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Sunday, September 30, 2007

How to trade on the Bulgarian Stock Exchange

This is supposed to be some practical post about the things a foreigner has to do in order to trade Bulgarian stocks. I'm not going to cover the process in details, just give you some hints and links.

The first thing is that you need to sign a contract with an Investment Intermediary that is allowed to trade on the Bulgarian stock exchange. Here are two lists of such Investment intermediaries:

The first one is from the Central Depository and the second one is from the Bulgarian Stock Exchange itself. There should'n be any diferences between them anyway...

You could ask any of the members about their specific conditions. One could prefer a bank ( like Raiffeisenbank (Bulgaria) EAD or UBB /a Member of NBG group/ , etc. ) or chose some of the Bulgarian Investment Companies ( like Karoll, Elana, First Financial Brokerage House/FFBH/, etc. ) Statistics show that banks make the biggers turnover while the investment houses take the prize for the number of trades. FFBH is known to have the biggest number of foreing clients through the investment houses but don't take this as granted.

After the contract is signed one has 3 options in order to trade on Bulgarian Stock Exchange.

The first is every time he or she decides to trade to give a call to the intermediary and to place the order. For someone this could be an unconvinient way...

So here comes the second one - the online trading platform /COBOS/ provided by the stock exchange. Ask your intermediary to make you a client of this platform and you can see in real time what trades are taking place, the quantity and the prices of the deals. Moreover you can place your own order electronically by this platform and they go streight to the stock floor. It's a flash application so one should be able to access it everywhere there is Internet. The stock exchange issues to you a certificate that identifies you as the person that made the contract and secures the connection between you and the stock floor so it's considerably safe.
One of the many advantages of this is the ability to do day-trading. If you place your orders by phone and not using COBOS you should wait the 3 days period for the settlement of the shares to be done. By COBOS this obstacle is gone.

The third option is to place your money in one of the many fast growing mutual funds offered by the asset managing companies in Bulgaria. The theme of mutual funds in this emerging market is a vast one and it deserves a separate post but to make it short - this is the fastest growing financial industry nowadays here. For only the last month it accumulated almost 150 mln leva and its assets are expected to surpass 1 bln till the end of the year. Still this makes only about 3 percent of the savings in banks. In Europe the figures are about 50-60%, and in Eastern Europe - about 30%. So imagine the growth it has ahead...
The main nonbanking financial institutions tha strive here are again Elana and Karoll - both managing more than 250mln assets in their mutual funds.

These are the main ways a foreign person could take part in this fast growing market. The last week Bulgarian Stock Exchange bought a new trading platform from Deutsche Boerse so we could expect new and easier ways for anyone willing to participate. So keep following the news.. :)

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