Capital Markets: How the Stock Exchange Is Organized Trade in securities in BiH is conducted through two stock exchanges, located in Sarajevo and Banja Luka. These two stock exchanges are organized on the same regulatory principles. According to the legal regulations governing capital markets in BiH, the stock exchanges are "places for bringing together supply and demand for securities and trading with securities, pursuant to previously defined rules." Linking supply and demand for securities produces rates (or prices) for the securities being traded. The third function of a stock exchange is to secure information on supply and demand and so the market value of the securities traded. The Sarajevo Stock Exchange (SASE) was founded by eight brokerage houses on September 13th, 2001. Trading officially started with the first auction, totaling 3,099.00 KM, on April 12th, 2002. SASE has three segments, with trading conducted on separate rules: The Official Quotation, The Fund Quotation (as a sub-segment of official quotation), and The Free Market. The Official Quotation is the market sector where our "blue chips," i.e. the highest-quality local enterprises, are traded. For a company to be accepted into quotation, it must meet certain general and special conditions and criteria. An issuer included in the Official Quotation must regularly inform the public and the stock exchange of all and any events affecting their business. They are also bound to submit semi-annual and annual financial statements to the stock exchange. Their operations should be as transparent as possible, so a potential investor can assess the likely return on investment in this issuer. The Fund Quotation is that part of the Official Quotation reserved for investment funds (IF). IF shares are included in much the same way as those of regular issuers, but the process is governed by the Law and Regulations of the Securities Commission. The Free Market is the segment of the SASE with the least strict requirements. For a security to be traded on the Free Market, it suffices for a brokering house or issuer to submit a request for inclusion. An issuer submitting such a request must submit their own financial statements to the stock exchange. The Banjaluka Stock Exchange (BLSE) has two stock-exchange markets: the Official Stock Market (Quotation), and the Free Stock Market. The BLSE was founded on May 9th, 2001 by eight banks and one company to trade in securities. The RS Securities Commission issued an operational permit to the Banja Luka Stock Exchange on August 9th, 2001. The Official Stock Market has the following elements: Shares - list A, Shares - list B, Closed investment funds, Open investment funds, Bonds and other debt securities, Short-term securities, and Other securities. Securities can be included in the official stock-exchange market if they meet the following general conditions: They can be traded in an organized way, They are paid in full, They are negotiable without restriction, and They are issued in non-material form. Shares are included in list B if, as well as these general conditions, they meet certain special criteria: two years in business, 3 million KM capital, a minimum of 1 million KM share issue, a minimum of 15% shares issued publicly, and at least 50 shareholders. An issuer requesting inclusion in List A must also meet the following conditions: Have adopted the corporate management standards for joint-stock companies, Have a website with accessible information on the issuer in the local language and English. The shares of both closed and open investment funds can be included in the official stock-exchange market, if they meet the general conditions for inclusion. The Free Market includes securities that meet the general conditions for inclusion. Inclusion in the Free Stock Market is made on request by the issuer, an individual shareholder, or in the normal course of business. Shares from privatization proceedings and publicly issued securities are included in the normal course, based on reports by the Central Registry. The Free Market has the following segments: Shares, Closed investment funds, Open investment funds, Bonds and other debt securities, Short-term securities, and Other securities.
