Despite last-minute problems, the Bulgarian Stock Exchange (BSE) reached a compromise with the Financial Supervision Commission (FSC) and launched its new trading platform on time. Backed overwhelmingly by the investor community, the bourse procured a partial regulatory nod on the new bourse trading rules, the last hurdle to the platform launch, and had Xetra off to a start on June 16.

With the move, more than 5000 stocks trading on the BSE are now visible to just as many foreign financial houses and traders licensed to trade on other Xetra-traded exchanges elsewhere in the world.

“I am happy we can offer the BSE the reliability and speed of our trading system and thus enhance the international competitiveness of the Bulgarian market,” Frank Gerstenschlager, member of Deutsche Boerse board of directors, who is in charge of equities, said in a statement the same day.

Bistra Ilkova, chief executive of the bourse, said that the new platform represents the technical means to the bourse’s chief end – invigorating trade on the Bulgarian bourse. She warned, however, against treating Xetra as the “panacea” to the bourse liquidity woes.

“It is just the technology which provides for more opportunities,” Ilkova said. “Nonetheless, it will undoubtedly lead to a liquidity boost because it modifies the philosophy of the market, introduces new instruments, which are set to spur the return of existing and new investors and raise the reputation of Bulgaria’s capital market abroad.”

With the technical tool already being in place, the bourse management is now ready for the next step in its strategy: to promote Bulgaria’s capital market on an international scale. Promotion will occur through several events, the first being in September in Sofia and the second in November in Frankfurt, the seat of Deutsche Boerse, owner of the Xetra trading platform.

Apart from attracting Xetra-based foreign traders, the bourse hopes to attract the attention of more than 400 EU-registered investment intermediaries that have already notified the FSC about plans to operate on the Bulgarian bourse, but are yet to begin active trade as they wait for the right conditions, Ilkova added.

BSE’s five-year management contract with Deutsche Boerse should help enhanced professionalism of the local bourse. Apart from overseeing trade on the BSE, Deutsche Boerse will also be responsible for the calculation and licensing of the bourse’s main indices Sofix, BG40, BGTR30 and BGREIT.

The outsourcing of the bourse’s management is seen as a step in the right direction, according to brokers, because it introduces a host of innovations. In functional terms, the new system will bring a new daily routine to the bourse, trade being interceded by opening, interim and closing auctions.

Pre-trade will last between 9am and 9.20am and the opening auction until 9.30am. De-facto trade will be underway until 10.50am, the 10 minutes thereafter being an interim auction. In the 11am-1.40pm interval, trade will be uninterrupted and the five minutes to 1.45pm will be the so-called closing auction. After-trade, which allows for the entry, deletion and change of offers, will last until 4pm.

The new platform will introduce the trade halting option on unstable trade and will also introduce several new types of orders – limited to market, stop, and iceberg orders. Innovations also relate to timing of transactions, the three new ways to time transactions being immediate-or-cancel (IOC), fill-or-kill (FOK) and orders allowing for purchase or sale at a certain day and hour within a 90-day period.

Xetra also waived the price restrictions. Each single stock will now be allowed to range from minus 99.99 per cent of its value the previous day to infinity.

Bourse trade will start in earnest once the full-fledged BSE rules get the approval of the FSC. The financial regulator still needs the BSE to fine-tune the duties and job descriptions of the senior broker and administrator positions. Furthermore, each investment intermediary is obliged to clearly define the level of access for each of its bourse traders. FSC has recommended clarifying the oversight functions of the BSE, guarantee the option for companies’ double listing, as well as clearly map out the bourse’s risk management rules.

The FSC expects that the BSE will file an update to the rules in two weeks’ time. This is also the legal deadline for filing complaints against the rules from all affected parties. FSC also wants to bring the full suite of laws in line with the European Union norms. The financial oversight body is planning to draw up a brand new Clearing and Settlement Act; however, Bulgaria is yet to move into the clearing and settlement services niche. The bill’s fast approval is also necessary in light of plans of the European Central Bank to bring a pan-European platform for this type of service. The bill also envisions minimising clearing and settlement fees and allowing fast trans-border sealing of transactions. Furthermore, it is hoped to facilitate the listing of companies on multiple stock exchanges, according to the FSC.

If the full suite of legislation takes place this year, experts believe trade on the bourse would rise by tens of per cent in a matter of months.