The weapons are rattling at the BSE

The stock market is rumbling, an increasing number of malcontents are appearing concerning the proposals of the current management of the Bucharest Stock Exchange.

It would seem that a new "revolution" is brewing: the sides are sharpening their axes.

The Bucharest Stock Exchange has summoned its shareholders for March 13th, prior to the balance sheet meeting, in order to change the articles of incorporation and pass a new ratings policy.

The Association of Brokers expressed its disagreement with the increase in the fixed fee for brokerage firms, as proposed by the BSE.

Right now, the Association of Brokers, together with six other brokerage firms, has asked for the agenda of the General Shareholder Meeting of the BSE to be amended to include some new additions, according to a report sent yesterday to the Bucharest Stock Exchange.

The Association of Brokers proposes the mandatory introduction of the cumulative vote in the election of the directors of the BSE.

The cumulative vote is intended as a protection measure for the minority shareholders. However, on the Bucharest Stock Exchange, the holdings are limited to 5%, so that there is no majority shareholder which the minority shareholders would need to be protected against. "Strategic" alliances are always being forged at the BSE, so that often times voices have been heard claiming that one voice which the CNVM should work on "is the acting in concert of shareholders".

The proposals of the Association of Brokers to amend the Articles of Incorporation "would introduce the obligation of the company to apply the cumulative method vote when the General Shareholder Meeting is summoned to elect all of the nine members of the Council of the Stock Exchange, either as a result of the expiration of their term, or as a result of their revocation by the Ordinary General Shareholder Meeting, with the exception of cases where a final director is appointed following a situations where the position is vacant following the reasons presented in article 56, as in such cases the cumulative vote is not mandatory".

Also, the shareholders of the BSE who asked for the modification of the Notice to Attend request the preservation of the Board members' requirement to state that they did not cooperate with the former communist political police, the Romanian and/or foreign secret services and to extend this obligation to the managers as well.

• The proposal for the tariff policy is not based on the analysis at the budget level, according to the Association of Brokers

The shareholders who asked for the modification of the Notice to attend have expressed their opposition to the amendment of the regime of the fees practiced by the BSE.

The signers of the document want letters a and b of item four, concerning the pricing policy, to be eliminated, and for the shareholders to debate "the ratification of tariffs and commissions approved by the Council of the Exchange and the setting of their maximum allowed levels".

In other words, the shareholders want to discuss in the General Shareholder Meeting the terms of the pricing policy, not just the proposal of the BSE.

According to the Association of Brokers, the proposal of the Council of the Exchange is not based on an analysis on the budget level of the financial implications that such a modification is generated, it does not anticipate nor does it review the possible anticompetitive effects that such an amendment could have, and the economic context is not beneficial for such changes.

The BSE is considering the introduction of a fixed monthly fee of 3,500 lei for brokers and the reduction of the variable commissions levied on turnover.

Lucian Anghel, the president of the BSE, said that the objective is a 15% increase in liquidity in the coming 12 months.

The BSE proposes a reduction of the variable fee by 20%. The Bucharest Stock Exchange is also considering stimulating market makers.

The previous elections at the BSE took place on January 9th, 2012, when the management was taken over by the "banks' faction" which has imposed its own president, former BCR chief-economist Lucian Anghel, to the detriment of the traditional shareholders of the Bucharest Stock Exchange: brokerages which are not affiliated with banking groups, .

It remains to be seen whether the market will see a new clash, at the General Shareholder Meetings of March and April, and especially, which of the two "sides" will be better prepared.