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Pensions of Ukrainians will new way to invest in stocks and bonds

The Parliament submitted a bill that extends the range of instruments to reduce the risks to investors

In Ukraine are going to completely rewrite the existing rules of work of stock market. Independent Association of banks for that worked with financiers bill No. 9035, and acting head of finkomitet of the Verkhovna Rada Mykhailo Dovbenko for a couple with his Deputy Ruslan Demchak registered it in the Parliament.

The goal of legislators is to rock the Ukrainian securities market, which is more than 20 years is in its infancy, and is most often used to transport money between businesses and other schemes. Not only because of the love of our business to questionable transactions, or due to lack of funds, but also because of the shortage of tools.

“In our market now there is no liquid market instruments, except for bonds of domestic Treasury bonds. Shares of Ukrainian companies illiquid bonds, almost no one is releasing with a few exceptions. There is no demand, because big risks, there is no normal regulation, infrastructure and so forth,” — said in a conversation with UBR.ua the Director of analytical Department of investment company Concorde Capital Oleksandr Parashchiy.

Effect and the reluctance of owners of Ukrainian business to lose complete control over their businesses, as well as inadequate corporate governance and the unwillingness of investors to take risks.

“Investors are not willing to invest in a turbulent real sector, and the owners are not in a hurry to share income and accurate information about your business. Another problem is the lack of infrastructure. It does not develop because the market is missing,” said UBR.ua partner of JSC “SK group” Julia Kurylo.

Bill No. 9035 means a host of innovations:

  • Described and legalized several new types of securities: credit linked notes, Depositary receipts, stock warrants.
  • Issued details the activities of professional participants of the capital market, with all the rights and duties of dealers in financial instruments, depositories, clearing institutions, companies, asset management, exchanges, etc.
  • Introduced rules for defaults on bonds, describes the mechanism of protection of the rights of the holders in such cases.
  • Define systemically important participants in the capital market (similar to systemically important banks).
  • Write out the mechanisms that allow the currency risk hedging for investors.
  • Details issued the concept of the derivative for the securities market (formerly used for foreign exchange transactions).
  • New experience

    When preparing the bill, clearly took into account the experience of neighboring Poland, which for several years has turned the market of securities in major European hub for investors. The secret of success of neighbors lies in four points:

    • Nationwide, the privatization of the industry at market price.
    • The introduction of three-tier pension system.
    • Active advertising among the citizens of the securities market.
    • The judicial reform.

    Results of reforms the economy has received a massive influx of domestic and foreign investors, thanks to whom Poland is the only country in the EU escaped recession during the crisis of 2008-2009.

    However from the list it is seen that the Polish experience is not similar to Ukrainian. In our country a national privatization has failed and has become oligarchic. And ordinary people are not interested in securities. All that has been done so far — it’s adopted some of the laws on judicial reform which is carried out only on paper. And made the first steps toward pension reform — at its first level. The bill for the second level only tabled in Parliament. And preparing accompanying legislation, which can be attributed to the above-mentioned bill No. 9035 — it creates infrastructure to investments of private pension funds, which will need to not only raise money of the population, but also to earn on them.

    “If this law is passed, it can create a new infrastructure of the stock market and to bring it closer to European. It is theoretically possible to conduct IPO (initial public offering), market placing of bonds, stocks, to produce some derivatives on these instruments and so on. It creates preconditions for the development of a full-fledged stock market in Ukraine. However, demand for these assets now, no. The only option that I see is force in the so-called second pillar of the pension system”, — said Oleksandr Parashchiy.

    From ordinary people yet don’t expect much activity in the stock market. Certainly not at the initial stage of its full formation.

    “Against the background of instability in the banking sector, as well as the ongoing devaluation of the hryvnia, the demand for savings to alternative pension in the national currency will be more sluggish. Although Ukrainians are daring and open to new ideas to earn. Suffice it to recall MMM, funds of mutual crediting, financial companies when increased interest, creating increased risks and yet people are actively invested money in them,” said Julia Kurilo.

    However, experts called the bill a useful, although admitted that it will need to be refined as consideration in the Parliament. The developers promise not to resist and to promptly bring the document to mind.

    “Due to the large volume possible large number of fixes and improvements that need to work between the first and second reading”, — declared in NABOO. Although not undertake to predict the timing of the consideration of the revolutionary document.

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