The integration of financial markets in the countries of the CIS

The global exchange industry is undergoing major changes. This is due to the development of new markets, the introduction of new instruments , consolidation and consolidation of exchanges, a change of business principles . One of the main trends in the development of exchange institutions lies in their internationalization. The reasons for these processes are seen as sharply intensified globalization and consolidation of the traditional exchange of business in the face of increased competition. Technological capabilities and the need to withstand the onslaught of competition forced the exchange to go beyond national borders and to offer their services in foreign markets. Competing with brokerage electronic systems , exchanges abandoning traditional forms of work as ” closed clubs ” that exist at the expense of members’ contributions . They are increasingly becoming the financial centers that provide services to almost any participants who expressed willingness to use these services.

Taking place today in the global economy integration processes have fundamentally changed the world around us. All the stronger the desire of various countries to join efforts and resources in key areas such as the development of industry, science , education, health care and many others. Integration processes could not affect the monetary and financial sphere . As an illustration, take the growing interdependence of the European economies , the consequence of which was an integrated and efficient European capital market . The result of the introduction of European integration have become the single European currency , education, exchange of alliances , mergers of several major corporations in the region. But this is only the most striking manifestations observed in recent years the trend of transition to integration. There are a number of factors that point to the fact that in the coming years, unifying trends in the field of monetary and financial relations will prevail not only in Europe but also in other regions of the world.

Having embarked on the path of integration into the world economy , the choice of a particular model of regional financial integration cost and the CIS countries. In my view , the inevitability of such integration , which in recent years has increasingly claimed the policy of the Commonwealth, a number of objective reasons can take a closer look at the theoretical aspects of financial integration. First of all, it must be assumed that, in varying degrees, all countries of the CIS region are in need of such integration. However, it can not be built just a declarative institution of any cross-country agencies and supranational institutions , as its main premise is the growth of trade between the countries of the CIS. Circulation of goods and services , in turn, gives rise to increased demand for the free exchange of currency, which implies freedom of movement of capital in the region. Thus, it becomes apparent that it is foreign exchange and money markets in the future will have an increasing influence on the movement of trade and financial flows in the Commonwealth . It is no coincidence that it is foreign exchange and capital markets -scale operations are superior to other segments of the financial markets , thus affecting interstate economic relations .

It is becoming increasingly clear that the CIS as an independent and authoritative regional structure will take place only when the effective economic integration. And then the political will for integration is not enough. First coordinated exchange rate policy is needed in order to limit the mutual fluctuations of the exchange rates and facilitate flow of capital between countries. Despite the steady growth of the national economies of involvement in economic relations with other countries of the CIS, between the Commonwealth until there is a low level of coordination of monetary policy. Second, it should be noted that in the absence of a unified system of national currencies quotation CIS majority of netting is made in foreign currency. Thirdly, there is too uneven development of national stock markets in the CIS countries – in some countries there is a high capitalization of this segment , in others , on the contrary , low liquidity , and the third is too narrow a range of financial instruments. As a result of the foregoing, the growing corporate sector has limited access to financial resources for the capital market. That is why the creation of the international sectors in the national markets of the CIS countries can become a bridge between country markets as well as between national and international capital markets. This will significantly expand the range of financial instruments and provide the real sector , banks and financial companies of CIS countries new opportunities to attract investment and capital.

At the same time, one of the conditions for progress towards an integrated capital market should be the creation of an integrated currency market of the CIS countries , when, along with operations in foreign currency at the national level will be possible to direct conversion of the national currencies of the countries – participants of the Commonwealth. This model of integration of capital markets and currencies will effectively complement national markets . Especially those national markets where the banking sector is not yet lost its primacy as a mechanism for redistributing funds stock segment. In addition, the integration of capital markets and currencies will limit the adverse impact of external factors by creating a joint anti-crisis mechanisms.

I am confident that as a result of significantly expanded range of financial instruments , allowing banks, finance companies and enterprises of the real sector of the CIS states will have additional opportunities to attract investment and capital. It should be noted that for the functioning of integrated capital markets and the currency is almost not needed unification of legislation , it is only necessary to agree on the basic principles of regulation of conversion operations , and the mechanisms of interaction of regulators. This does not require changes to existing legislation.

For the development of domestic capital markets , including through their regional integration requires a well -organized and technologically advanced stock markets . Perhaps, it is a basic condition for the integration of national economies and financial markets. Organized exchange trading – the institution , numbering a century. And the role of exchanges increases significantly in times of financial crisis , when it is necessary to protect the national economy from the sharp fluctuations of spontaneity and confront the informal market . In such cases, the possibility of a timely response to the crisis of the state is greatly enhanced . One example of this is the organization of a currency exchange in Azerbaijan. At independence , and typing in the national currency , our country , like other former republics of the Soviet Union , faced with the problem of maintaining the stability of its currency. To combat the monetary and financial crisis and the normalization of the economic situation was organized Currency Exchange. Gone are the years of successful development of Azerbaijan’s economy , minimize the risk of the crisis , and the idea of it is organized trade in the financial markets has not lost its appeal. Certainly , the role played in this technological revolution . Electronic trading platform , which has evolved over the years BBVB, different from the traditional high degree of automation of the trading process . But still a number of exchange mechanisms aims to prevent intentional or unintentional distortion of market prices, panic in the financial market . In other words, the presence of stock trading makes the market more transparent and allows us to monitor the processes taking place in it . In this regard, a very instructive experience of the EU in the field of joint solutions monetary and financial problems , which, along with a fairly high level of financial legislation was paid to the development of exchange infrastructures and effective regulation of financial, including the stock exchange , markets .

Obviously, the global trends in the development of the exchange business has a significant influence on the activities of financial institutions in Azerbaijan and most of the countries of the CIS. The openness of the national financial markets came close to the level characteristic of the major industrialized countries. However, in most countries of the Commonwealth of the process of liberalization ahead of the development of financial institutions , including the stock exchange centers. As a result, the CIS financial markets are open to competitors from outside, although in terms of infrastructure they are much weaker than similar markets in the West. With the globalization of world finance foreign exchange alliances have shown considerable interest in the CIS markets . In connection with this is to state the fact the active involvement of Western issuers of exchange-traded structures of Azerbaijan, Russia , Kazakhstan, Ukraine. Therefore, regional integration in the CIS for the Commonwealth acquires special importance as it allows a large extent neutralize the negative effects of globalization , to preserve the natural internal environment of a region , close vulnerabilities and turn the regional specificity into a competitive advantage . For the integration of the CIS countries remained almost the only legal way to protect the interior from a much stronger competitor to stop the spread of his international “rules of the game” that meet the interests of a leader . It is very important to the weak markets of the CIS, which is very difficult to compete with the world’s leading financial centers and to take its rightful place in the global financial system. After all, each of the countries will create a succinct , integrated national financial market with the full scope of tools specific to the markets of the advanced states . In the West these markets were formed many decades , in the CIS have to create them in a very short time. Thus , the integration of financial markets need to CIS countries , because they have goals, realize that alone is immeasurably more difficult than to do it together. Respectively increase and the need to deepen the interaction of CIS Stock Exchanges and co-ordination that will boost speed and improve liquidity .

I believe that many exchanges in the CIS countries have already proven their ability to consolidate national financial markets. Now exchange institutes have the necessary technological capabilities for regional financial cooperation . In my opinion, the very activity of exchanges already inherent desire for integration , and it is associated with the need to integrate financial markets to increase their liquidity. Proof of this are the numerous international and regional exchange alliances , associations, unions , including the CIS region include the International Association of Exchanges ( MAB) of the Commonwealth. Exchanges – IAB members have considerable potential , which can be used to integrate markets. The very concept of objective necessity of consolidation of financial markets has prompted them to establish the MAB . The main objective of the Association, one of the founders of which is the BBVB, – is the formation of a single exchange area and the achievement of equal cooperation with Western exchanges. This will speed up the solution of the problem of modernization of the economies of the Commonwealth and increase their competitiveness in the international market . Establishment of a mechanism of the single market in the future will be the most important prerequisite for joining the CIS in the most dynamically developing regions of the world.

At the same time, cooperation exchanges of the CIS countries in the IAB should be considered as an alternative to the dominance of so-called ” Western money ” in the lending banks and the real sector of the economies of the developing countries of the Commonwealth. A good example is the situation in the financial market of Azerbaijan, where the share of the banking system with assets of 11 billion dollars in capital investments in the national economy is a little over 3%. One reason for the low rate of financial intermediation is undoubtedly the very value of money , which the domestic market is higher than that of Western creditors . At the same time, the observed with the 2007 crisis in the global economy in the close involvement of local capital markets in the world have already hit the banking systems of Russia and Kazakhstan. This again makes us think about the vulnerability , which can be addressed through the development of local capital markets and regional integration.

Already, under the auspices of the IASE primarily developed projects combining electronic trading systems , the implementation of which in the future will solve the problem of the organization of integrated capital market , mutual quotations , carrying out operations on purchase and sale of national currencies in mutual settlements provide them. The use of modern electronic and Internet technology simplifies and facilitates the process. On the other hand, the organized form of the interbank market has by several indisputable advantages , including the centralization of operations, equal and democratic access to markets for banks and their customers , technical standardization , standardization of transactions and settlements guaranteed . In addition , exchange trade is a convenient mechanism for the implementation of state regulation and monitoring of several national financial markets.

IAB Establishment and development of horizontal cooperation between key exchanges in the CIS can be considered as the first step in the birth of an integrated financial market. At this stage, BBVB has already signed bilateral memorandums and agreements with institutions such stock exchange , as the MICEX , KASE, MoldSE, TICEX . In them, the parties agreed on a strategic partnership for the development of financial markets in the countries they represent , creating the conditions for convergence of their functioning and formation of a single integrated exchange area . These agreements primarily provide active information exchange current data and analysis , as well as the technological standards of the exchange systems . In addition, we study the possibility of unification of the technological base of trading and settlement. In particular, it is possible upgrading of the national financial centers based on a number of major stock exchanges of the CIS. They can act as organizers of a single exchange capital market actors will not only commercial banks, but the central ( national) banks . It is also important to national bidders have access to a single exchange market capital is as members of their exchange. At the same time as the core of a single trading system can be used by the electronic trading system of one of the above exchanges. In terms of technology should agree on the powers of the combined system administrator , whose role can perform one of the exchanges or specially authorized organization . Its task is to ensure the multilateral trading account national final payment obligations of trading platforms , the formation of the final net obligations of national trade organizers and participants . At the same time, to minimize the risks is preferable to use a universal principle of ” delivery versus payment” that the first phase should fully guarantee the performance of the participants of transactions .

However, the very formulation of the organizational and technical principles of the integration of markets , their coordination among exchanges , technical re- exchanges, as well as study the formation of an integrated market while a little. Must be at the level of the business community and government level, to take decisive and coordinated action to go from theory to build a common financial market in the CIS to take practical steps to achieve this goal . Today, when there is no alternative to international economic integration , there is no alternative and economic integration within the CIS, which implies the creation of a strong alliance exchanges, responsible mainly the demands of globalization .