The Bucharest Stock Exchange is trying to delay the OTC market

The management of the Bucharest Stock Exchange is trying to delay as much as possible the facilitation of trades on the "over-the-counter" (OTC) market, which was launched last week by an unexpected decision of the Board of Directors of the Central Depository, almost one month before the expiration of their mandate. The launch of the OTC market was approved by the shareholders of the Exchange in their General Meeting of April 2009, but it took more than a year for the Central Depository to give its agreement for the settlement of transactions on this market segment.

Yesterday, the BSE requested the addition of new items on the agenda of the General Shareholder meeting scheduled for October 21st, requesting among other things that the future Board of Directors of the Depository be mandated to draw up an impact study concerning the impact of OTC trades on the domestic market and to overrule the decision of the current Board of Directors of the Central Depository concerning OTC transactions. The Exchange also proposed not to ratify the launch of the OTC market before the new administrators of the Central Depository approve the study on the impact of the new market and before "receiving a favorable answer from the CNVM on the overall framework of OTC markets".

The request of the Exchange is strange to say the least, as CNVM officials said that the CNVM is not required to issue any additional regulation concerning trades on the OTC market, since they are already regulated by European legislation.

"The CNVM does not need to issue additional regulation that would approve trading outside the regulated market or of an alternative trading system for securities admitted for trading on the infrastructure managed by SC BVB SA. We must also specify that the MiFID directive does not concern the approval of OTC trading by the capital market regulators, but rather the reporting of the transactions concluded on that market", the representatives of the Commission said.

Sources from the Depository contacted by BURSA said that the BSE has been trying to delay the launch of the OTC market for a long time, as it fears that brokers would no longer be used for intermediating trades.

"A study on the impact of the OTC market could take months, if not years. Besides, the very idea of such a study is completely mind boggling: how can anyone estimate how many trades will be made on the OTC market in a month or in a year? Who do you ask that question to in order to get an answer?", the quoted sources asked rhetorically.

On Tuesday, the Central Depository issued a press release in which it presented several decisions made by the Directors of the Institution during their session of September 20th, including the decision to launch the settlement of OTC trades. Even though this has also been confirmed by Ovidiu Sergiu Mugur Pop himself, the president of the Depository, the information is conspicuously missing from Tuesday"s press release of Tuesday.

The executives of the Central Depository were not available for comment.