The OTC market gives the BSE a major cause for concern

The possibility of having some of the trading from the BSE move to the over-the-counter (OTC) market, after the Board of Directors of the Central Depository decided to settle the trades without going through the market"s screens, has caused the management of the BSE to worry it might miss out on fees charged to companies the transfer of companies to the regulated market. The unlocking of the OTC transactions finally occurred after the project for an "over-the-counter" market sat in the drawers of the Central Depository for almost a year.

Octavian Molnar, deputy manager of brokerage firm "IFB Finwest" and a member of the Board of Directors of the Bucharest Stock Exchange claims the decision of the Central Depository is harming the interests of the Bucharest Stock Exchange, which is its largest shareholder, namely the Bucharest Stock Exchange.

"From the point of view of the Bucharest Stock Exchange, the approval of OTC transactions is a blow that the Depository dealt to the BSE, especially now, when there is a low number of transactions on the regulated market. The Bucharest Stock Exchange runs the risk of losing the commissions levied on trades. It is well known that it is precisely at a time like this that the Exchange needs those commissions", Octavian Molnar said for BURSA.

The broker of IFB Finwest considers that the decision of the Depository to greenlight the transfers to the OTC market comes at a bad time, and he rhetorically asks why the OTC market did not become functional in 2007, when the exchange was constantly making new highs.

"Why didn"t the management of the Depository approve the settlement of OTC transactions in 2007? This is a bad time to do something like this. The problem is that the representatives of the Stock Exchange sitting on the Board of Directors of the Depository should have represented the interests of its majority shareholder, instead of the interests of various other third parties. Instead they acted as if their motto was < Damn the consequences >", said Molnar, alluding to the fact that the terms of five out of the nine members of the Board of Directors of the Central Depository will expire in less than a month.

In fact, even though it would seem like it"s going to lose money, by no longer charging fees for transactions performed on the regulated market, the Exchange could win more from the fees that the Central Depository will levy for the settlement of OTC transactions, which far exceed those for transactions performed on the BSE. While the Central Depository charges 0,0085% for the settlement of transactions which occurred on the BSE, it charges 1.5% for OTC transactions.

After running the numbers, the supporters of the OTC market claim that the BSE will not lose any income, however, brokerage firms will gain more freedom, while also complying with the European directives.

They say that some investors may wish to transfer shares to people they know, operations which would be very risky when performed in the regular market.

Also, brokerage firms which are registered as "dealers", will be allowed to buy and sell on their own behalf, outside the BSE market, and they will report their trades and settle them with the Depository.