A new and improved securities lending and borrowing framework designed to increase liquidity and entice foreign players into the Romanian market will enter into force on Monday.

Regulators and officials at the country's central bank have signed off a reworked set of rules drafted up by the Bucharest Stock Exchange, BVB, and the country’s CSD.

The long-awaited changes, in place from August 1st, allow market participants to short sell stock and other instruments listed on the Romanian exchange, regardless of their type and features.

Firms will also be able to enter short sell orders without any restrictions related to price, minimum volume or order type.

Meanwhile an obligation to specifically mark the short selling orders has been removed as part of the modernised approach. 

"Short selling is an indispensable element of a developed capital market,” said Ludwik Sobolewski, chief executive of Bucharest Stock Exchange.

“It creates new possibilities for the investors, protecting the value of the investments and giving a chance for gains resulting from intensive speculative trading.

“Lending of financial instruments puts them at work generating new revenues for the lenders and ensuring the safety of the short selling for the market.”

Lucian Anghel, BVB's president added that the changes enhance the quality of the infrastructure of the capital market, making it more competitive versus other markets in Eastern Europe and drawing attention of the international players. 

Key changes to the CSD's rulebook include the removal of an obligation to use a standard lending agreement and send it to the central depository.

Instead, market participants can carry out the function with all the financial instruments already registered in the central depository system.

In addition, the CSD has eliminated the maximum number of business days corresponding to a securities lending agreement.

"The improved version of lending and borrowing of shares brings flexibility, meets market requests and ensures the necessary framework to increase liquidity, a requirement of the Romanian capital market which must be met to be upgraded to the emerging market status” said Silvia Buicanescu, chief executive of Romania’s Central Depository.

“This project is the result of a joint effort by all market participants - regulators, infrastructures, intermediaries - being a proof that the common goal of developing the financial market in Romania puts all parties at the same table and generates an efficient cooperation.”