THE MONGOLIAN STOCK EXCHANGE, AN ASSET WHICH HAS BECOME A LIABILITY

Abstract

As it sits today, the Mongolian Stock Exchange is a loss making government asset currently lacking qualified leadership, serving neither the needs of its participants, or the Mongolian people. Not only has the LSE’s Millennium Information Technologies (“MIT”) system not delivered on initial promises, much needed reforms and initiatives are in a state of limbo, while market participants suffer as a result. In this paper, we lay

out six separate initiatives which could be implemented in a matter of days or weeks, which would have a profound effect on attracting foreign investment and fully address the problems inherent in the exchange today. These initiatives are consistent with international standards and enjoy the full support of Mongolia’s largest investors and brokers. Structural issues, in addition to the problems created by MIT, have resulted in inefficient pricing and valuations of MSE listed equities. Once structural issues are addressed, initiatives to fix the MSE are taken and qualified leadership is in place, Mongolia may well again become one of the world’s best performing equity markets.

KEYWORD: T+3 settlement, margin trading, bank settlement account, reference price’, Reverse Takeover (“RTO”), Counter Party Risk, quantitative approach