The Mongolian economy is continuing to grow at a very rapid pace, expanding by 16.7 percent year-on-year in Q1 and GDP growth accelerated to an unprecedented 17.3 percent in 2011 from 6.4 percent in 2010. To restore and ensure this economic growth, stability in the financial market is essential. To create balance in the financial sector where commercial banks currently dominate, Mongolia needs to develop the capital market same as other countries in the world. Developing the capital market is the cornerstone of policy to provide people and enterprises with opportunity to find investment, encourage the development of public companies, put the natural resources into economic circulation and distribute national wealth equally.
   The Government of Mongolia has been promoting the capital market consistently by policy for last 2 years and during this period, market capitalization increased drastically reaching two trillions. Within the framework of this policy, Financial Regulatory Commission /FRC/ is conducting extensive reform activities of capital market infrastructure and legislations with other regulatory and related organizations.
Within the scope of regulatory reform, revised draft of Company law was approved in Oct 2011. Due to changes in economic conditions of Mongolia since 1999 when the Company law was last approved, the revised Company law resolved many issues comprehensively such as governance issues of a company, especially a public company, heightened responsibility of company management and the protection of rights of investors and stockholders.
   FRC submitted the new draft of Securities Law to the State Great Khural which was developed in accordance with international standards in cooperation with the Mongolian Stock Exchange /MSE/, Ministry of Justice and Home Affairs, research institutions, market participants - broker dealers, underwriters, foreign and domestic specialists and other related parties. Although draft of Securities Law has been delayed for last two assemblies, we are confident that the new draft of Securities law which brings the financial market, especially the capital market into a new stage would be presented and approved by the State Great Khural in this autumn assembly.
   Within the framework of infrastructure reform, Master Services Agreement /MSA/ has been established between MSE and LSE in April 2011 according to the “Strategic partnership agreement” which was signed by Mongolian State Property Committee /SPC/ and London Stock Exchange Group in 2010.
   Under the strategic partnership, FRC, MSE, Securities Clearing House and Central Depository /SCHCD/ and market participants - broker dealer, underwriter companies co-operated substantially for last one year to launch the integrated system of Trading, Clearing, Settlement and Depository and Surveillance. By launching this integrated system, trading infrastructure, technology of our capital market and capability of human resources shall be brought in line with international standards. Furthermore, foreign and domestic investors shall become able to connect to the high speed trading platform, participate in a trade at efficiently at low cost for long term, and enjoy a real benefit from the capital market.
   New trading system launched successfully starting from July 2nd 2012 and some of the market participants-broker dealers, underwriter companies have not been able to participate in MSE trading because they have not yet established an agreement with clearing banks and have not posted collateral yet. Therefore, the broker dealer and underwriting firms possessing a special license should immediately sign the tri-party contract with the Securities Clearing House and Central Depository and banks, in order to keep pace with the development of capital market. FRC has been consistently supporting these reform activities and has been co-operating with Mongolian Association of Securities Dealers by organizing certain activities to increase the financial and professional capability of brokers.
   Market participants holding special license should perform their duties to serve investors and shareholders, to execute their orders and to provide them with information.
   Within the aim of providing stability in the capital market, FRC shall continue to demand and monitor the fulfillment of appropriate requirements and responsibilities from market participants - MSE JSC, SCHCD JSC, broker dealer, underwriter companies, clearing banks and professionals associations to protect the rights and interests of investors and stockholders.