Stock market going hi-tech
May 5, 2000, 6 p.m. |
Analysts say a fancy new clearing depository that opened up last week in Kyiv will bring long-awaited transparency to trading in Ukrainian securities.
ring depository in Kyiv, industry analysts said. Though not yet fully operational, the All Ukraine Clearing Depository (AUCD), located in downtown Kyiv, is destined to become the venue where all Ukrainian stocks and bonds are exchanged. Experts said the new depository meets all the international standards required of such an institution - it is centralized, independent of the government and equipped with hi-tech computer systems. According to PricewaterhouseCoopers' Susan Hertel, a chief consultant for the project, "It [will be] very clear what securities are traded, how many shares and at what prices." According to Hertel, the AUCD is owned by Ukrainian securities firms themselves. Each member has a share and a voice in its operations. Ukrainian specialists in the industry shared Hertel's enthusiasm. "This is a very big move for the Ukrainian securities market," said Valery Antonov, director of brokerage Alpha Capital's research and analysis department. Antonov specified that the new depository will play a big role in increasing investor confidence. "Foremost, it will make the market more transparent and increase foreign investors' confidence. ... They should know that their shares are guaranteed," he said. But the AUCD is also about speed. Its hi-tech computer system will serve as the hub for all institutions involved in trading - banks, traders and companies. Experts are saying that traders will now be able to close deals within 20 minutes - faster than ever before. The speed factor will largely benefit smaller firms and allow them to better compete with larger ones. "Before this, it took up to several weeks for smaller companies to close a deal, Antonov said. "They won't have to go to, say, Kharkiv to close the deal." According to Antonov, the larger firms, which had no trouble finding funding to close deals quickly, will no longer have a trading advantage over smaller rivals. "Now, the smaller firms will also be able to follow up on quick decision making and quickly close the deals," he said. The initial stages of the project can be traced back to 1998, when the National Bank of Ukraine teamed up with the country's major securities firms and established a centralized clearing depository called the Interregional Securities Union (IRSU). But Ukraine's economic decline soon took its toll and the project stalled. However, with U.S. financial assistance via the United States Agency for International Development and the guidance of PricewaterhouseCoopers, the world's largest consulting and accounting firm, the IRSU has been transformed into a fully functional clearing depository. USAID refused to reveal the exact amount of assistance it provided, but according to a depository press release, several million dollars in U.S. assistance was granted. To date, the depository is officially still called the IRSU. But sources close to the project say that the name will be changed to the AUCD later this month at a board meeting of all the securities firms with shares in the institution. With a total of 70 securities holders, including 50 private banks and 20 trading companies, the depository will cover nearly 90 percent of all securities trading operations in Ukraine. But there's still a lot of work ahead. "[The AUCD is] fully functional, but ... not all the securities traded on the PFTS are connected to the system as of yet," said Hugh Haworth, head of USAID Kyiv's financial markets division. "Between 5 percent an 10 percent of Ukraine's securities are in the system as of now ... the rest should be in within a month or two." AUCD President Mykola Shvetsov acknowledged that the depository has some way to go before realizing its full potential. "Of course, this depository will be constantly growing and transforming into its designated role - the centerpiece of Ukrainian securities," he said at the AUCD's opening ceremony. At the same ceremony, Steven Pifer, U.S. Ambassador to Ukraine, summed up the significance of the new depository. "Nowadays, investors have a choice with a large number of financial markets ... The competition for international capital is extremely competitive," he said. "Institutions like this are important to Ukraine as Ukraine is going to hope, and try to win in that competition." For information about the depository, see www.mfs.kiev.ua