The founding of the Stock Exchange
The Budapest Stock Exchange (hereinafter: Exchange) was established in 1990 by
the founding general assembly accepting the foundation agreement. The main purpose
of establishing the Exchange was to facilitate the supply and demand of listed
securities, and to enable public pricing. The Exchange is an independent legal
entity functioning on the basis of exchange membership. This means that the founders
established it voluntarily. The Exchange's independence and autonomy can only
be restricted by the Hungarian Financial Supervisory Authority. From the end of
June 2002, the Budapest Stock Exchange had functioned as a company limited by
shares; since May 2006, it has been functioning as a private company limited by
The Exchange's organisational structure and regulations
The Exchange is, on the one hand, a self-governing body establishing its own
offices, committees and officers. On the other hand, it is a self-regulating body,
which means that it draws up the general terms for itself regarding its operation
according to statutory law. The Exchange is divided into the following bodies:
the Board of Directors, functioning as the main executive body; the Supervisory
Board, controlling this, and the Management, acting as a representative body.
These bodies establish the BSE's rules. Within these, it is the Board of Directors'
responsibility to establish the Exchange Rules, the Exchange Regulations and the
directorial resolutions, while it is the CEO's responsibility to establish CEO-level
resolutions. The Exchange Rules contain all binding provisions regarding membership,
trading, the listing and continued trading of securities, de-listing of securities
as well as sanctions, the publication method of Exchange data, incompatibility
and trading floor commercial structures. The Exchange Regulations contain effective
rates, the construction of the Exchange's working organisation and its operation,
the trading rules of the MMTS free trade system and all binding rules for the
corporate system of traders, issuers and investors. Directorial and CEO-level
resolutions define rights and responsibilities for issuers, traders and brokers.
These sources of law enter into effect when the Board of Directors – apart from
its own resolutions – ratifies the rule, regulation or CEO-level resolution. When
this happens, the CEO states the effective date in his or her resolution. In
the case of regulations, the permission of the Supervisory Authority is also needed
for the regulation to enter into force.
Organisational and other requirements for the exchange
The CMA defines the exchange as a company limited by shares and includes only
those rules which, due to the special character of the activity of the exchange,
require regulations that are different to those in the act on business associations
or which are not included therein. Such rules include the capital requirement,
different from that in the general provisions for companies limited by shares,
which states that the smallest amount of the exchange’s registered capital must
be HUF 150 million in the case of exchange activities related to the trading of
commodity-based transactions, FX and futures interest rate transactions, while
in the case of the trading of any other exchange products, the requirement is
HUF 500 million.
The same regulation is relevant for all exchanges regardless of the subject of
the trading (i.e. stock or commodity exchange). It is still possible to establish
a new exchange, and exchanges can de-merge, merge or cease to exist. The founders
and owners of the exchange have a right and, at the same time, an obligation to
decide what type of an exchange they wish to operate. An exchange can be established
as a company limited by shares with dematerialised shares only or in the form
of the branch of a foreign exchange; a licence from the Supervisory Authority
is necessary for its establishment. In the case of trading commodity-based transactions,
FX and forward interest rate transactions, an exchange can be established with
a share capital of HUF 150 million, while in the case of the trading of other
exchange products, a paid-up share capital of HUF 500 million is required.
According to the rules currently in force, the extent of the largest ownership
share in the exchange has not beendefined, however, the statutes of the private
exchange may set the highest degree of the voting right that can be exercised
by one owner. The permission of the Supervisory Authority is needed for exceeding
the individual ownership proportions (33, 50, 66, 75 and 100%), as opposed to
the former preliminary permission from the Supervisory Authority which was mandatory
for the acquisition of the 5 and 10% shares and the voting right. The exchange
must publish any changes to the ownership structure. The Supervisory Authority
may reject the acquisition of ownership shares in the above proportions if the
applicant threatens the independent, reliable and careful management of the exchange
by the shareholders, or if its business activities or other shareholdings hinder
the activity of the Supervisory Authority.
Rules for the activities of the exchange
In addition to the exchange activity and its supporting and complementary activities,
the exchange can only be involved in clearing house, training, IT, publication
production and distribution, and data supply activities. The CMA kept the self-regulating
licences of the exchange, i.e. the exchange can define the elements of the activity
in its internal regulations in addition to the approval of the Supervisory Authority.
Thus, for example, the exchange can define the rules for listing and continued
trading of securities, the order of the establishment and operation of the individual
sections, rules of trading, the order of publishing exchange information, the
obligations of exchange traders, etc. in regulations.
The right to trade at the exchange
In the case of exchanges operating in the form of companies limited by shares,
the right to trade can be obtained by the persons holding the official licence
to trade exchange products and not by the shareholders of the company if such
persons comply with the other conditions set out in the regulation of the exchange
(section membership). The CMA ensures legally defined licences for the exchange,
which enable the control of exchange traders. During its controlling activity,
the exchange cooperates with the Supervisory Authority and is entitled to impose
sanctions, if necessary.
Since Hungary’s accession to the EU, any foreign business associations may receive
a right to trade on the Hungarian exchange if they have a licence to trade exchange
products, without needing to establish branches or subsidiaries in Hungary.