The Cyprus Stock Exchange (CSE) is undergoing one of the most eventful periods in its history, with the setting up of a common trading platform with the Athens Stock Exchange (ASE).

In April, the final two pieces of legislation were passed by the parliament, relating to remote trading rules and the Central Registry. With the computer systems having already been developed and put in place, trading on the new platform could begin in early summer.


The result will be a much higher international profile for Cypriot-listed companies. They will benefit from higher liquidity and better research coverage, as international investment banks already cover major stocks on the ASE.

The strategy is that the two exchanges will retain their separate status, while co-operating via the common platform. Member firms of one exchange will be allowed to join the other. The CSE has 14 member firms, and the ASE has 80.

Harmonised trading

“The concept is to facilitate trading on both exchanges using the same software, and to harmonise trading rules and regulations to make them identical,” says Nondas Metaxas, CEO of the CSE. “We will retain separate clearing systems and listings will go through separate regulators. Brokers will be free to join the other exchange and there will be one screen showing all prices.”

In the past, Cypriot stocks had suffered from low turnover, and a consequent inability to buy or sell in volume without pushing the price up and down. In addition to this, the investor base was narrow.

This led some big companies to the idea of obtaining a dual listing on the ASE, so they could reach out to a bigger investor base and be able to raise capital via bigger rights issues.

The pioneer was Bank of Cyprus (BOC), which listed on the ASE in 2000. Since then the visibility of its name has increased, share liquidity has grown and it has been able to carry out large capital-raising exercises. As the investor base has broadened, its share price has risen. The bank now has international research coverage from houses such as UBS, Deutsche Bank and JPMorgan, as well as more Greek brokerages than before the dual listing.

Not surprisingly, the success of the BOC strategy made other Cypriot companies consider following in its footsteps, and this partially explains the move by the CSE to link up with Athens.

“The dual listing by Bank of Cyprus was one of the catalysts for us setting up the common trading platform,” says Mr Metaxas. “There has been tangible interest from other Cypriot companies for dual listings and by setting up the common trading platform, we hope to avoid the double listing of more Cypriot companies on the ASE.”

Trading on the common platform will be conducted in euros. This adds complexity to the project because, although Greece is part of the eurozone, Cyprus still uses the Cyprus pound and will not adopt the euro until January 2008.


Crash recovery

The general view is that the common platform should usher in a new period of growth at the CSE, which has only recently recovered from the effects of the spectacular bull run of 1999 and the subsequent crash.

In 1999, there was a share-buying frenzy in Cyprus and the year ended with CSE stocks having a market capitalisation of C£12.7bn ($21.7bn). The bubble then burst, and market capitalisation ended 2000 at C£7bn and 2001 at C£4bn. The number of CSE members fell from 44 to the current 14.

But stock prices are rising again, and in March the market capitalisation stood at C£7.3bn.

The CSE hopes that it can move forward and see the top Cyprus companies become well-known names for international investors.

The future status of the CSE itself is also being discussed. It is one of the few exchanges in the EU that remains a public sector institution and its common platform partner, the ASE, is itself a listed company. Privatisation is a distinct possibility in the next couple of years.