FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT JUNE 2012
GEORGIAN STOCK EXCHANGE
We continue promotion of IPO
opportunities with potential Georgian
issuers.
George Loladze
Chairman of the Supervisory Board
2011, on the background of processes
developing at the world financial markets, turned
out to be somewhat difficult year for us - as to
many stock exchanges in the world; however,
at the same time, the year was quite interesting
– because practically the whole period was
devoted to development and implementation
of necessary procedural and software
improvements both at GSE and GCSD.
HISTORY AND DEVELOPMENT
Equity securities first appeared in Georgia in
1991 after the declaration of independence
that signaled the beginning of market-oriented
reforms. A vast majority of the newly established
joint-stock companies were owned by a rather
small number of private shareholders and
trading in these shares was relatively inactive.
With the launching of the Mass Privatization
Program in 1994, approximately 1,300 state-
owned enterprises were organized as joint-
stock companies, creating about half a million
individual private shareholders. However, during
a five-year period (1994-1999), the lack of an
appropriate legal framework and organized
market infrastructure seriously impeded the
secondary trading of these shares and any
over-the-counter market activity was nearly
nonexistent.
The Georgian Stock Exchange (GSE) was
founded in 1999 by a group of Georgian
securities market professionals, leading banks,
investment and insurance companies. It is the
only organized securities market in Georgia.
Designed and established with the assistance
of the United States Agency for International
Development (USAID) and operating within the
legal framework of corporate and securities
laws drafted with the assistance of American
and German experts, the GSE can assert that
it is designed and operated to comply with
“global best practices” and offers an attractive
investment environment to foreign investors.
Official trading at the GSE began in March 2000.
The number of companies admitted for trading
at the GSE trading system increased gradually
and by the end of 2004 reached 277. Practically
all of these companies are former state owned
and operated companies transformed into joint-
stock companies and then privatized.
We have important news this year as well
– from 2011 GSE is fully represented at
Bloomberg: investors and other interested
parties can receive GSE trading data and
standard information about listed companies,
as well as to monitor in real time GSE trading
sessions. We continue promotion of IPO opportunities
with potential Georgian issuers and have some
progress in this regard. As a result we hope to
have number of IPOs at GSE this year providing
for increased liquidity and making our market
more interesting and attractive for investors.
2004, was a landmark year for the GSE, due
to the unprecedented increase in basic trading
figures compared with previous years, reflecting
the overall revitalization of the economy in the
wake of the “Rose Revolution” of 2003. In March 2011 an agreement was signed
between GSE and Bloomberg, one of the
largest data vendors, regarding GSE real time
and end-of-day data dissemination.
In the end of November, 2006 Bank of Georgia
(GSE:BOG), the company listed at the GSE
since 2001, concluded successful IPO at the
London Stock Exchange Main Market and
through issuance of GDRs raised circa US$ 160
ml. The bank is the first Georgian company ever
and the second bank rom the CIS since 1999
listed on the London Stock Exchange.
In 2007 the remote trading system was
practically implemented at the GSE.
In 2008 significant amendments were made in
Georgian legislation, GSE Charter and Rules
ensuring GSE demutualization, stock-exchange
membership for various licensed financial
institutions, including remote membership for
respective foreign entities. In August 2009 the
decision on GSE capital increase was taken
by GSE General Meeting of Shareholders
with purpose of attraction of NASDAQ-OMX
as a strategic partner. In May, 2010 the GSE
Supervisory Board took decision on introduction
of the official stock exchange indicator - GSE
index (GSX). GSX is published on a daily basis
at the GSE website.
In November, 2010 the Georgian Central
Securities Depository – the 99% subsidiary of
GSE – completed fundamental amendments
to it self-regulation rules inspirited by intention
of one of the largest global custodians to start
operations in Georgia. In the end of 2010
the National Bank of Georgia adopted new
regulation according to which the procedure
of public offering in Georgia of the securities
admitted for trading at the eligible foreign
exchanges is dramatically simplified.
FUTURE OUTLOOK
In 2012 the Georgian Stock Exchange plans to:
1. Make important changes in its trading system
and trading rules so as to increase the efficiency
of trading and increase the liquidity of the
market:
• Further improve remote trading system for
brokerage companies;
• Establish electronic links between stock
exchange, central depository, brokerage
companies, banks and securities registrars;
• Introduce partially guaranteed trading of
securities.
2. Launch a new web-site for the GSE, which
along with traditional statistics will provide
corporate reports database for the companies
who are admitted to the trading system.
3. Sign the data distribution agreements with
large global data vendors.
4. Finalize upgrade of the Georgian Central
Securities Depository clearing and settlement
system, thus increasing efficiency of operations
for large institutional investors and global
custodians.
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