The Estonian securities market had a significant year 1997. Both the Estonian Central Depository for Securities and the Stock Exchange, in its first full year of operations showed that the two institutions responsible for the market infrastructure can provide a cost-effective and efficient investment environment.

In a very short time there has been remarkable progress in increasing market transparency. An environment for the orderly execution of transactions is in place and an increasing number of companies have been able to raise new capital. There was also considerable growth in the number of private investors taking part in the local market last year.

Activity on the securities market has grown considerably, presenting a challenge to both the depository and stock exchange to meet the changing needs of the investment industry and ensure a firm foundation for the country's economic reforms. Last year's experiences helped set a clear agenda for the future - to act as self-regulatory bodies overseeing all market dealings and guarantee cost-effective services to the investment community.

In 1997 the regulation imposed on the listed companies was considerably increased and an objective is to build on the achievements. The goal is to maintain the reputation of a transparent market through a consistent enforcement of the regulation. Our main task for 1998 is to expand the regulations for member firms and investor protection rules. We want to see possible conflict of interest situations solved and protect investors so confidence in the securities market remains.

A successful marketplace depends on the capacity, reliability, flexibility and security of its electronic systems. Both the exchange and depository began major updates of its information technology in 1997 to provide modern systems for trading, clearing and settlement, ensuring the market operates efficiently at low cost. Throughout 1998 profit will be channeled back into developing the trade and registry systems and making them ever more responsive to the market's needs.

Risk management is also key for 1998. The insurance carried by the exchange and depository is bought from Lloyd's and helps guarantee operational stability. There are plans for major investments in back-up systems and a remote site implementation of both the exchange and depository over the coming years. This should guarantee constant service to investors should there be any systems breakdown.

We see Estonia as part of the whole Baltic securities market and welcome the 1997 initiative taken by the three countries' state regulators to harmonize market legislation. Our goal in 1998 is to increase pan-Baltic cooperation between the depositories and exchanges and already our links with the Latvian central depository are up and running. We consider it a signpost to a future of closer integration of the Baltic countries.

Ivar Lukk

Chairman of the Supervisory Board of
Tallinn Stock Exchange
Chairman of the Supervisory Board of
Estonian Central Depository for Securities