets can no longer provide sufficient investment alternatives,” he tells bne.

Meanwhile, the MSE’s CEO, Ivan Steriev, hopes that the project could bring international investors back to Skopje. “Over the past years, foreign portfolio investors have been largely absent from the Macedonian capital market,” Steriev says in an emailed response to bne. “We believe this project would give investors easier access to the regional markets and will increase the visibility of our markets as a whole, and will make them more attractive for foreign portfolio investors, not only within the region but hopefully outside the region as well.”

Listed companies in the SEE region have also called for more integration of its fragmented capital markets. Speaking at the East Capital summit in Belgrade in June, Emil Tedeschi, president and CEO of Zagreb-based Atlantic Grupa, recommended a regional approach. “The problem is that markets in the region are quite fragmented – I would like to see a joint stock exchange for the region,” he said.

As planning for the joint system gets underway, the three participating exchanges have each provided €80,000 of capital for SEE Link. In June, the European Bank for Reconstruction and Development (EBRD) agreed to provide a €540,000 grant to set up the electronic order routing system through its local currency and capital markets development initiative.

While acknowledging it is hard to forecast how large the benefits will be, participants in the project say they have seen a high level of interest, and expect other exchanges will decide to join in future. According to Gazic, talks with other regional exchanges may start by the end of this year, while Takev forecasts more will join once they see the platform in action. “If the project proves to be successful and viable in the long-run, I expect more exchanges will reconsider,” he says.

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