The Bucharest Stock Exchange wants to stimulate its derivatives market

ŞTEFANIA CIOCÎRLAN ( Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 7 decembrie 2010

The Bucharest Stock Exchange wants to stimulate its derivatives market

The clearing house yesterday announced a 50% in collateral requirements for brokers

The Bucharest Clearing House will also accept BSE stock as collateral instead of cash

After peeking at the derivatives exchange of Sibiu, which has a derivatives turnover that the BSE can only dream of, the management of the BSE has decided that it is about time to get its own derivatives market on its feet, as it is basically dead for most of the week.

The Bucharest Clearing House yesterday announced the first steps for the thawing of the derivatives market of Bucharest. They are intended to ease the financial burden which weighs on derivatives brokers and to attract new members. What is significant is the fact that not even half of the brokers which are active in the market are members of the Bucharest Clearing House (CCB), and some of the current members are unhappy with the size of the collateral they have to deposit, as the volume of derivative trading on the BSE does not justify its current level.

One of the most important measures announced yesterday allows the members of the CCB to use the most liquid stocks of the BSE as collateral, instead of having their cash immobilized in the accounts of the Clearing House.

Valentin Ionescu, the general manager of the BSE, explained how the Board of Directors of the BSE reached this decision: "Following the internal analyses and the suggestions received from the brokerages which are active on the derivatives market, we have found that qualitative adjustments were needed, such as allowing for a larger array of assets which can be used as margin (collateral) and setting the financial burden of brokerages based on their operations volume.

Since the BSE also manages spot markets on which various financial instruments are traded, accepting the most liquid stocks as collateral is a decision that serves both the interest of customers and brokers in the instruments listed on all the markets of the BSE".

The Bucharest Settlement House announced yesterday that it will return approximately 30,000 lei to brokerages, and those looking to intermediate derivatives trading will be required to submit only 20,000 lei as collateral, as opposed to the previously required 50,000 lei. Brokerages will also pay an annual minimum subscription fee of 500 lei instead of the previous amount of 5,000. The management of the Bucharest Clearing House has yet to announce when these discounts will come into effect.

"These measures are justified by the fact that the financial burden placed on brokers needs to be correlated with their derivatives trading volume", said Valentin Ionescu, who added: "The first expected effects are the registration of companies as market makers for the futures contracts for the stocks listed on the BSE and an increase in the number of brokerages that will request access to the derivatives market".

Investors will be able to place their own orders on the derivatives market, just like on Sibex

The management of the BSE has decided to also offer investors on the Bucharest market to place their own derivatives orders, a facility which was previously unavailable.

Ciprian Zah, a member on the Board of Directors of the BSE, explained that the Bucharest Stock Exchange is working on a bigger project for growing the derivatives market and said that the steps announced yesterday by the Bucharest Settlement House are just a hint of the changes that are in store for the Bucharest derivatives market: "We have a project intended to grow the Bucharest derivatives market, but there are still some steps that need to be taken until it is complete. For instance, we want to allow investors to place their own orders, which is something they could not do until now. With the introduction of Arena XT this has now become possible. We are also talking to several potential market makers. Any market is important for the BSE, as long as brokers and the exchange itself make more from fees".

In the beginning of November, the management of the BSE announced that the BSE would launch futures contracts with the ROTX index and the stock of the BSE as their underlying assets.

Ştefania Ciocîrlan

The stocks that brokerage firms will be able to use as collateral with the Clearing House are those issued by the five SIFs, "OMV Petrom", "Banca Transilvania", the Bucharest Stock Exchange itself, "BRD Groupe Societe Generale".

The Bucharest Clearing House will also accept Euros and dollars as collateral.

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