Equity investors, the Bulgarian government and the Sofia bourse can all benefit if a new plan for the development of the Bulgarian Stock Exchange bears fruit on time, market players and experts told SeeNews.

The new board of directors of the bourse, which took office at the beginning of the year, presented last week its strategy blueprint aimed at making the dormant market more attractive for foreign investors and boosting its liquidity by launching new trading instruments, including derivatives, futures and options.

Figures from the bourse show that the market capitalisation of public companies in Bulgaria fell to 11 billion levs ($7.8 billion/5.6 billion euro) at the end of February from 28.9 billion levs at the end of 2007.

Market players polled by SeeNews say the change is much needed and it is a strong signal that the bourse aims to develop in the direction the market demands.

"This signal is very important, but it is more important that we see these intentions implemented. [...] The good thing is that this time the stock exchange is the active counterpart, which is seeking new investors, and now it's up to the government [to support the process]," the managing director of Sofia-based Benchmark Asset Management, Petko Valkov, told SeeNews.

"The things in this strategy have been proposed by investors for several year but the bourse's management never paid attention to them. What happened now is that the new management is paying attention to the problem. For some reason the problem so far has been that the management could not find a common language neither with investors, nor with the Central Securities Depository," said the executive director of Sofia-based asset management firm Capman, Nikolay Yalamov.

If the new strategy succeeds, it would boost turnovers and and thus it will make BSE more attractive to foreign investors which currently are not interested in the market simply because its too small in comparison with major European bourses and even with some of its peers in Southeast Europe.

The good thing about this strategy is that it comprises a timeframe for making the proposed changes, Yalamov said.

"I think this would give a boost to the market, as currently the free float is very low, which is hindering the entry of foreign investors and local institutional investors," Valkov said.

"What needs to be done is to implement new technologies, new platforms that would allow the trading of new financial instruments."

Such trading platforms have already been introduced in neighbouring Romania, Markus Piuk, legal advisor and partner at corporate law firm Schoenherr, told SeeNews over the phone from Vienna. His company has been hired to consult the launch of derivatives trading on the two Romanian bourses, in Bucharest and Sibiu.

"In Romania it took about six to nine months - the introduction of derivatives, including the changes required in the rule book of the stock exchange and the approvals from the security commission," Piuk said.

"It was not such a success as everybody has hoped, so the volumes are fairly small, but there is still significant trading. Generally, it's important and I think generally it's also important for Bulgaria to do this, to create derivatives platform," he added.