There will be a new trading system soon. Please describe what it will be and when it will be implemented.
KHALAF: We’re going to start continuous trading as soon as
we have an agreement with the government. We already
have a deal with the Paris stock exchange to install the same
software program that’s used there. You’ll have on-screen
trading the same as in Paris. We’re hoping to get it within
12 months.
The first step will be the shouting system. It will be a temporary
period to get us to the computerized continuous
trading system. Because it’s a transitory period, we’ll
continue with our fixing system, but just for the opening. I
think we will open for one-and-a-half to two hours of
shouting, as in New York. The fixing system will also permit
small investors who don’t want to wait for the broker to
find other investors in order to be involved in trading.
Everybody will have a chance to trade on the BSE.
Why not a full day of trading?
KHALAF: In other countries they have much greater volume.
If we have more volume, we’ll be flexible. We’ll start with two
hours. When we find that there’s enough volume, we can go to
three hours, four hours, six hours and maybe even eight hours.
The BSE allows no more than a 5% price change in one day. Will you allow more fluctuations?
KHALAF: We will change it a little, keeping 5% for the fixing
and 5% for the shouting – 10% total. The committee can
decide to change this without going to another authority. We
will be going in steps, seeing how the market is acting and
reacting with our plans.
What are the benefits of the new computer system?
KHALAF: It will be easier for brokers to place their orders –
with just a click of the mouse. We have another proposal to
get on the Internet and link all Arab markets on the same
website. You go in and you get information on all the companies
and get connected to any trading room with continuous
pricing on it. This will start with the Kuwait stock market,
Cairo and Jordan.
Someone in another country might ask: “Is there a stock
market in Beirut?” On the Internet I have my CAC, my Dow
Jones, my Nasdaq. So if you have an Arabic website, you can
go and see what’s happening there.
When should we expect the Internet system to be in place?
KHALAF: I have to present it to the committee and sign it. Then
we can start to implement it. In the Gulf it took one year.
Are you pressing for the BSE to have a regulatory body soon?
KHALAF: As soon as possible. We are working on it. I’m
working with the minister of finance and others. Then we
have to propose it to the cabinet and then to parliament.
Can you give us a time frame?
KHALAF: I can’t say. It depends on how long it will take to
get through the cabinet and then how long it will take to be
agreed in parliament. I hope as soon as possible.
Meanwhile we can’t say there’s no department regulating the
market. The BSE is carefully watching the market, and the
central bank is carefully watching the financial institutions.
If there’s a transaction that’s not completely clear, we
can stop it and have it clarified.
It’s obvious that there is lack of transparency with some companies listed on the BSE. How are you going to improve on this?
KHALAF: What we have done is recruited someone to follow
companies for transparency, to make sure that they give us every
statement we need at the proper time. For banks it has to be every
three months, even if it’s not audited. For other companies it has
to be every six months. We haven’t implemented a fixed date.
But there is a logical time limit. As for other information, when
we think there’s information that needs to be published, we call
the company and if they don’t react we send them a letter that
they have 48 hours to inform the public.
But what about companies that are tardy with their financial statements? Will you make them pick up the pace?
KHALAF: It’s not easy to get audited year-end statements in
as early as February. In March we have to have it. We will
enforce it. We will be flexible if there’s a reason. We are not
rude, but we are becoming rigorous.
How will you control insider trading before the regulatory body is established?
KHALAF: It’s a bit hard to control insider trading with a fixing
system and little liquidity. You can control it if you are
watching your staff enough, and that’s what we’re doing.
What can we do with companies? It’s difficult. If you see someone
making a transaction and you think something is wrong, it’s
difficult to prove. We think that with the fixing system and
small liquidity, it’s easier to manipulate prices than with
continuous trading. What’s important is to prepare the market
to be more transparent and to reflect the reality of the transactions.
When you have continuous trading and more liquidity,
you cannot influence the market with only a few shares. It will
be easier to control the situation.
What’s your plan to promote the market?
KHALAF: We are working on putting together a marketing
campaign. The first step will not be talking about the BSE, only
what a stock exchange is, for the investors and the companies.
In the second phase, we will focus on what the BSE is. The third
one will include the progress made to improve the BSE.
To get to the public directly you have to go through television
and newspapers. To talk to investors in person, we will start
conferences in Beirut in April. We are also promoting the stock
exchange in other countries.
Are there any plans to relocate?
KHALAF: We’re trying to find a place in the Beirut Central
District. It will be the BSE building, in which we will have not
only the stock exchange. We have demands from financial
companies and brokers who want to be in the same building.
There is a problem getting companies to go public because of the tradition to keep business in the family. How can you persuade them to list?
KHALAF: To help encourage family businesses to become listed,
there are tax incentives. We are trying to help them become more
aware of the benefits, such as raising capital by being listed.
Dividend taxes were cut by 50%, from 10% to 5%. Some companies
want to be listed but are hesitant because of the lack of activity.
They are waiting for others to do it first. In 1997, when one bank
listed, others followed. When the first company comes, others
will follow.
