Global appetite for asset trading goes beyond a desire to swap conventional corporate stocks on an exchange. The largest increase in global volume for 2006 is in the exchange traded futures which rose 33.8% from 2005 while options contracts rose 22%. The fastest growth rate in these derivative trades, 41%, is outside of the US.

In a comment for the Financial Times, Raghuram Rajan claims that the reason for this massive expansion in global trading is because there is a global shortage of assets and that such shortage is driving up asset prices globally and in particular in the emerging markets.

"Many observers call this a liquidity glut... But in my view, these conditions may primarily be driven by a global shortage of hard assets," says Rajan.

One way to increase the supply of investable assets and capture those profits is through mergers, acquisitions and alliances in the exchanges industry and according to Jean-Francois Theodore, Euronext's chief executive, this buyout mania in the Exchanges has just entered the global scale.

	With market growth of 58.01% in 2006, Belgrade Stock Exchange came ahead of Hong Kong, Singapore, India and Brazil Exchanges, all enjoying a more widespread buzz then the BELEX.

With increase in its capitalization of 51% for 2006, Serbia's Belgrade Stock Exchange, the BELEX, may be ripe for the pickings once the third leg of the global consolidation in the exchanges industry starts soon.

Austrian banks have been aggressive in expanding into Serbian market and some speculative thought is that the Vienna exchange may want to expand its growing alliance of regional exchanges by adding BELEX.

"I believe that this is the question you should ask Austrian investors or anyone else you think is having such a deliberated plan," tells us Natalija Nedeljkovic, Associate Specialist for Marketing at BELEX but adds that BELEX is "currently involved in talks that Vienna Stock Exchange is having with regional exchanges. We are very interested for any kind of bilateral (Vienna Belgrade) and multilateral cooperation."

The attraction to the Austrian alliance may be twofold. Austrian Exchange has a network of interconnected exchanges from Vienna to Budapest, Sarajevo and Zagreb and is also well integrated with other exchanges in the Western Europe, all desirable features that provide liquidity to an exchange network.

On the other hand, BELEX has an existing agreement with the Athens exchange which aims to integrate the two exchanges and expand the network regionally. Athens is also interested in the upcoming privatization of the Bulgarian stock exchange.

So the decision on BELEX's part as to which financial empire will it join - the Austro-Hungarian or the Byzantine - is already in the minds of some smart money investors.

Natalija Nedeljkovic and Miroljub Ristic, an Associate Specialist for Market Surveillance, both at BELEX, were kind to talk to serbianna on these issues and give us a glimpse of their operations that were jump-started in earnest in 2000.

World stock exchanges are experiencing a consolidation and mergers into bigger entities to realize the economy of scale. Will Belgrade Stock exchange eventually get bought off?

Belgrade SE is closed company and it's shares are not traded at the stock exchange market, and the decision on selling shares is up to it's shareholders. On the other hand, Belgrade SE is interested in different kind of cooperation with other stock exchanges, but at this moment we are also very oriented to developing Serbian capital market, so our citizens could benefit both from domestic market and international integration.

	Educational course in the training room for potential investors at the Belgrade Stock Exchange (Beogradska Berza). After the wars and isolation surrounding the break up of Yugoslavia, Serbia is now of major interest for foreign investors, with hundreds of milions of Euros of new investment annually. PHOTO: Russell Gordon (c) 2007

Investing in different securities is a decision of  individuals and professional investors. It surely depends on ones’ readiness to accept different levels of risk and expected returns, so, as in all stock exchanges in the World, you also have different type of investors at the BELEX. We don't produce nor public this kind of analyses about investors’ profiles.

About half of the trading in stocks on Belex is from foreign investors? What attracts them and why are domestic investors sidelined?

Foreign investors are more familiar and experienced in stock exchange activities, and therefore they recognize the potential of Serbian securities and market. As for the he companies foreign investors are interested in, it is noticeable that they are interested in different sectors, for example, from banking sector to food industry, agriculture, construction, transportation, etc.

Although domestic market is in process of intensive development, Serbian citizens still need to learn about possibilities of investing in securities. Capital market is relatively new opportunity, and some of the citizens even don't know that they can invest their money in stock exchange. Also, you have to keep on mind that Serbian citizens still don't have enough savings that anyone could invest in the capital market. In addition, domestic investment and pension funds are currently in process of establishing and beginning their activities, so we can reasonably expect the growth of participation of domestic investors on BELEX.

Inverted yield curves on bonds signal coming of a recession, at least in Western economies. Why is Serbian bond yield persistently inverted?

When talking about Serbian bonds yield curve, you should keep on mind that these bonds are involved in the privatization process in such way, that enables to holders of bonds to use the full nominal value for paying obligations toward the state, when state sells companies in privatization process. This is one of the major reasons for inverted yield curve, since the process favorites the bonds with later day of maturity.

	Olivera Bugarinovic, Associate Specialist of the Director's Cabinet at the Belgrade Stock Exchange (Beogradska Berza) explains the functioning of the Belex electronic trading system to potential investors. After the wars and isolation surrounding the break up of Yugoslavia, Serbia is now of major interest for foreign investors, with hundreds of milions of Euros of new investment annually. PHOTO: Russell Gordon (c) 2007

One of the reason for that kind of result is that Serbian market is in early phase of transition, and there is a lot of speculation about further consolidation of ownership for such companies, which includes takeovers from the biggest world players. On the other hand,  predictions are that the future growth of earnings will be significant. What should be taken into the consideration is that domestic practice of financial reporting is just based on annual publication of balances, so you have ratios with big tracking errors  in comparison to the current financial situation of the companies.

BELEX has doubled its monthly dinar value in stock transactions, yet the number of transactions has actually shrunk from 14,000 last October to below
12,000 in September? Does this mean that smaller investors are out of the picture?

There was a tendency of rising of value of single transaction in previous year, which can both mean that there are less smaller investors but also that those small investors have increased their investments. Number of transactions is not the only indicator of investor's size on one market, but there is a number of other indices that show participation of small investors.

What will it take for you to offer internet trading of stocks on your exchange?

Belgrade SE is in the process of developing the project that will enable technical conditions for orders’ routing. However, for stocks’ trading via internet there are also other necessary conditions, like law regulations and other conditions that are defined by the environment in a whole.

What can Serbia do to expand stock trading among domestic public? What are some legislative and economic challenges that you find need correction?

Apart from ensuring the general positive climate for sustained economic development and investments, the biggest positive impact for stock exchange trading would be State decision to put shares of the public companies at the Stock Exchange. It would give good material to invest in for the widest public and professional investors. Talking about the legislative challenges, I would just stress that it is necessary to include caters of the market into all processes of brining new laws and regulations. Only by discussing the actual and current problems at the stock market, with the actors at the market their selves, good and adequate laws can be made.

	Meeting of the IT Department of the Brokerage Club of the Belgrade Stock Exchange (Beogradska Berza). After the wars and isolation surrounding the break up of Yugoslavia, Serbia is now of major interest for foreign investors, with hundreds of milions of Euros of new investment annually. PHOTO: Russell Gordon (c) 2007

At this moment, BELEX and other Balkan's exchanges have cooperative activities covering interchange of experiences and practices that can bring positive impacts on capital market development. It is hard to talk about direct competition when you have shared goals of developing local markets as well as positioning local markets into international ambient in the best possible manner.

Why does the Serbian financial sector tower over others in terms of capitalization on BELEX and agriculture and waterworks, both abundant in Serbia, are lagging?

In financial sector transition process is reaching the final stages, while all other sectors including agriculture and waterworks are still in the middle of restructuring. In the future we are expecting that those sectors will take the place that they deserve.

After a drastic decline of your index in late May and June the composite index has rebounded and hit a historic high in mid October. Sentiment is on the rise. Is this rebound sustainable? What is driving it?

The increase in index values is driven by the development of the domestic market, as well as rise of  the confidence. Keep on mind that summer decline was recorded not only in Serbian, but also in other European markets, due to the trend in all markets and economies. Main reasons for that kind of performance is strong growth of financial sector, and increase in participation of retail investors.

	Olivera Bugarinovic, Associate Specialist of the Director's Cabinet at the Belgrade Stock Exchange (Beogradska Berza) explains the functioning of the Belex electronic trading system to potential investors. After the wars and isolation surrounding the break up of Yugoslavia, Serbia is now of major interest for foreign investors, with hundreds of milions of Euros of new investment annually. PHOTO: Russell Gordon (c) 2007

Belgrade stock exchange has no intention to take  part in analysis of price movements of any specific company. This is forbidden by the law and internal rules.

Why isn't BELEX trading commodity futures (extensively) and help alleviate insecurity of Serb farmers. Do you think the commodity futures trading is
the way to relieve Serbian agriculture from its heavy dependency on government?

Commodity trading is surely one of the best options for Serbian agriculture, and Belgrade SE is strongly supporting all the possible initiatives for introducing derivative products in this sector. Although ready for accepting trading in futures in it's BELEX trading system, Belgrade SE can not itself initiate development of this kind of securities, because it is up to other institutions to issue the trading materials, and Belgrade SE is to organize trading in that.

How is insider information treated? Where is the threshold and has anyone been convicted?

Insider trading and manipulation based on privileged information is prohibited by the Securities Act and authority for dealing with this kind of malpractice is on the Securities and Exchange Commission.