How Should BSE Allocate Earnings?

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How Should BSE Allocate Earnings?

The Bulgarian Stock Exchange, as Profit.bg already wrote, is holding deposits in banks in the amount of 3.756 mln leva (1.9 mln euros). Its available cash and money equivalents stand at 5.181 mln leva (2.6 mln euros), according to the institution's 2007 report.

The growing popularity of the stock market among private businesses has had an impact on the turnover and the amount of revenues from commissions, registration fees etc.

According to Mincho Minchev, senior dealer in Investbank, the high turnovers last year were mainly die to the record transactions on the position of BTC and EIBank, which will probably not be repeated soon.

BSE's turnover surged from 3.38 bln leva (1.72 bln euros) in 2006 to 9.95 bln leva (5.08 bln euros) last year. the number of deals grew from 213,600 to 490,550 leva for the same period.

The standard commission BSE charges on stock transactions is 0.10% (for both sides).

Profit.bg asked three market experts the question “What should BSE do with its 2007 income?”

We have to mention several things here. One market expert said that such a question may be asked only if the government has adopted a certain strategy for the development of the market and of BSE as an institution. Another said that what an institution does with its profit is its own business and no recommendations are appropriate. However, we think the issue is worth discussing.

So here are the opinions we gathered:

Mincho Minchev, chief dealer, Investbank

The past year was very successful for BSE in terms of turnover volumes. We saw some record transaction on the positions of BTC and EIBank, which will hardly be repeated any time soon. Those deals were to a large extent the reason BSE accumulated such high revenues from fees. In my opinion, BSE should use the funds to improve services.

A new trade system will be introduced this year, which will no doubt greatly contribute to the improvement of the trade process. I think BSE should not just stop here, but will continue to invest in improvements in order to establish itself as a regional leader.

Blagovest Krachev, broker, Karoll

In my opinion BSE has to invest a large part of its earnings in improvements of the technological services. The new Xetra system will make trade more convenient for brokers, but it won't help COBOS clients and we know that the majority of the orders come via COBOS. Also, on more dynamic days the stock exchange has often had to stop trade temporarily, due to the very high number of orders received, which is completely unacceptable.

BSE may also wish to invest money in research and cooperation with other stock markets in relation to the introduction of new trade instruments, in boosting liquidity, in popularizing the stock market as a whole etc.

Razvigor Hrsitiv, investment consultant, KD Securities

Last year 90% of the profit was allocated as dividend but this is unlikely to happen again, as BSE has a large expense this year – the introduction of the new trading system Xetra. I think BSE will allocate a smaller share of the income as dividend for shareholder and will invest the rest in improvements.

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