Millions of investors, state-owned company shares, and real trading volumes: what the Stock Market 2.0 initiative is bringing into play

Millions of Ukrainians can become investors for the first time, and the stock market can get a real second chance for development. This is the goal of the initiative launched by Ruslan Magomedov, Chairman of the NSSMC, called “Stock Market 2.0,” which provides for the introduction of personal investment accounts (PIAs) and opens up access for citizens to shares of profitable state-owned companies.

Ruslan Magomedov spoke about this in an interview for Novyny.LIVE.

The problem with the Ukrainian stock market all these years has been the lack of instruments, as for years it existed rather formally: many securities made no economic sense and were used for tax evasion schemes.

At present, our economy is bank-centric: businesses and citizens earn money, deposit it in banks, and then the banks decide who to grant loans to, on what terms, and against what collateral. This is a normal stage of primary distribution of GDP.

At the same time, this model has its limitations: it does not create conditions for the large-scale redistribution of capital through the securities market. In Ukraine, stock exchanges have not been functioning properly for a long time, although by their nature they are just like any other business. Without trading instruments, even the most well-prepared infrastructure cannot work effectively and make money.

Taking this into account, the NSSMC, having analyzed international experience, is proposing to introduce PIA as a mechanism for attracting long-term capital via the capital market.

“A PIA will be opened at an investment firm and will allow citizens to invest in domestic securities: municipal bonds and corporate bonds, shares of Ukrainian companies. Provided that the funds are not withdrawn for 5 years and work in the economy, a person becomes eligible for a tax break. They can reinvest profits, buy and sell assets, but the key condition is that the money remains in the economy,” said Ruslan Magomedov.

The Chairman emphasized that at a certain stage of economic development, there is a need not only for primitive accumulation of capital, but also for its redistribution. It is PIAs that will provide more flexible access to instruments with a higher level of risk than traditional banking products. This is how it works in developed economies around the world.

The sale of shares of profitable state-owned companies will attract 5 million new domestic investors.

Recently, the NSSMC, together with Member of Parliament Taras Tarasenko, presented the concept of the draft Law of Ukraine No. 14296. According to Ruslan Magomedov, it will promote the introduction of real investment instruments:

“We propose that the state itself become an example: selling a small share — for instance, 7% of the shares of profitable state-owned businesses—via the Diia app.

It is important to note that this is not classic privatization, but rather the sale of a portion of already existing shares of stably working, state-owned companies that generate profits and pay dividends.

“Our strategic goal is not just to sell shares. We want 5 million retail investors to appear in Ukraine, for the secondary market to start working, for the stock exchanges to receive trading volumes, and for the state to receive the fair value of the shares it owns,” emphasized the Chairman.

According to him, the introduction of such instruments is capable of launching a full-fledged stock market and providing the economy with long-term money, which in the long run will make the cumulative pension system effective and secure.