In Bulgaria, at the beginning of this decade, a stock market for corporate stocks emerged simultaneously under the disposition of the acting Commercial Code.

The First Bulgarian Stock Exchange (FBSE), later transformed into the Bulgarian Stock Exchange, was the first stock exchange in the new democratic history in Bulgaria. It was established on 8 November 1991. One after the other emerged several stock exchanges. For a period of almost two years (1992 - 1994), approximately 20 stock exchanges or stock sections to the commodity exchanges had been established in Bulgaria. Due to a lack of legislation to regulate the financial markets, delay in structural reforms and the emergance of the pyramid structures, the securities market notably decreased its trading volume. It was logical for a lot of stock exchanges to cease operations.

In 1995 the Bulgarian authorities undertook a reform of the stock market. The Law on Securities, Stock Exchanges and Investment Companies, adopted on 29 June 1995 concerning the reorganisation of the Bulgarian stock market, set a new legal framework of the capital market. The enforcement of the new law initiated important structural changes in the existing securities market. In January 1996 the Securities and Stock Exchanges Commission was established. The functions to regulate, control and promote the stock market and to protect the investors' interests were assigned to the Commission. In August 1996 the Central Depository was created as a key institution to register the transfer of securities ownership and to serve the trading of securities.

On 5 December 1995 the major operating regional stock exchanges merged into the FBSE, establishing the Bulgarian Stock Exchange (BSE). After the consolidation stock exchanges throughout the country operated as regional branches of the BSE. The exchange increased its capital and enrolled the largest and most reliable Bulgarian banks and financial intermediaries, as well as some foreign financial institutions, as shareholders and members. Among them are ING Bank, ABM AMRO Bank, Societe Generale, National Bank of Greece.

The performance of the Bulgarian Stock Exchange followed the performance of the Bulgarian economy. In 1996 the exchange registered its worst performance. A chaotic macroeconomic environment and heavy corporate losses deflated investor interest in equities. The value of turnover at the Exchange decreased by 98.4 per cent, from BGL 298.7 million in 1995 to BGL 4.7 million in 1996. Equity prices plummeted due to soaring foreign exchange rates and inflation, causing significant losses for all market participants. The market capitalisation of the Bulgarian Stock Exchange was BGL 2,818 million, down 35.14 per cent on the end - 1995 figure.

Trading was suspended on the floor of the exchange at the end of October 1996, because all listed companies became ineligible for trading until they filed the requisite licensing paperwork, as required by the new Law on Securities, Stock Exchanges and Investment Companies. At the close of the market there were 12 companies listed (18 at the end of 1995) with 19 issues among them - 4 banks, 3 investment funds, 1 financial and leasing company, 1 company for production and installation of small family bakeries, 1 company establishing communication systems and 2 hotels.

All the listed companies, except the investment funds, were the constituents of the BSE Index. This Index was created on 7 September 1993 and is the first stock exchange index to be created in the country with the basis of 100. The BSE Index is a price share index weighed according to market capitalisation. The highest registered value of the Index was 127.6297 on 10 October 1994 and the lowest value was 77.5686 at the close of trading wit corporate securities on 23 October 1996.

Since the suspension of trade last year the market has remained closed till 21 October 1997. Meanwhile, like many other countries of Central and Eastern Europe, Bulgaria has decided to privatise a large part of the state-owned companies in order to ensure the emergence of a competitive market that may allow a real economic takeoff. Shares of 1050 Bulgarian state companies have been privatised through the Mass Privatisation Programme. The trade with securities of the privatised companies on the secondary market is expected to start in early autumn. The Government and the BSE are currently considering another important channel for privatisation - public placement of securities of would-be privatised companies. The public placement on the Stock Exchange will speed up the process and make it easy, quick and transparent. The application of the first company to be privatised through the stock exchange is already in the listing department of the Exchange.

The potential flow of orders which the Bulgarian Stock Exchange may face is huge. For that reason, the BSE has signed an agreement of international cooperation with the SBF - Bourse de Paris. This cooperation will lead to the modernisation of the organisation of trading on BSE, as well as supplying a new trading system, a direct transcription of the current French trading system SUPERCAC.

BSE connected its electronic order driven trading system with REUTERS and TELERATE vendor systems for redistribution of real time market data, in order to promote its activity and to attract investors on the market.

The development of the Bulgarian capital market is facing many problems and difficulties. However, the Government supported the efforts of the Bulgarian Stock Exchange to create a modern, transparent and reliable market place by providing a non-cash contribution to the capital of BSE, notably a building for the stock exchange.

The goal of the Bulgarian Stock Exchange is to gain the reputation of an exchange, operating in compliance with the internationally accepted standards and determining the active international contacts of the BSE. The BSE is a corresponding member of the International Federation of the Stock Exchanges (FIBV) and is among the founders of the Federation of the Euro-Asian Stock Exchanges (FEAS).

BSE is actively involved in cooperation with the governmental and non-governmental organisations, including the American Securities and Stock Exchanges Commission, the International Financial Corporation, the British Know-How Fund, as well as many first class international banks and financial institutions.

An important field for the future progress of the BSE is the internationalisation of its activities, including listing of foreign companies and attraction of foreign portfolio investments.