The OTC market under attack

The Board of Directors of the BSE has scheduled a meeting for today, on the same day as the elections for the Central Depository, meaning they"re getting so busy that it becomes a problem to meet all the items on their schedule.

The Board is under pressure to pass a draft decision to void the Decision of the Central Depository, which allowed the OTC market to begin operations, and to do so before the meeting of the Board of Directors of the Central Depository. The officials of the BSE are afraid the OTC market would cannibalize on the business of the BSE.

At the same time, the CNVM is preparing a less "totalitarian" draft Decision on the same subject, which would restrict the trading on the OTC of stocks listed on Stock Exchanges, but allow other types of transactions.

The CNVM suspects that OTC trading could skew the prices of stocks on the BSE.

The 2004 law concerning capital markets no longer prohibits the trading of the stock of one issuer on two markets, a restriction which was present in the old capital market law of 1994, which was eliminated under the influence of European legislation.

The Board of Directors of the BSE apparently has obvious reasons to believe that its business might be cannibalized by the OTC market, but the managers of the BSE did not take into account the fact that the BSE could benefit from the fees for OTC trades, as 66% of the profits of the Depository go to the BSE.

The Board of Directors of the BSE will dump the problem in the lap of the Depository, by requesting the drafting of a study on the impact of the OTC market.

The dallying of the launch of the OTC market seems fatal for the Romanian stock market, which, given the way it is at the end of its rope, would have gained a second chance, by expanding its trading capabilities outside the standard stock trading.

It"s just another mistake to add to the ones the BSE has made over the years.

Playing peek-a-boo with trade reporting