BAKU, Azerbaijan, January 27. International
development banks are showing growing interest in issuing
securities in the local currency (manat) on the Baku Stock Exchange
(BSE), Ruslan Khalilov, Chairperson of the Management Board of the
Baku Stock Exchange, said in an interview with Trend.
At the beginning of the interview, Khalilov spoke about the
BSE’s achievements in 2025.
“Last year, as the Baku Stock Exchange, we conducted a full and
in-depth diagnostics of our technological infrastructure. Our
trading systems are built on a unified platform, and extensive
testing was carried out on this platform. Based on the results of
the diagnostics, internal stabilization work was implemented to
enhance system harmonization and stability. In parallel, several
stress tests were conducted to ensure that the platform is fully
prepared for large-scale operations.
These inspections are conducted every year, but last year they
were carried out in a broader and more detailed manner. This is
because the market may see the entry of numerous initial public
offerings (IPOs) and bond issuances. The goal is to ensure that the
technological platform can process hundreds of thousands of orders
without any issues. I can confidently say that the Baku Stock
Exchange is fully ready to handle multiple issuances,” he said.
Khalilov pointed out that the exchange is now stepping into the
next strategic chapter of its internal transformation journey,
putting a significant emphasis on technological readiness and
integration.
“At this stage, our main focus is on strengthening technological
preparedness and technological integration. The objective is not
only integration within the BSE itself, but also increasing
integration across the entire capital market,” he said.
Khalilov added that the BSE’s trading platform is currently
integrated with two banks through the applications of two
investment companies, with the ultimate goal of connecting all
investment companies operating in the market through their own
applications. Banks holding investment licenses are also expected
to integrate their systems.
“This creates maximum convenience for the retail investor. In
other words, an investor can trade on the exchange with a single
click through their broker’s application. This model is already
actively operating for shares of the International Bank of
Azerbaijan (IBA),” the chairperson noted.
Speaking about last year’s achievements, Khalilov highlighted
the signing of a collective exchange agreement within the Tabadul
project between the Abu Dhabi Securities Exchange (ADX), the
National Depository Center (NDC), and Azer-Turk Bank.
“This document enabled the launch of technological connections
and the testing phase. Currently, the Baku Stock Exchange continues
testing technological integration with the Tabadul Trading Hub. The
main objective of this work is to strengthen integration within the
local market and to ensure seamless cross-border integration.
The Tabadul Hub operates as an exchange-hub model, bringing
together exchanges from different countries into a single space.
Through this mechanism, for example, a broker operating in Abu
Dhabi could directly trade on the Baku Stock Exchange. For this,
the broker must be a member of the Baku Stock Exchange.
Current legislation does not prohibit foreign brokers from
becoming members of the BSE. However, there are several
requirements. For instance, a foreign broker must establish an
office locally or have a local representative. To simplify these
requirements, we have shared our views with the Central Bank of
Azerbaijan (CBA) within the framework of the review and proposed
amendments to securities market legislation,” he stressed.
Khalilov emphasized that integration processes are currently
being carried out mainly through the Tabadul platform, while active
discussions are also underway with regional and global brokers.
“In meetings that I personally attend, we discuss what
conditions are required for global brokers to connect the Baku
Stock Exchange platform to their systems, what criteria are
considered, and expectations regarding market turnover.
The main goal here is to determine in advance what technical,
institutional, and market conditions must be met if such
integration becomes possible in the future. At the same time, we
analyze what advantages this model could bring to the local market
and what potential shortcomings may exist,” the official said.
He explained that most global brokers operate under a
multinational trading facility model and typically use smart order
routing (SOR) systems.
“Through this system, if a security is listed on several
exchanges, the order is automatically routed to the market offering
the lowest price and minimal commission. In this context, even
displaying securities traded and quoted on the Baku Stock Exchange
on such platforms could be an important integration step for our
market.”
Khalilov also highlighted the launch of trading in
manat-denominated floating-rate bonds issued by the European Bank
for Reconstruction and Development (EBRD) on the BSE, calling it a
highly significant development.
“This is the first issuance by an international financial
institution in both local currency and floating-rate note format.
There has even been a transaction on the secondary market, with an
operation amounting to around 3 million manat ($1.76 million).
Another benefit of trading EBRD’s floating-rate manat bonds is
that, although it may be early, this could eventually lead to
interest rate swap transactions. At the very least, the market now
has a floating-rate bond as a first step, which did not exist
before. This was a very important step,” he explained.
According to Khalilov, negotiations are currently underway with
several other international financial institutions regarding bond
issuances.
“International development banks are interested in issuing in
local currency, as this allows for more effective management of
'currency risk.' Many international financial organizations with
which we are in contact are interested in issuing bonds on the Baku
Stock Exchange.
We see such practices in neighboring countries. However, it
would not be correct to say which institution will issue and when.
I would say that almost all international development banks
operating in Azerbaijan are interested in issuance. At the very
least, because as development banks, the most suitable solution for
them is to issue bonds in local currency at their own risk levels
and then channel the proceeds into local strategic projects, also
in local currency,” Khalilov said.
He noted that the exchange actively engages with these
institutions, invites them to meetings, and provides information
about the domestic market.
Khalilov also stressed that the time has come for state-owned
enterprises to enter the market through bond issuance:
“One of the key strategic initiatives approved by the
Supervisory Board of the Baku Stock Exchange in the Strategic
Development Plan for 2024-2026 is encouraging and attracting
state-owned enterprises to issue bonds.
We are actively holding discussions with state-owned
enterprises. We have met several times with Azerbaijan Railways
CJSC and even prepared a brief presentation on local capital market
opportunities for them. I am very pleased that the company has
started issuing bonds.”
He added that one or two more companies from the transport and
logistics sector are also planning bond issuance, and that the
exchange is in active discussions with all of them.
“We even prepare and send additional information to some
companies to support their decision-making. Several both state and
non-state companies are showing significant interest in bond
issuance," Khalilov noted.
In addition, Khalilov recalled that trading in green bonds
issued by the State Oil Company of the Azerbaijan Republic (SOCAR)
began on the BSE in March last year.
“The green bonds are issued for a five-year maturity, with a
total issuance volume of $200 million. To support green bonds, we
created a dedicated Green Bond Segment and set all listing fees for
this segment to zero.
If a company meets the relevant criteria and wants to be listed
as a green bond or green instrument, we exempt it from listing
fees. There is interest from companies in certain sectors,
particularly in the energy sector, and we also see interest from
companies in the logistics sector. Much depends on the investment
banks involved, and over time, we are likely to see additional
green bond issuances,” he said.
Touching upon the development of the manat yield curve, Khalilov
said it has fundamental importance for the market.
“The 'yield curve' serves as a base interest rate for issuers.
While liquidity in Azerbaijan is currently concentrated in
instruments with maturities of up to three years, we expect
liquidity to gradually increase in the 5-7 year segments as
well.
The CBA already publishes the yield curve, and it is gradually
becoming more market-based,” the official said.
Khalilov also spoke about the BSE’s recent membership in the
United States-Azerbaijan Chamber of Commerce and the potential
benefits of this step.
“This membership is important for learning best practices from
the U.S. market, exploring technological solutions, and
establishing contacts with potential investors. We have very good
cooperation with the chamber and maintain active communication.
The U.S. is a mature market with much to learn from. At the
initial stage, our cooperation focuses on understanding how
exchange and trading platform companies structure their operations,
as well as exchanging views on technical matters and overall market
development. Commercial cooperation may also become possible in the
future. At present, there is no direct linkage comparable to
Tabadul, but extensive efforts are underway to establish
foundational contacts and advance preliminary discussions," he
pointed out.
Finally, Khalilov addressed regional cooperation opportunities,
particularly with Central Asian countries.
“We have exchanged views with the Kazakhstan Stock Exchange
(KASE) on sharing technical expertise and creating a regional data
hub. The goal is to process capital market data from Central Asia
and the Middle East on a single platform and present it to regional
and international investors.
This project is still at the idea stage, but cooperation is not
ruled out. At the same time, we are exchanging experiences with
Uzbekistan and other Central Asian countries. These markets are at
similar stages of development and are comparable in terms of
technological progress.
Overall, our goal is to transform the Baku Stock Exchange into a
market with high regional and global visibility. This can be
achieved through the integration of BSE-listed instruments into
global brokers’ platforms and through advanced technological
solutions,” Khalilov concluded.
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