THE IMPACT OF MIFID ON THE BULGARIAN CAPITAL MARKET: ONE YEAR LATER APOSTOL APOSTOLOV, CHAIRMAN FINANCIAL SUPERVISION COMMISSION

1
THE IMPACT OF MIFID ON THE BULGARIAN CAPITAL
MARKET ONE YEAR LATER APOSTOL
APOSTOLOV, CHAIRMAN
FINANCIAL
SUPERVISION COMMISSION
16 September 2008
2
Why MiFID was needed ?

• To increase the integration rate between the
  European financial markets
• To replace the outdated Investment Services
  Directive (ISD) and to tackle the following
  issues
• Passport did not work well enough
• Retail investor protection needed to be updated
• Concentration rule a barrier to the emergence
  of an integrated and competitive trading
  infrastructure
• New services (investment advice) and financial
  instruments (derivatives) needed to be covered.

3
Implementation of MiFID

• MiFID and MiFIDs implementing measures have been
  transposed in the Bulgarian legislation through
  the following acts
• Markets in Financial Instruments Act (promulgated
  in State Gazette, issue 52, effective of November
  1, 2007)
• Ordinance No 38 of 25 July, 2007 on the
  requirements to the activities of investment
  intermediaries, in effect as of November 1, 2007.

4
MiFID Impact 1

• The scope of the financial instruments subject to
  regulation and supervision was expanded
  (securities and various forms of derivative
  financial instruments with underlying assets
  securities, currency, commodities, interest
  rates, indexes, etc.). In Bulgaria the impact of
  MiFID has not yet resulted in an increase of the
  variety of the products offered
• Detailed requirements regarding the internal
  organization of the investment intermediaries
  were established in view of ensuring the
  organizational and administrative stability of
  the investment firms as one of the major
  participants on the capital market in the EU. On
  the basis of the conducted inspections by the FSC
  a conclusion can be drawn that the organizational
  and administrative stability of the investment
  intermediaries in Bulgaria has improved
• Investment firms and market operators can freely
  perform activities (investment services,
  regulated markets/ Multilateral Trading Facility
  (MTF) access facilitation) in other Member States
  based on the home Member State authorisation.

5
Statistics as of 10 September 2008

• Market operators
• 4 market operators notified FSC about their
  intention to provide arrangements on the
  Bulgarian territory to facilitate access to their
  systems for trading on regulated markets and to
  their Multilateral Trading Facilities.
• Investment intermediaries
• 597 investment intermediaries from other Member
  States have notified their intention to provide
  services in Bulgaria since 2007 (483 under MiFID
  and 114 under ISD)
• Only one has become member of the BSE-Sofia
• Two branches have been established in Bulgaria
• Four Bulgarian investment intermediaries have
  expressed their intentions to provide financial
  services in another Member State.

6
MiFID Impact 2

• A new type of service is introduced as part of
  the activities of investment firms organization
  of Multilateral Trading Facilities. It is
  envisaged that such a system could also be
  organized by a market operator. At this stage in
  Bulgaria there are no other regulated markets but
  the Bulgarian Stock Exchange and no MTFs despite
  the removed concentration requirement
• MiFID gives many new opportunities to the
  Bulgarian market participants to develop their
  activity and to take the desired place at the
  capital market
• The detailed requirements which the investment
  intermediaries should comply with when providing
  investment services have resulted in higher level
  of investor protection in Bulgaria.

7
Benefits of MiFID

• Improved market access due to the Single
  Passport
• Improved functioning of markets
• More flexibility for the investment
  intermediaries in organizing their activity
• Reduced authorisation costs
• Reduced compliance costs
• Reduced operating costs
• Improved investor protection.

8
Single Passport Impact

• The impact of the Single Passport in practice was
  not considerably high as most of the
  notifications were not followed by immediate
  action towards the provision of services. Most of
  the investment intermediaries register in EU
  Member States as a technical act to make sure
  that they would have an opportunity to conduct
  cross-border services whenever the need and
  occasion arise. At this stage there is no
  considerable competitive pressure on the
  Bulgarian investment intermediaries.
• The Markets in Financial Instruments Directive is
  considered to be one of the most comprehensive
  reforms ever made on the European Capital Market.
  
• Short period since coming into force the
  results of the impact of MiFID on the Bulgarian
  capital market are yet to evince.

9
Thank you for the attention!