YEREVAN, May 29. /ARKA/. One of the main tasks of the Central Bank of Armenia is to ensure continuous liquidity and fair pricing in the foreign exchange market, stated Martin Galstyan, head of the regulator.
According to him, the depth of the foreign exchange market is critical for the development of the capital market.
“While we often discuss the development of local currency bond and equity markets, attracting foreign investors and ensuring sufficient demand from buyers also depends on how easily investors can open and close positions in the local currency,” Galstyan said at an international conference dedicated to the 25th anniversary of the Armenia Stock Exchange (AMX).
According to the head of the Central Bank, if investors are unsure of the ability to convert large positions in Armenian drams if necessary, they are significantly less inclined to invest in the local currency capital market.
Noting that Armenia’s foreign exchange market remains relatively small, Galstyan explained that in emerging markets such as Poland and Kazakhstan, currency spreads are very low—around 0.007%—while in Armenia this figure is close to 1%, a significant difference.
The regulator also noted that data on average daily foreign exchange turnover in emerging markets shows that the liquidity of Armenia’s foreign exchange market remains relatively low.
“As a result, the foreign exchange market may not be able to absorb large positions as easily, and significant transactions can cause significant price fluctuations,” he said.
Among possible policy options, Galstyan mentioned expanding participation on the existing AMX currency platform to help the market absorb large positions.
“Currently, participants include banks, insurance companies, credit institutions, and investment companies. We are considering whether investment fund managers or large companies in the real sector, especially exporters and importers, could also participate and provide additional liquidity,” he said.
Furthermore, according to Galstyan, the regulator is considering developing the institution of market makers to provide continuous two-way quotes on the foreign exchange market.
“We need to consider incentives for market makers, such as regulatory benefits or discounts on trading platform fees,” he noted.
Another area, Galstyan explained, could be a requirement to conduct large foreign exchange transactions through brokerage channels rather than dealer execution.
“This would reduce conflicts of interest, improve price transparency, and strengthen trust among institutional investors,” he said.
According to the Armenia Stock Exchange, in April of this year, the volume of US dollar conversion on the AMX currency exchange platform amounted to approximately 364 million drams across five transactions. During the month, the exchange rate fluctuated between 370.75 and 376.5 drams per dollar.
