When the Bulgarian Stock Exchange (BSE) secured the compromise with the Financial Supervision Commission (FSC) to launch the Xetra trading platform on time on June 16, the proviso was that the bourse would iron out the kinks in the system as soon as possible.

On July 23, however, the regulator told the bourse that it had to fix a number of technical deficiencies that are preventing small investors from using the full range of investment opportunities offered by Xetra. If BSE did not “correct the breaches and oversight, the regulator can impose financial sanctions on the [bourse] operator and even seek administrative punishment of the individuals that manage the company,” FSC said in a statement.

The securities regulator was referring to the incomplete overlap between the Xetra platform, used with permission from the Deutsche Boerse, and the Cobos system that can be used to submit orders online. Two particular types of transactions that investors cannot submit using the Cobos system are stop orders, in which securities are bought or sold when their quotations reach a certain price, and iceberg orders, by which a bigger order can be broken down into smaller lots.

Cobos is very popular with small-time investors who can place orders to sell and buy securities themselves by using the system. BSE estimates that more than 5000 clients use Cobos to generate 70 per cent of the total number of orders on the Bulgarian bourse.

FSC said that it had received numerous complaints from investors, who said that the discrepancy between Cobos and Xetra put them at a disadvantage to the larger investors. In particular, the BSE was breaching provisions of its own recently amended rulebook, which the regulator said it had warned the bourse about back in June.

The bourse objected to the FSC order, saying Cobos was outside the regulator’s scope and FSC had no business interfering, Dnevnik daily reported on July 23. However, it also said that it was ready to implement the necessary changes to eliminate the discrepancy between Cobos and Xetra, although it would not commit to any specific deadline. The regulator rejected the objection, Dnevnik said.

In a separate statement on July 23, FSC said that it launched a probe to ascertain the validity of the terms of the BSE managing board. Earlier this week, media reports claimed that the board was recorded in the country’s Trade Register as having a term until June 14 2012. However, the item did not feature on the agenda of the general shareholders meeting (AGM) neither in 2007, nor in 2008. Only the AGM has the authority to replace or extend the term of board members.

A representative of the BSE made the register entry on the basis of an application form submitted online, the Registry Agency was quoted as saying by Dnevnik on July 21.

The regulator said it has asked BSE, Sofia City Court and the Registry Agency to present the contents of the application form, but did not say when it expected to conclude its investigation.

For the BSE management board, it is only the latest in a series of rows tarnishing its image, after an association that brings together the biggest brokerage houses in the country, asked at the AGM earlier in July for the board to be sacked. The motion was defeated after the Finance Ministry, which owns 44 per cent in the bourse, voted against it.