Q: What were the most significant developments on the Bulgarian Stock Exchange in the last five years? How has the privatization affected the market?

A: The privatization definitely helped the development of the stock market because it provided a lot of volume, especially in the last several years. Some of the privatization deals, such as the sale of the Bulgarian Telecom Company (BTC), placed Bulgaria on the radar of the large investors. It was crucial for sending the message that investors can actually win from the market. The people started noticing that there are other good companies, not just BTC, and began to invest in them. It is a chain reaction as a successful market attracts a greater number of investors, and when there are more players, the markets gets more successful.

But now the privatization process is more or less over. The important thing is that the economy stabilized and there is a significant inflow of investments. The people have already calmed down after the bank crisis in 1995-1996 and the hyperinflation in 1997. They regained their trust in the banks and the financial system as a whole, and begun to look for alternatives to the previously known investments. On the other hand, the decline of the interest rates additionally fueled the search for greater profitability and liquidity, such as real estate or publicly traded securities.

The total capitalization of the market reached about $11 billion, which is significant, and the trend is positive. Even if BTC is bought out, it will have to happen through the exchange and that will generate a lot of volume again.

Q: What’s your policy for stimulating the interest and educating the general public about the opportunities?

A: Since last year we have been organizing a series of events in several regions of the country to present the opportunities that the stock market provides to the issuers. At the same time, we are quite busy with the integration of the Bulgarian Stock Exchange with the European exchanges, and the possibility to merge with one of the bigger exchanges in Europe. It is no secret that there has been serious interest from several exchanges.

Q: What is your view on the benefits and the risks of such a consolidation?

A: The consolidation is a worldwide trend that we cannot ignore, so the key aspect is to find the most suitable partner, or the one which will provide most benefit to the Bulgarian market. Right now we have six candidates with serious interest and it is obvious that each of them would benefit from the merger, so we have to choose the right one for us.

Q: Do you expect the process of consolidation to aid the development of alternative trading systems, such as electronic trading?

A: Such systems represent exchanges that optimize the expenses and offer inexpensive access to users. Because the traditional exchanges usually have a dominating position, almost like a monopoly, they don’t always react fast enough to the changing environment. Instead of adopting new technologies, lowering the fees, and becoming more attractive, they hold the process, and respectively, get punished. Archipelago, for example, became a factor that must be considered, but at the end it merged with the NYSE, which now offers a more flexible and modern service. That happens in life as well – if you rely on past glory, you end up with problems.

Currently, there are no such threats for the BSE, but it doesn’t mean that this cannot happen. That’s why we tr y to be proactive. Instead of waiting for someone to consolidate us, we select our partners because right now we have the luxury to look for the best scenario. Our partner should have a trading platform that will decrease the expenses for the investors and should maximize the number of investors in our market. Overall, the consolidation should ease the access of investors to the Bulgarian Stock Exchange.

Q: What are the strengths and the weaknesses of the current trading platform?

A: The existing platform is RTS from Moscow, which is a customized version of the NASDAQ. It was done by USAID for the Russians and then was re-adapted for Bulgaria in the late 1990s. It hardly has any future because no one supports and develops it. A trader in London, for example, would need to go through some hassle and expenses to install the platform and would probably decide against it because of the size of the market. But if our platform is on his screen integrated with his existing system, he’d be glad to use the opportunity to invest on the Bulgarian market.

Q: Have you noticed interest from the brokerages for new platforms?

A: Many of the brokers trade internationally. Those who aren’t happy with the COBOS (Client Order-Book Online System) platform, have proprietary platforms for trading on our stock exchange. There are a couple of brokers with their own systems for online trading on the basis of the existing platform. But we don’t mind the competition, because it keeps you in good shape.

Q: Is there pricing pressure for data feeds from the brokers?

A: Yes, but because of the privatization of the state share, the timing is not appropriate for changes. After the change in the ownership and the implementation of a new platform that provides easy access to the foreign investors, we’ll have to lower the fees and to optimize the expenses to make the market even more attractive. Improvement is needed in clearing and settlement as well. But the listing fees are low, and the transaction costs are not that high. Currently, about 60% of the market is held by foreign investors, and after the optimization, even more foreign investors will come.

Q: What developments do you expect if the government share of the stock exchange is privatized? Do you expect new bourses to appear after the end of the monopoly?

A: Actually, there has never been a monopoly. If 20 investment intermediaries take a decision at any time, they can create an exchange. There is no law to stop them if they meet certain requirements. The sale of the government share means only a change in the structure of the ownership. It is very important, however, who the new owner will be because we have witnessed cases in Europe where the consolidation brought none or negative change to the acquired market. One such example is Lisbon - after it became part of Euronext, the market lost lackluster and the local brokers disappeared. Lisbon will now become part of the NYSE Group, but this integration will hardly help. So the consolidation is not a straightforward process.

Q: In terms of the regional competition, does the BSE get the attention it deserves? Who are the main competitors?