FEAS Yearbook FEAS Yearbook 2002 | Page 39

FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 37 GEORGIAN STOCK EXCHANGE LETTER FROM THE CHAIRMAN It is our strong belief that the principles of transparency and disclosure, underlying the operation and development strategy of the Exchange, are an unquestionable guarantor of our success. The third working year of the Georgian Stock Exchange (GSE) is nearing completion. As before, it was full of challenges and emerging opportunities. The year 2002 was quite productive in terms of implementing the business systems conceived earlier. The most significant achievement is that, as a result of active cooperation with the National Securities Commission and the Ministry of State Property Management, the special privatization auctions commenced in December 2002 on the GSE trading floor. We hope that the GSE system will soon prove itself to be the best mechanism for the state as well as for the investors, for conducting such auctions. The frequency of these auctions will significantly increase in the coming year. 2002 was difficult for the Georgian economy. Harsh socio-political developments were accompanied by a severe curtailing of foreign investment. The economic downturn could not but negatively reflect on the trading activity at the GSE. Unfortunately we cannot speak about annual increases in the trading volumes and other related statistics. The ardent work and enthusiastic attitude of the GSE staff, however, gives us firm hope that the following years will be busier and more fruitful for the Georgian capital market. operation and development strategy of the Exchange, are an unquestionable guarantor of our success. The GSE will unwaveringly continue to apply these policies to encompass the various facets of the Georgian securities market and work in cooperation with all those who strive toward economic development of Georgia. George Loladze Chairman of the Supervisory Board It is our strong belief that the principles of transparency and disclosure, underlying the HISTORY AND DEVELOPMENT Equity securities first appeared in Georgia in 1991 after the declaration of independence that signaled the beginning of market-oriented reforms. A vast majority of the newly established joint-stock companies were owned by a rather small number of private shareholders and trading in these shares was relatively inactive. With the launching of the Mass Privatization Program in 1994, approximately 1,300 state-owned enterprises were organized as joint-stock companies, creating about half a million individual private shareholders. However, during a five- year period (1994-1999), the lack of an appropriate legal framework and organized market infrastructure seriously impeded the secondary trading of these shares and any over- the-counter market activity was nearly non- existent. The Georgian Stock Exchange (GSE) was founded in 1999 by a group of Georgian securities market professionals, leading banks, investment and insurance companies. Today it is the only organized securities market in Georgia. Designed and established with the assistance of the United States Agency for International Development (USAID) and operating within the legal framework of corporate and securities laws drafted with the assistance of American and German experts, the GSE can assert that it is designed and operated to comply with “global best practices” and offers an attractive investment environment to foreign investors. In order to promote the concept of self- regulation, the GSE membership adopted a number of rules. After approval of these rules by the National Securities Commission of Georgia, the GSE was officially recognized as a FUTURE OUTLOOK During 2003 the GSE plans to: establish mechanisms for the initiation of an electronic exchange of information between brokerage companies, the GSE, and the Central Depository, as well as the commencement of trading from remote workstations; stimulate the issuance and circulation of corporate bonds; and implement the infrastructure to trade new instruments, particularly T-bills, municipal bonds and securitized government arrears, including pension arrears. self-regulatory organization (SRO) and received a stock exchange license in January 2000. The GSE utilizes an automated trading facility. Thousands of securities can be traded by its members from the workstations on the GSE floor or remotely from their offices. The GSE adopted the platform employed by the Russian trading system (RTS) in Moscow. However, RTS - as an excellent informational-communication system - was significantly modified to ensure those requirements outlined under the GSE trading rules reflected the peculiarities of the Georgian securities market. After several months of training and a series of mock trading sessions for the members/brokers, official trading at the GSE began in March 2000.