The amendments to the “Rules on Organization and Conduction of Securities and Derivatives Instruments` Trading at Baku Stock Exchange” proposed by representatives of Financial Markets Supervisory Authority, Baku Stock Exchange and AFBIA were approved. Based on objectives defined in the “Strategic Roadmap for the Development of Financial Services in the Republic of Azerbaijan” the changes were focused on the development of the capital market, the revival of the REPO market, stimulation of financial intermediaries. These amendments were formed taking into account the experience of other countries and are as mentioned below.
Amendments to stimulate the repo market:
- The range of corporate REPO securities has been extended. Thus, according to international practice, all corporate securities included in the main and standard segments of the BSE may be subject to repo transactions. As well as other securities with a high rating (at least “B-“) and liquidity on the stock market, they may also be REPO transaction’s subject.
- In compliance with the international practice, the requirement on the REPO closing date that securities subject to REPO be paid at least five days before the beginning of interest payment or repurchase has been removed. This will allow conclusion of REPO transactions for a longer period and provide financing through the REPO market.
- If the REPO seller does not fulfill its obligation after the expiration of the term, the process will be resolved as soon as possible, since all rights to the REPO subject pass to the REPO recipient. At the same time, interest or dividend income on securities subject to REPO during the REPO period will be received by the REPO buyer.
In order to optimize the targeted purchase and sale transactions concluded by the parties under the new rules at pre-agreed prices and conditions, the amount of large-scale transactions has been reduced from AZN 10 million to AZN 1 million for bonds with a market maker on the secondary market, and for other bonds – from AZN 5 million to AZN 500,000.
These changes can help align operations conducted at the stock exchange with international practice, develop the REPO market, increase the number of closed transactions at the BSE and liquidity, stimulate the participation of financial intermediaries and attract to the BSE the transactions concluded on the OTC market.