The coming years will see a unique and intrusive partnership revolutionize the until now fairly sleepy exchange, paving the way for exponential growth in market capitalization, liquidity and shareholder value.
As more and more businesses open in the Capital, so the growth of the Mongolian Stock Exchange (MSE) will accelerate. It is an observable phenomenon that the rapid growth of economies triggers an aggressive expansion in the market capitalization of the local stock market, as flourishing domestic and international businesses seek alternatives to private financing.
In order to attract word-class listings and provide a highly liquid market, the MSE needs an international standard framework. In 2010, the London Stock Exchange Group (LSEG) agreed to actively manage the MSE in one of the most intrusive and unique partnerships in the history of capital markets.
Due to the strong mining presence on the London Stock Exchange, it is in the interest of the LSEG to see that international mining companies have access to capital in Mongolia through dual listings. The only way to achieve this is to work with the MSE to ensure that it’s listing process, technology and securities regulation meet the high standards required by the international community.
As a consequence of this relationship, in the summer of 2012 the MSE successfully migrated to MillenniumIT, the world’s fastest trading platform currently used on the LSEG own exchange and other world-class bourses. The technology has revolutionized the way in which trades are conducted by switching from a T+0 to a T+3 system. In other words, brokerage accounts no longer need to be pre-funded in order to carry out trades, as trades can now be processed through an escrow account. Despite a few teething problems, in the long run this will undoubtedly provide a huge boost in liquidity to the exchange, allowing far greater volumes to be processed with much greater ease.
The LSEG is also advising Mongolia on a new securities law. This law will lay the legal foundation by which listed companies will need to abide in order to ensure the quality corporate governance in public companies. It will also revolutionize the listing process, introducing Depository Receipts to facilitate the listing of international companies on multiple bourses.