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.