The Financial Regulatory Commission (FRC) is the main governing body promoting the development of Mongolia's capital markets. The FRC’s main responsibilities are the implementation of legal and regulatory frameworks, for regulation of the securities market.
The FRC aims to improve the securities market’s policies and regulations - in accordance with international standards - to meet the needs of investors and professionals, to expand cooperation with international organizations, and to implement innovative technologies and market infrastructure.
Resolution No. 29 of the FRC provided for the introduction of the principles of T+2 settlement cycle and delayed payment. Moreover, provincial institutions and professional market service providers, under the supervision and leadership of the FRC, completed preparations and the system was transferred on 31 March, 2020. These innovations will allow investors to:
• place orders at their own risk,
• not have to place 100% of their resources on the basis of their own risk assessment,
• transfer the remaining payment if the order is fulfilled,
• reduce companies' fees from brokers and dealers, and
• raise foreign capital has become important to increase investment.
The Regulation on registration and public offering of depository receipts (approved originally in 2015) was revised and approved. The Regulation covers the scope for companies (operating in Mongolia but whose shares are traded on major stock exchanges in other countries) to expand their base and attract additional resources (by issuing certificates of deposit for example) and clarifies the procedures involved.
The Commission established a regulatory environment for cash and securities nominal accounts to bring securities’ ownership registration activities in line with international standards, to build the capacity of professional intermediaries, and introduce new types of services to the securities market. This created conditions for foreign and domestic investors participating in the securities market to quickly process cash flows and register securities ownership rights. It also provides for movement to an internationally recognized system of direct ownership; improving the quality of financial, (and human) resources, software, management, and organizational requirements for service providers. It also increases the range of new products and services, that increase the liquidity of the securities market.
Market capitalization and liquidity
o Market capitalization increased by 12.5% from 2019 (and by 105.5% from 2016) to MNT 3.0 trillion, while liquidity decreased by 3.2 percentage points (from 2019) to 1.8%.
o The decrease in liquidity in 2020 was mainly due to a decrease of MNT 79.8 billion (or 59.7%) in stock trading.