FEDERATION OF EURO-ASIAN STOCK EXCHANGES
SEMI ANNUAL REPORT OCTOBER 2006
BUCHAREST STOCK EXCHANGE
In 2005, the 10th year of trading activity for
Bucharest Stock Exchange, all the market
indicators reached historical highs.
Stere Farmache
General Manager & CEO
In 2005, the 10th year of trading activity for
Bucharest Stock Exchange (BSE), all the
market indicators reached historical highs.
We could say that after the first decade of
trading ended BSE passed to a new stage
from its modern history to the new
approaching challenges.
The total market capitalization of the BSE at
the end of 2005 exceeded more than EUR
15 billion compared to almost EUR 9 billion
at the end of 2004. The market capitalization
currently represents 26% of Romania’s GDP.
This increase of 70% in terms of market
capitalization represented one of the highest
indicators from this region. The total turnover
in 2005 exceeded more than EUR 2.1 billion
almost four times more than it was in 2004.
Also, the daily turnover value was almost
EUR 9 million. On the December 6, the
number of trades per day exceeded for the
first time 10,000.
HISTORY AND DEVELOPMENT
Trading in equities in Romania dates back to
1882, a year after the legal framework was
passed. The market was very slim and from
the beginning official trading was soon
substituted by off-exchange trading.
However, with the exception of the two world
wars and the economic depression, the
market grew to significant levels reaching, in
terms of listed securities, 56 shares (banks,
oil, mining, industrial, and insurance and
transportation companies) and 77 fixed
income securities, in 1935.
The peak was reached in 1938 but after the
end of the Second World War, in 1948, the
stock market was left without any public
companies due to the nationalization of the
entire economy. For almost fifty years
Romania did not have one of the most vital
institutions of a modern economy.
The adoption in 1994, by the Parliament of
Romania, of the Securities and Exchanges
Act made the reconstruction of a modern
capital market possible. The National
Securities Commission, the BSE, brokerage
companies, and the National Association of
the Securities Dealers have been set up
based upon the provisions of this Act, the
main institutions of the Romanian capital
market.
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Furthermore, all three indices computed by
the BSE posted significant increases
reaching all time highs in 2005. Thus, the
BET index stood at 59% above the value on
the last trading day of 2004. The BET-C
index posted an annual growth rate of 46%,
while BET-FI recorded an annual growth rate
of 191%. In March 2005, the BSE and Wiener
Borse AG (WBAG) launched the ROTX Index
as a result of cooperation between the two
institutions. The ROTX is a capitalization-
weighted price index which is calculated on
the prices of the most actively traded stocks
of the BSE, making it suitable as a
benchmark and underlying for standardized
derivatives (such as futures and options) or
structured products (such as warrants, index
certificates and swaps).
noteworthy evolution is that of the turnover
for the municipalities which increased two
times in comparison to 2004.
For 2006 we expect to see the same
increasing trend like the previous years in
spite of new admission to trading,
companies which were traded until the end
of 2005 on the RASDAQ market. The number
of traded companies could reach 100.
Furthermore we expect in 2006 that a
number of large state-owned companies to
be transferred to private investors and stocks
issues by the new “Ownership Fund” to be
traded on the market. Hopefully all of these
expectations will be achieved and that will
generate an increase in the market
capitalization to around EUR 20-25 billion.
In terms of new instruments, in 2005 the
investors had for the first time the opportunity
to trade preemptive rights. Another
The BSE was re-established in April 1995, by
a decree of the National Securities
Commission (NSC) at the request of 24
brokerage houses–the founding members–to
trade on the BSE. A new
law on securities was approved by the
Parliament in 2002.
For 10 years the BSE was a self-financing
and self-regulating institution of public
interest, operating on corporate principles. At
the beginning of 2005 BSE transformed
according to the provisions of the new law
which governs the capital market legal
framework from July 2004 into a joint stock
company with 67 shareholders representing
only investment firms.
Trading is performed on the BSE in a
dematerialized environment. Exchange
operations have been conducted exclusively
through the electronic systems since the re-
establishment of the Exchange.
FUTURE OUTLOOK
2005 was very special for BSE because the
company passed through significant changes
and important projects. Thus, at the
beginning of the year BSE became a joint
stock company after being a public entity for
10 years. Also, in the first quarter of the year
BSE implemented a new integrated platform
named ARENA for trading, clearing,
settlement and registry which was developed
in-house. At the middle of the year, the BSE
trading platform accommodated the
denomination process of the domestic
currency. By the end of the year the BSE
celebrated its 10th anniversary of trading and
concluded the merge process with RASDAQ.
Like the previous years BSE continued to be
one of the best performers in the region.
According to our estimations, the upward
trend will maintain for the next year which will
represent the year before the Romania’s
integration in the EU and the market
capitalization of the BSE will exceed 30% of
the GDP in 2006.
The BSE plans for 2006 are to:
• reorganize the structure of the stock
exchange market according to the legal
framework;
• admit to trading new companies owned by
the state;
• develop a trading platform for financial
derivatives instruments;
• introduce new instruments and trading
techniques provided for by the new
legislation, such as financial derivatives,
margin trading and short sale; and
• launch indexes for economic sectors that
are represented on the stock market.