With the purpose of reforming the Mongolian Stock Exchange (MSE), the Government of Mongolia signed a 14 million USD agreement with the London Stock Exchange
. In the scope of this 3-year period agreement, "Millennium IT" trade and payment system was launched starting this Monday, July 02, 2012.
With security trading being held through this new system, many negative occurrences started to be observed in the Mongolian stock market
. A requirement was set for broker dealer companies that are participating in the trade with the new system to locate a certain amount of asset into the acquittance fund from MSE and to locate a deposit asset equal to 30% into the payment clearing bank, which lead to over 70 companies to drip out of the trade, resulting in only 5 broker dealer companies participating in the trade on last Monday, July 02, 2012. On this day, MSE made a total trade of only 51,150 MNT. On July 03, 2012, 4 shares of “Shivee Ovoo” JSC were traded for 37,600 MNT and 10 shares of “Aduunchuluun” JSC were traded for 49 thousand MNT, totaling the 2-day trade at 86,600 MNT. Economists are debating as to what is happening to the MSE that previously JSCs were trading about 100 million MNT daily.
Deputy Director of MSE G.Saruul said, “With the launch of the new trading system
along came in the service of a clearing bank, where broker and dealer companies are required to establish agreements with banks. In other words, broker dealer companies are to establish an acquittance fund and to locate a deposit asset. The Financial Regulatory Commission has also released a compulsory regulation to locate asset into the acquittance fund, meaning broker and dealer companies to participate in the trade only after locating a certain amount of asset into this account. We have regularly reminded and held trainings on this issue.”
However, broker dealer companies are saying, “According to the new system, broker dealer companies are required to establish an agreement with banks and locate a minimum amount of 10 million MNT into the acquittance fund. If a broker trades 100 million MNT, he is required to have located about 30 million MNT into the acquittance fund. Previously, when a buyer was to purchase shares of 1 million MNT, the payment was made on the spot, whereas with this new T+3 system, the client can transfer the money in a 3 days’ period, thus the brokers are required to locate their own asset into the acquittance fund. With these conditions, many companies are possibly being unable to participate in the trade, losing their clients and facing bankruptcy. If the authorities of Mongolian Stock Exchange
do not admit the requirements of brokers, we will address the Financial Regulatory Commission.”