The Parliament and the Cabinet of Mongolia issued resolutions in 2009 and 2010 to develop Mongolian stock market in line with international standards, for which London Stock Exchange has been selected as a strategic partner. Agreements between LSE, State Property Committee and MSE have been signed in 2010 and 2011 respectively. Since then MSE has achieved certain milestones as follows:
– In scope of regulatory reform, MSE played a significant role in drafting the Securities Markets Law and Investment Fund Law. The two laws will be in effect from 1st of January, 2014. All the regulations and guidance to follow the law is being drafted before the law comes into effect.
– One of the fundamental factors to successfully implement the revised Securities Law is the infrastructure reform. Millennium IT system was launched on 2nd of July, 2012, and Financial Regulatory Committee, MSE, Mongolian Securities Clearing House and Central Depository, and brokerage firms are using the system.
– Along with the system renewal, clearing system was shifted from pre-paid to T+3 promoting foreign investment, which will be fully beneficial with the introduction of custodian services. Commercial banks now perform the cash settlement of the trades, making the post-trading operations more aligned with international standards.
– 120 market professionals attended LSE training in London to further their professional knowledge. In addition, educational materials are provided to the general public through MSE’s website.
– MSE has been publishing registered companies’ financial statements, shareholders meeting announcements, press releases in a timely manner improving corporate governance of the companies. For example, last year only 97 companies have submitted their financial statements, but in 2013 the number increased by 2.23 times to 217 companies.
1. Since the implementation of Millennium IT system, there has been no glitch or system failure during this one year period. The system is used by over 30 stock exchanges and financial institutions in 20 countries including the LSE. The system provides various benefits including T+3 settlement, online trading, block trades and market making. For example, from April, 2013 brokerage companies started online trading and currently 15 companies are trading from their offices.
Due to the international practice that investment banks, not the stock exchange, deal with allocation during IPO procedure, Millennium IT system does not include IPO functions. Considering the characteristics of domestic market, MSE has requested a customized IPO feature for the current system.
MSE announced that it is ready to have the Millennium IT system audited by independent international auditors to confirm whether the system aligns with international standards.
2. The total budget for the project was determined to be USD14.2 million by the Cabinet, which includes technology improvements, staff training, legal environment improvement consultancy fees and other services. From the budget, USD5.2 million was financed from the state budget, additional USD1.7 million was borrowed from banks, thus overall USD6.9 million is spent as of today.
3. The decrease in trade volume is mostly due to the decrease in foreign investment into Mongolia that accounts for 90% of the overall trades of MSE. However, MSE views the situation as temporary. It is worth noting that MSE is working hard to promote Mongolian financial market in order to attract foreign investors, to encourage domestic companies to raise capital through the stock market and to improve public education about the stock market. Therefore, we view that inaccurate information about MSE’s operations could lead to negative effects such as decrease in investment from both foreign and domestic investors.
MONGOLIAN STOCK EXCHANGE