The Law on Securities of 1998 (Official Federal Gazette, nr. 39/98 and 36/99) define the Exchange as "a place for matching demand and supply for securities and securities trading, following predefined rules". Through the matching of supply and demand a price for the securities which are traded is defined - the market price. A third function of the exchange is the gathering and publishing of information about supply and demend and the market value of the traded securities.
The market of the Sarajevo Stock Exchange is comprised of three market segments:
- The official market (Kotacija)
- Free Market (Slobodno tržište)
1. The Official market
The official market is the place where our "blue-chips" are beeing traded. In order to be listed at this market segment, an issuer has to meet certain requirements.
Listing requirements refer to operations of the issuer in the past few years, size of the capital, audited financial statements, size of the class of securities, number of shareholders and securities dispersion in public. After a company has been listed on the Sarajevo Stock Exchange, it has the obligation of continuous disclosure to the Stock Exchange and the public of any event or change in its operations that may be important to the company and / or its investors.
The criteria are as following:
- Years of operation: min. 3 years
- Fair financial statements: audited financial statements for three (3) years
- Size of capital*: min. 4.000.000 KM (ca. 2.000.000 Euro)
- Minimum size of class of shares**: 2.000.000 KM (ca. 1.000.000 Euro)
- Distribution of class in public: min. 25%
- Number of class holders: min. 150
* Total capital according to the last balance sheet: share capital, paid-in surplus, reserves, retained net profit or loss from previous years, capital revaluation adjustment undistributed net profit or loss for the year)
** the share’s book value shall be considered, or its market capitalisation, if the share has already been traded on any segment of the organised market
Decisions on whether to list a company or not on this market segment are taken by the SASE Admission Board (Odbor za prijem u Kotaciju), which consists of four independent legal and financial experts and one representative of the Exchange. Only those shares and bonds, which are freely transferable, which have been paid in full, and are approved by the Admission Board, can be listed on the Official market.
Upon application for listing on the Official Stock Exchange Market a company must submit its application for listing to the Admission Board together with prooving documentation that both legal and listing requirements have been met; a form of prospectus pertinent information enabling an investor to make an informed investment decision is also enclosed.
The application from the preceding paragraph shall be accompanied by:
- five (5) copies of a draft prospectus for listing
- the Securities Commission's authorisation for the initial public offering or the Securities Commission’s authorisation for organised trading
- the updated version of the issuer's Articles of Association(Statute)
- the extract from the court register
- a report on audited annual financial statements of the issuer for the period of the last three years of operation
- the Securities Commission’s decision on the public offering's success for the security, which is the subject of the application
- statement confirming that the class of security, subject of the application, has been fully paid-in
- a Registry of Securities's (Registar vrijednosnih papira) decision on entry of securities into the central register of dematerialised securities
- a list of ten (10) major holders of securities and their percentage and the total number of holders of securities
- information on the percentage of securities, held by the Management Board of the issuer of securities
- names of persons who perform services relating to the initial offering of securities
- evidence of payment of a charge for deciding on admission
The application shall relate to the whole class of issued securities.
2. The Free market (Slobodno tržište)
The Free market is a segment of the organised securities market, where those securities are traded, which have been successfully offered to the public or whose further public sale has been approved by the Securities Commission of the Federation of Bosnia-Hercegovina and which had not been listed on the official market. Due to a quite simple admission procedure, most issuers are listed on this market.
An application for admission to the Free market can be filed:
- by a brokerage house (upon request of a client)
- by the issuing company itself
In case the issuer applies for listing on the Free market, he is obliged to publish anual and semi-anual financial reports. In this case, the responsibilities of the issuer regarding transparency resemble those of issuers listed on the Official market.
Trading, clearing and settlement for both markets is done in exactly the same way. The only differences are that price movements on the free market are not subject to the 10% daily limitation movement and that reporting (disclosure) requirements for the companies whose securities are listed in the official market segment are stricter (e. g., the companies whose securities are listed in the free market are not obliged by the Rules of the Exchange to publish their semi-annual reports).