Traders on the Bulgarian Stock Exchange will be able to use 'buy on margin' and 'sell short' equity transactions on a larger scale, now that the Financial Supervision Commission relaxed the requirements for companies allowed to offer such transactions with their equity, Dnevnik daily reported on April 16.

To date, only Chimimport has met the high requirements for the two types of transactions, which include the number of transactions in a day, turnover, market capitalisaion and share of free float securities held by retail investors, and even then has done so only for one session.

According to analysts, these types of transactions will remain a rare occurrence in future as well because one of the tightest requirements remained in force - no more than 20 per cent of the equity deals over the previous 20 sessions could be cleared through a single brokerage.

Under the new requirements, the two types of transactions would be open for companies, whose weighted average daily turnover over the previous 20 sessions is 5 000 shares, half the amount required previously. The weighted average number of deals during the same period should be at least 30 within a minimum of 15 sessions. The market capitalisation of the issue should be 20 million leva, whereas the free float held by minority shareholders should be at least 15 per cent of the capital.

According to Tsvetoslav Tsatchev, analyst at Elana brokerage, only five to 10 companies would pass the threshold for buying on margin. He added that given the current poor market conditions and low trading volumes, the number of companies would be at the lower end of the range.

In short selling, investors sell securities that they do not own, but are committed to buy at some point, and is used usually when investors believe that the price of the stock will go down, allowing them to buy the security to cover the earlier deal at a lower price. Buying on margin is the practice in which securities are bought with borrowed money.