Belarus' Stock Market: Does It Exist?

The Belarusian Currency and Stock Exchange (BCSE) is the national stock exchange of Belarus, based in Minsk. It was formed in 1998 by the National Bank of the Republic of Belarus, the State Property Fund of the Ministry of Economics of the Republic of Belarus, and several large banks of the Republic of Belarus. The BCSE is open to foreign investors, and since 2023, non-resident legal entities have been permitted to trade securities on the exchange. The market capitalization of the Belarusian stock market is projected to reach $2.50 million in 2024, with an expected annual growth rate of -4.40% resulting in a projected total amount of $2.39 million by 2025.

The Belarusian Currency and Stock Exchange (BCSE)

The BCSE serves as the trading platform for the four main segments of the organized financial market in Belarus: currency, securities, derivatives, and money markets. It acts as the National Forex Centre and is responsible for organizing trades, clearing activities, and electronic document management. The BCSE also acts as a central registrar of information about over-the-counter (OTC) securities transactions and supports indicative quotations on assets traded outside the trading floor.

The supreme body of management of the BCSE is the General Meeting of Shareholders, which includes banks, broker/dealer subsidiaries of the republic, and other shareholders in addition to its founders. The Management of the BCSE between the General meetings of shareholders is carried out by the Supervisory Council.

The market capitalization of the Belarusian stock market is projected to reach US$2.50 million in 2024, with an expected annual growth rate of -4.40% resulting in a projected total amount of US$2.39 million by 2025.

The National Forex Centre

The BCSE acts as the NFC, and its main functions include:

• Collecting, organizing, recording, storing, and analysing reports of forex brokers.
• Revealing violations in forex brokers' operations with non-deliverable OTC financial instruments.
• Reporting when forex companies' financial capacity does not meet the standards set by the National Bank.
• Forming a guarantee fund using fees from forex brokers and making payments from this fund.
• Informing the National Bank about forex brokers' violations and non-fulfilment of obligations.
• Verifying the software of legal entities, including forex brokers, on a contract basis.
• Disclosing information about forex brokers' activities.

The NFC's functions are limited to specific activities, including the organization of OTC trading in non-deliverable financial instruments and operations with these instruments.

The BCSE serves as the trading platform for the four main segments of the organized financial market in Belarus: currency, securities, derivatives, and money markets. The exchange aims to promote the formation of a fully organized financial market that meets the needs of its members and provides the government with effective market mechanisms for monetary and fiscal policy implementation and regulatory functions.

The supreme governing body of the BCSE is the General Meeting of Shareholders, which includes banks, broker/dealer subsidiaries of the republic, and other shareholders in addition to its founders. The Management of the BCSE between these meetings is handled by the Supervisory Council.

The BCSE is open to foreign investors, and since 2023, non-resident legal entities have been permitted to trade securities on the exchange. However, private companies must meet certain criteria to trade stocks, such as profitability and a minimum net asset value.

The BCSE's role as a central registrar of OTC securities transactions

The Belarusian Currency and Stock Exchange (BCSE) is the primary trading platform for the four main segments of the organised financial market of the Republic of Belarus: currency, securities, derivatives, and money markets. The BCSE acts as the National Forex Centre and is responsible for promoting the formation of a fully organised financial market that meets the needs of its members. It also provides the government with effective market mechanisms for monetary and fiscal policy implementation and the performance of supervisory and regulatory functions.

As a central registrar of information about over-the-counter (OTC) securities transactions, the BCSE plays a crucial role in maintaining transparency and integrity in the Belarusian financial market. The BCSE collects and processes information on OTC transactions to ensure compliance with regulatory requirements. According to the Resolution of the Ministry of Finance of the Republic of Belarus No. 112, dated September 12, 2006, "On Regulation of the Securities Market", professional participants in the securities market are mandated to submit information on specific types of OTC transactions to the BCSE within three working days from the registration date.

The IQS "OTC Market" BEQAS module, launched on February 2, 2010, is a dedicated software solution that automates the processing of OTC transaction information. This module ensures efficient and secure handling of OTC transaction data. The BCSE's role as a central registrar includes maintaining a comprehensive database of OTC securities transactions, facilitating regulatory compliance, and providing transparency in the Belarusian financial market.

The BCSE's functions as a central registrar of OTC securities transactions extend beyond mere data collection. It also offers clearing activities, operates an electronic document management system (EDMS), and provides information services to market participants. This comprehensive approach ensures that the BCSE plays a pivotal role in the smooth functioning of the Belarusian financial market, fostering confidence among investors and contributing to the overall economic growth of the country.

In summary, the BCSE's role as a central registrar of OTC securities transactions is vital for maintaining a well-regulated and transparent financial market in Belarus. By collecting, processing, and maintaining records of OTC transactions, the BCSE ensures compliance, supports informed decision-making, and promotes the development of a robust and reliable financial environment in the country.

The BCSE's role in promoting a fully organised financial market

The Belarusian Currency and Stock Exchange (BCSE) is the trading platform serving the four main segments of the organised financial market of Belarus: currency, securities, derivatives, and money markets. The BCSE acts as the National Forex Centre and is a member of the International Association of Exchanges of the Commonwealth of Independent States countries (IAEx of CIS), the Federation of Euro-Asian Stock Exchanges (FEAS), the Association of Belarusian Banks (ABB), and is also a partner exchange of the UN's Sustainable Stock Exchanges Initiative.

The BCSE was formed in 1998 by the National Bank of the Republic of Belarus, the State Property Fund of the Ministry of Economics of the Republic of Belarus, and several large banks of the Republic of Belarus. The supreme body of management of the BCSE is the General Meeting of Shareholders, which includes banks and broker/dealer subsidiaries of the republic. The BCSE carries out functions of trade organisation, settlement-clearing, and registration of transactions concluded on the over-the-counter market. It also acts as a central registrar of information about OTC securities transactions and supports indicative quotations on assets traded outside the trading floor.

The BCSE plays a crucial role in promoting a fully organised financial market in Belarus. It provides the government with effective market mechanisms for monetary and fiscal policy implementation and enables companies to raise capital by issuing shares. The BCSE facilitates capital formation, investment, and economic growth, allowing investors to buy and sell ownership stakes. The BCSE also contributes to the advancement of the financial market by leveraging rapid technological developments, enabling cross-border transactions, and increasing the participation of individual investors.

The BCSE offers a range of services to its members, including organisation of trades, clearing activities, electronic document management, and information services. It aims to meet the needs of its members while providing the government with the necessary tools for effective economic management.

The impact of sanctions on Belarus' stock market

The Belarusian Currency and Stock Exchange (BCSE) is the primary stock exchange in Belarus, serving as the trading platform for the country's four main financial market segments: currency, securities, derivatives, and money markets. The exchange was formed in 1998 and is based in Minsk. The BCSE is a member of several associations, including the International Association of Exchanges of the Commonwealth of Independent States (IAEx of CIS) and the Federation of Euro-Asian Stock Exchanges (FEAS).

The impact of sanctions on the Belarus stock market has been significant, particularly in the banking and defense sectors, which have close ties to Russia. The United States, the European Union, and other countries have imposed sanctions on Belarus due to its involvement in Russia's invasion of Ukraine and its own human rights violations. These sanctions have targeted individuals, entities, and industries that support the Lukashenka regime, which has resulted in a deterioration of the business and investment climate in Belarus.

One of the most notable effects of the sanctions has been the restriction on Belarus's ability to deal in hard currency, leading to a technical default on external debts and a downgrade in the country's international credit rating. The banking sector has been heavily impacted, with sanctions prohibiting any commercial activity with certain Belarusian banks, including Belinvestbank and Bank Dabrabyt. Additionally, the country's ability to attract foreign direct investment (FDI) has been hampered by the sanctions and legislative changes that restrict the disposal of property by companies from "unfriendly states."

The defense and security industries have also faced significant sanctions, with entities and individuals associated with the Belarusian defense sector being targeted. This includes the Minsk Wheeled Tractor Plant (MZKT), a state-owned enterprise and flagship of the Belarusian military-industrial complex, along with its senior executives. The State Authority for Military Industry of the Republic of Belarus (SAMI) and several other defense companies have also been sanctioned for their role in supporting Russia's military capabilities.

The overall impact of the sanctions on the Belarus stock market has been detrimental, isolating the country economically and causing a decline in foreign investment. The future outlook for the Belarusian economy remains uncertain, with most economists and international organizations predicting modest growth or stagnation through 2024.

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