Azerbaijan: Baku Stock Exchange Adopts MT4 to Offer Forex and CFD's Through its Members

Eurasia based stock exchange announced MetaTrader4 will be offered to introduce Forex and commodity CFDs as growth in the exchange's

logo(Update: article was updated with additional information concerning liquidity providers.) Another national exchange announces a MetaQuotes product integration, with the latest coming from the Baku Stock Exchange (BSE) located in the city of Baku, Azerbaijan’s capital.

While most of the recent exchanges that have selected MetaQuotes adopt the MetaTrader 5 (MT5) platform, BSE has chosen MetaTrader 4 (MT4) and will include forex, precious metals traded as Contracts for Difference (CFD), and other commodity CFDs. These instruments will be offered through BSE’s exchange members via MT4, according to the announcement.

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A corporate statement from BSE was included in the release and stated, “The new trading system offered by BSE is equipped with advanced technological parameters and fully adapted to the current needs of the local capital market participants. The advanced technological solutions used in the platform provides information security to protect data and maintain privacy, avails sustainable operation of the system and realization of the settlements within the country.”

BSE Revenues Mean Much to the Economy

Although the BSE exchange itself is relatively new in comparison to stock markets in the developing world, it has experienced quite a degree of sustained growth since having the first trade executed during the inaugural September 1, 2000 launch.

Last year, trading volumes in securities were reported through September 2012 with results of a 34% rise year-on-year (YoY) and reached 8.2 billion manats, or 41 percent of non-oil GDP during the period.

From a greater perspective, the revenues from the Baku Stock Exchange during the mentioned period represent 15% of total GDP (including oil), which was recorded at $53.9 billion manats (nearly $69 billion USD based on prevailing exchange rates). Clearly the BSE is a significant financial center for the Azerbaijan economy.

Expansion Plans for Forex 

In a comment to the media BSE said, “Forex was introduced into the trading system options in order to attract new instruments to the market under the State Securities Market Development Program for 2011-2012.” BSE further added, “Individual investors will be able to carry out transactions with currency, commodities and precious metals. At that, transactions with commodities and metals will be available at the contract for difference.”

According to Forex Magnates’ research, several BSE exchange members have existing forex offerings, including on the MT4 platform (from MetaQuotes) and/or cTrader platform from Spotware Systems. For example, member firms such as InvestAZ and Unicapital have existing offerings. At the time of publication, the BSE has 18 members out of who 12 are active at the moment.

It’s not entirely clear how the liquidity aspects of the MT4 platform will be propagated via the exchange members, and to what degree – if any – the exchange will standardize the market-making process.

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Adding to the media comment, BSE said, “Liquidity of transactions will be provided by BSE market makers. The advantage of BSE Forex access services is that the settlement of transactions will be conducted in local banks and not abroad as it’s in practice today. Besides, BSE guarantees no delays with transactions and their settlement that couldn’t be provided by other forex brokers so far. We assume that BSE forex services will  mostly be in demand at the commercial banks of Azerbaijan.”

logo_216x64In a comment to Forex Magnates, Dr. Hakan Advan, CEO of InvestAZ, a member on the BSE said regarding this news, “We are delighted to see that Baku Stock Exchange is taking a new step towards the aim of developing capital markets in Azerbaijan by introducing new trading systems, such as the MT4 platform. Actually, BSE is taking an initiative to control and regulate forex transactions, in order to provide a safer environment while expanding available instruments to investors. Since InvestAZ has been active in the forex market for years, we have profound knowledge and experience in such transactions and with MetaTrader platforms. Therefore, we share the vision of the BSE and are determined to remain side by side with them in the development of capital markets in Azerbaijan. We think that the BSE and Azeri investors will become important participants in world’s financial markets in near future.”

Market Regulation and the Economy

The BSE is regulated by the State Committee for Securities (SCS) which regulates the capital markets and oversees the National Depository Center of the Azerbaijan Republic. The SCS handles the registration of brokerages in the following categories:

  •  Asset management activities
  •  Brokerage activity
  •  Preparation and sale of all types of security functions on banks
  •  Depository activities
  •  Dealers activities
  •  Stock exchange activity
  •  Clearing activities
  •  The registration of securities holders

According to a 2012 year-end report, Azerbaijan has a population of nearly 9.2 million people and ranked 64th globally in exports, which are based on estimates accounted to $39 billion and 90% driven from gas & oil. There has been low unemployment rates in recent years with inflation of 4.8%, and improved economic conditions including a decrease in poverty, as the infrastructure has improved despite existing economic inefficiencies, and an income per capita of 3,784 manats ($4,805 usd).

Geopolitical Ties

According to the Ministry of Economic Development, during the first half of 2013, income of per population increased by 5.7 % compared to the same period of the previous year, and reached 1708.8 manat, or on average 284.8 manat per month. Average monthly nominal wage/salary of employees engaged in country economy was 408.8 manat in January-May, 2013. It was increased by 6.8 percent compared to the corresponding period of last year. Average monthly nominal wage/salary was 1555.0 manat in the oil sector, 378.5 manat in non-oil sector, 328.5 manat in state field, and 534.0 manat in the private sector. The YoY GDP figures, January 2013 through August 2013, were also higher as can be seen in the graph below:

GDP

 

Earlier this week on Tuesday, Azerbaijan assumed the rotating presidency of the UN Security Council for October from Australia. Azerbaijan, one of ten non-permanent members of the Security Council, began its two-year mandate on January 1, 2012, as a representative of Eastern Europe.

The country maintains close trading ties with Turkey, and the Istanbul Stock Exchange is one of the major shareholders in the Baku Stock Exchange. If growth continues in the country, Forex volumes should pick up assuming that the exchange members and commercial banks being targeted with this offering can attract volumes from their respective clients.

The Baku Stock Exchange has signed a contract with InvestAZ – one of its member firms – who will provide liquidity provisioning as a market-maker through the new MetaTrader4 (MT4) platform offered by the CJSC Baku Stock Exchange. Initially, Invest AZ will provide buying and selling quotations on 48 currency pairs and three CFD instruments. The contract was signed by the Chairman of BSE Board Amin Muradov and Invest-AZ Chairman Elshan Guliyev.

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