The market is split into two segments – an official market and a free market. To be listed on the official segment, a company has to fulfill certain requirements. Currently, there are 14 entities listed on the official market – three companies and 11 investment funds. According to the securities law, all the investment funds have to be listed on the official market. The rest of the companies’ trade on the free market, where the requirements are lower.

The majority of the people had access to the stock exchange through the mass privatization process. In early 2000, the Central Registry reported that there were 560,000 open accounts. Of course, many people sold their stocks and closed their accounts, and the stock ownership became more concentrated. In a few years, the number of accounts went down to 325,000. The privatized companies had very diversified ownership structure in the beginning, but it has gradually become more concentrated.

That was the first experience of the people with the capital market and many of them did not recognize the opportunity because they did not know anything about the stocks, the investments, and the process in this early phase of development. Over the last years, however, the stock market has gained popularity. Now most of the people have seen lectures about the capital market, at least through the electronic media. The institutions, the investment process, and the market itself became much more popular. The opportunity to invest is widely recognized and as the people understand how the market works, they become more confident to participate.

Q: What is the strategy of the exchange for educating the people and promoting investing?

A: One of the main goals of our institution is to educate retail investors and to explain the mechanism and the principles of the capital market. We have a separate approach for the different target groups and the mass market.

We approach the general population through printed brochures that we deliver to the daily newspapers. We also distribute those brochures in the financial institutions, such as the brokerage houses, the Securities Commission, and the Central Registry for anyone who approached those institutions. For the electronic media, we prepare presentations of the stock market. Another approach is to focus on specific target groups that we see as potential investors, such as students or professionals groups with good income.

Q: Could you describe your trading platform? Does it have capabilities for electronic trading?

A: We use a platform that is originally Canadian, but is also the trading platform of the Ljubljana Stock Exchange and several other exchanges in the region. We chose it because we can benefit from the regional exchange of data and cross trading. There are eight stock exchanges in ex-Yugoslavia and, in the future, we would like to use the benefits of a common trading platform with the other exchanges in the region. We also plan to use the benefits of developing that platform. Two years ago, the Sarajevo Stock Exchange acquired the source code and we started in-house development, such as developing the data feeds.

It is an electronically driven system, which means that the brokerage houses have online access and can receive orders from their clients in different ways, including the Internet, fax, voicemail, etc. The brokerage houses can immediately put those orders from their working station on our trading system.

There are two separate methods of trading on the Sarajevo Stock Exchange. We use the auction method for stocks that are less liquid and continuous trading for the others. In the auction method, there is one auction per day and there is a unique price for the stocks on the auction. In other words, you can buy the stock only at the price set by the auction. The system works independently without any influence from the people from the stock exchange.

Under the second method of trading, stocks exchange matches trades anytime during the trading hours between 10 am and 1:30 pm. Through the continuous trading, it is possible to make a transaction when two orders meet each other and the price during the day can vary.

Q: What are the major future developments that you expect?

A: Currently, we only trade with equities, so the structured products are the next step. There are no government and municipal bonds in Bosnia and Herzegovina, only a small amount of corporate bonds trade on the stock exchange. This year we expect that government to issue bonds and we hope that significant infrastructural projects will be financed through government bonds. So, there is high growth potential on the Sarajevo Stock Exchange.

Pension reform is ongoing process. Pension funds will be important players on demand side in future on our capital market. Mutual funds as open-end funds are new trend and we expect that those kinds of institutional investors will make significant contribution to future developments.

Selling state owned capital through SASE is new opportunities for development. The Government is announced offering shares of attractive companies from telecom, pharmaceutical, insurance sector.

Another growth area is the energy sector because country has surplus in producing electric energy. Many foreign investors are currently interested to invest in existing companies or in green-field investments. We recognize the possibility for development of our capital market through the future regional and European integration. We are on our way to the European Union and, when we join the EU, we expect the interest from investors to increase.