Kazakhstan Stock Exchange

Overview

The Kazakhstan Stock Exchange (KASE; Kazakh: Қазақстан қор биржасы, romanized: Qazaqstan qor bırjasy) is a stock exchange located in Almaty, Kazakhstan. The exchange was founded in 1993.

History

On November 15, 1993, Kazakhstan introduced its own currency, the tenge. The next day, November 17, 1993, the National Bank of Kazakhstan and 23 local leading commercial banks took a decision to found a currency exchange. The previously existing Center for execution of inter-bank currency transactions (Currency exchange) used to be a structural unit of Kazakhstan's National Bank. The main task assigned to the new exchange was to set up and develop the national currency market following the introduction of the tenge. The exchange was incorporated as a closed joint-stock company on December 30, 1993, under the name Kazakhstan Inter-Bank Currency Exchange. On March 3, 1994, the exchange was re-registered under the name Kazakhstan Interbank Currency Exchange due to the need to match the exchange's name to the current legislation. On July 12, 1995, the exchange was re-registered under the name Kazakhstan Inter-Bank Currency and Stock Exchange following the shareholders' decision to let the exchange begin operating on the securities market. On October 2, 1995, the exchange obtained license No. 1 to carry stock exchange transactions, however this license only covered the right to operate trading in government securities only. On April 12, 1996, the exchange was re-registered under the name Kazakhstan Stock Exchange, since the current legislation banned the stock exchange from carrying out functions of a commodity exchange. On November 13, 1996, the exchange obtained an unlimited license to operate securities trading from the National Commission of the Republic of Kazakhstan on Securities. Since the new Act of the Republic of Kazakhstan "On Securities" dated March 5, 1997 restricted the stock exchange's operation to securities only, the general meeting of shareholders in April 1997 decided to reorganize it by making it separate closed joint-stock company Almaty Financial Instruments Exchange (AFINEX), which was registered on July 30, 1997. As of September 1, 1997 the trading in foreign currencies and futures contracts moved to the AFINEX trading floor. The exchange itself underwent a re-registration in July 1997 retaining its former name. With the Act of the Republic of Kazakhstan "On Making Changes and Additions to Some Legal Acts of the Republic of Kazakhstan Regarding Joint-Stock Companies" of July 10, 1998 coming into effect, the ban prohibiting the exchange to operate trading in foreign currencies and financial instruments other than securities, was lifted, which made it possible to affiliate the AFINEX to the exchange. The relevant decision was taken at a general meeting of shareholders on January 6, 1999, and on March 16, 1999, an appropriate state re-registration of the reunited exchange was effected. On December 15, 2006, KASE was authorized as a special trading floor of the regional financial center of Almaty. On August 23, 2007, a general meeting of KASE shareholders took a decision to commercialize KASE. As part of KASE commercialization, the former voting principle "one shareholder – one vote" was scrapped and the traditional principle "one share – one vote at the general meeting" was adopted.

Status

The Exchange is a commercial organization operating as a joint-stock company. Bodies of the Exchange are as follows:

supreme body – general meeting of Exchange shareholders; governing body – Exchange Board of Directors; executive body – Management Board.

Exchange management

Alina Aldambergen – Chairman of Management Board Zhainar Sarzhakov – deputy Chairman of Management Board Andrei Tsalyuk – deputy Chairman of Management Board Natalya Khoroshevskaya – deputy Chairman of Management Board Ermek Mazhekenov – deputy Chairman of Management Board

Licenses

KASE holds the following licenses issued by the Committee for Control and Supervision of the Financial Market and Financial Organizations of the National Bank of the Republic of Kazakhstan:

license for carrying out banking transactions in the national and foreign currency (No. 5.3.3 issued on June 29, 2012); license for carrying out transactions on the securities market (including operations involving operation of trading in securities and other financial instruments and clearing of deals in financial instruments on the securities market) (No. 4.2.3/1 issued on July 19, 2012). Activities of the Exchange are mainly regulated by the following normative legal acts:

The Civil Code of the Republic of Kazakhstan; The Act of the Republic of Kazakhstan "On Joint-Stock Companies"; The Act of the Republic of Kazakhstan "On the Securities Market"; The Act of the Republic of Kazakhstan "On Investment Funds"; the Rules for Execution of Activities of the Operator of Trading in Securities and Other Financial Instruments approved by resolution No. 170 of the Agency of the Republic of Kazakhstan for Control and Supervision of the Financial Market and Financial Organizations dated October 29, 2008; Resolution No. 195 of the management board of the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations "On Requirements for the Trading Operator's Organizational Structure and for the Composition of the Stock Exchange’s Listing Commission and on Approval of the Rules of Operation for the Trading Operator’s Structural Unit Monitoring Transactions Executed in the Trading Operator’s Trading System" dated November 28, 2008. Resolution No. 77 of the management board of the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations "On Requirements for Issuers and Their Securities (Being) Admitted to Circulation at a Stock Exchange, as well as to Particular Categories of a Stock Exchange’s List" dated May 26, 2008; Resolution No. 196 of the management board of the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations "On Approval of the Rules for Classifying Deals Concluded in the Organized Securities Market as Executed for Purposes of Manipulation, for Setting Up and Operation of the Exchange’s Board of Directors’ Committee on Classifying Securities Deals as Executed for Purposes of Manipulation, as well as on Approval of its Quantitative Composition" dated November 28, 2008.

KASE shareholders

As of December 1, 2019, the total number of announced common shares of Kazakhstan Stock Exchange Inc. makes up 5,000,000 units, 974,373 shares are placed, the number of shares repurchased by the Exchange is 13,329. 49.1% of the total number of outstanding shares is held by the National Bank of the Republic of Kazakhstan in accordance with resolution No. KASE's Articles of Incorporation stipulate a "golden share", which is held by the National Bank of the Republic of Kazakhstan. It carries the right to vote decisions made by KASE bodies on issues of currency regulation and regulation of Kazakhstan government bonds market.

Members

KASE has three categories of membership. Depending on the type of financial instruments an organization is interested to trade in, it can become a member of KASE's currency, stock or derivatives. It is also possible to enjoy simultaneous membership in two or three of these categories. 53 professional market participants held the KASE member status as of October 1, 2018.

Participation in activities of international institutions

KASE is:

an affiliate member of the World Federation of Exchanges (WFE) representing more than 80 world exchanges which control almost the entire turnover of the global stock market; a member of the Federation of Euro-Asian Stock Exchanges (FEAS) uniting 50 professional institutions of the exchange industry operating on emerging stock markets in Europe and Asia; a member of the International Association of Exchanges of the Commonwealth of Independent States (IAE CIS) representing about 20 organizations from 9 CIS countries; a member of the Financial Information Services Division of the Software and Information Industry Association (FISD / SIIA) consisting of over 200 members, among which are the largest world exchanges, banks, brokers and investment companies as well as leading information agencies; a member of the Association of Financiers of Kazakhstan (AFK) which is the largest professional association in Kazakhstan's financial market, with about 250 members; a member of the Exchange Association of Kazakhstan (EAK), founded in 2011 and uniting 7 financial institutions represented by exchanges and market participants. The association has been founded to form and develop regulated (exchange) markets in Kazakhstan, including development of stock exchange acts.

KASE markets

KASE operates the following markets:

foreign currency (including currency swap transactions) market; government securities market; equity securities (shares and units) market; corporate debt securities market; repo transactions market; derivatives market.

Foreign currencies market

The currency market is one of the first markets organized on KASE and it has been operating since the latter's inception. The first foreign currency trading in US dollars took place in 1993. Today, transactions on this market account for about half of the total volume of trade on KASE. Main participants of KASE currency market are Kazakhstan's second-tier banks and the National Bank of the Republic of Kazakhstan. Currently, trading on KASE is conducted in US dollars, euros, Chinese yuan and the Russian Ruble and the tenge, as is Euro-USD trading. Pairs USD/KZT and EUR/KZT along with regular transactions are traded as currency swaps with terms of one and two days. Traditionally, USD/KZT trades make up more than 95% of the turnover in the foreign currency market. Throughout the day, KASE holds three foreign currency trading sessions: morning, afternoon and evening sessions. The first two are dedicated to trades settled on the day of transaction and in the evening session currency is traded according to the Т+1 and Т+2 settlement schemes. At the end of a trading day, KASE performs net-clearing of each currency instrument. Settlements are made by KASE Settlements department based on data provided by the Clearing department according to the DVP (Delivery Versus Payment) principle. Most currency market members work on KASE in the mode of immediate delivery of tenge and foreign currency. New currency market members and (or) particular banks prone to risks are required to pre-deliver the currency being sold. The banks acting as correspondents of KASE are:

National bank of the Republic of Kazakhstan (KZT); Deutsche Bank Trust Company Americas (USD); The Bank of New York Mellon (USD); Citibank N.A. (USD, EUR); Commerzbank AG (EUR); Sberbank of Russia (RUB); Bank of China (CNY). KASE's currency market plays an important role in Kazakhstan's economy. In recent years, its share in the total turnover on Kazakhstan's interbank currency market has been between 50 and 83%. This is where the average-weighted USD/KZT exchange rate is fixed, which is used as the official exchange rate by the National Bank of the Republic of Kazakhstan the next day.

Government securities

This sector features bonds issued by the Ministry of Finance and the National Bank of the Republic of Kazakhstan as well as by local executive authorities. All municipal bonds and bonds of the Ministry of Finance are offered in KASE trading system. The National Bank offers its notes independently. In recent years, there have been at least 200 government securities worth a total of about US$1.7 billion in constant circulation on KASE.

Equity securities

Today, this sector trades financial instruments of over 80 issuers, mainly stocks of local and foreign companies. The total shares market capitalization makes up more than US$42.5 billion. The main bulk of the market is occupied by companies from mining, energy and financial sectors.