Azernews.Az

By Aynur Karimova

The Baku Stock Exchange plans to start repo-transactions with stocks on its trading platform.

This was announced by Vugar Namazov, the deputy chairman of the Board, Director of Operations and Information Technologies of the Baku Stock Exchange, on May 21, as he addressed the 12th CIS and Baltic Region Bond Congress held in Baku.

He noted it is initially planned to actively develop repo-transactions with corporate bonds.

Trading in the repo-transactions market is based on the "Rules on conducting repo-transactions with investment securities at the Baku Stock Exchange."

Repo-transaction, being applied in Azerbaijan since February 25, 2014, is a type of transaction when securities are sold and at the same time an agreement is reached to repurchase them at a predetermined price.

Thus, a repo-agreement consists of two transactions: an operation with cash securities and a forward contract for the same assets in the future. From an economic point of view, the repo is an analogue of lending against securities.

"Repo-transactions on stocks will start after providing liquidity on them, which is a prerequisite. That is why the liquid bonds were selected at this stage," Namazov added.

First, it is planned to start the market making on stocks to provide liquidity to the market, and then the repo-transactions on the stocks, he said.

"The most important thing is to develop the level of liquidity when it will be obvious that no risks exist over these instruments," Namazov noted.

Touching upon the market maker services in Azerbaijan, Namazov said the Baku Stock Exchange will be providing market maker services on equities starting from June 2015.

“These terms are approximate, but it is planned to complete the preparatory work in a short time,” he said. “At present, negotiations are underway with two market participants who wish to act like market makers on equities.”

He said these are new market participants. Currently, market makers operate on the securities market of the country, dealing with corporate bonds.

“Currently, there are 49 bonds in circulation on the stock market, and there are market makers on 18 bonds," Namazov added.

The contract for rendering market maker services on the securities market of Azerbaijan was signed with Pasha Bank and Bank Standard, which carry out these activities through their subsidiaries Pasha Capital and Standard Capital.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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