CSE privatisation aims to attract strategic foreign investors

The draft bill for the privatisation of the Cyprus Stock Exchange (CSE) was submitted to the House of Representatives on Thursday, paving the way for the selection of a strategic partner.

The bill was previously approved by the Council of Ministers during its session on June 4, 2025.

The legislation, titled “The Law of 2025 on the Privatisation of the Cyprus Stock Exchange, the Central Depository, the Central Registry of Securities and the Transfer of CSE Personnel to the Ministry of Finance”, lays out the legal framework required for the privatisation of the Cyprus Stock Exchange, along with its Central Depository and Central Securities Registry.

It regulates the procedure for selling the shares of a special purpose vehicle established to facilitate the privatisation of the CSE, handing its operations to a strategic investor.

The bill also defines the competent bodies and stages of the privatisation process.

This includes the transfer of operations, responsibilities, activities, functions, assets, and liabilities of the CSE, as well as the transfer of CSE personnel to the Finance Ministry or the provision of compensation based on a relevant voluntary early retirement scheme.

The voluntary early retirement scheme offers compensation to CSE staff members who choose to retire early from the stock exchange.

According to the bill’s provisions, the tender process for selecting a strategic investor will be conducted by the Finance Ministry on behalf of the Republic of Cyprus.

The ministry has explained that this process will be based on the “principles of transparency and equal treatment”, while safeguarding national security concerns. The process includes several stages.

It begins with an open call for expressions of interest, setting as a pre-selection criterion that interested parties must fully meet the definition of a “strategic investor”.

Next is the evaluation of interested parties, followed by invitations to submit financial offers, but only from those qualifying as strategic investors.

Subsequently, the strategic investor offering the highest price per share will be selected, and the tender results will be announced to all interested parties.

The final stage involves the shares of the special purpose vehicle being transferred to the selected investor following the signing of the relevant share purchase agreement.

The privatisation of the CSE and its sale to a private strategic investor, as is common practice for most stock exchanges in both Europe and globally, is expected to significantly enhance its competitiveness and accelerate the development of its markets.

In general, the privatisation is anticipated to rekindle private sector interest and confidence in the stock exchange sector, increasing the activity of the new exchange and positively impacting the economy, positioning Cyprus as a regional financial services hub.

It should mentioned that the decision to privatise the CSE is a settled political decision.

The bill explains that due to successive economic crises both locally and internationally, the CSE’s turnover has gradually declined over the past decades, leading to continuous losses.

In light of this, the Republic of Cyprus sought solutions to ensure the long-term viability of the stock market.

The Cabinet, after considering various options analysed in a study prepared by an independent consultant for the Ministry of Finance, approved the privatisation of the CSE on May 7, 2020, as the most feasible and beneficial strategic option for the state.

Following the Cabinet’s decision, the CSE, through a competitive procedure, appointed advisors to draft the bill regulating all matters related to the privatisation.

Once the advisors completed the draft bill, it was submitted for public consultation in early 2024.

During its preparation, multiple consultations were held between the CSE, the Finance Ministry, the CSE’s advisors, various government departments, and other entities on specific issues included in the bill.

These entities included the Tax Department, the Cyprus Securities and Exchange Commission (CySEC), the Public Administration and Personnel Department, the Registrar of Occupational Retirement Benefit Funds, and the Office of the State Aid Control Commissioner, among others.

The selection of a strategic investor constitutes a milestone in the Recovery and Resilience Plan and falls under the seventh payment request for disbursement of funds from the Recovery and Resilience Facility.

The payment request must be submitted to the European Commission before the end of 2025.