Kazakhstan and Azerbaijan are reaching a new level of financial cooperation - from exchange interaction to joint development of technological solutions. Against the backdrop of deepening energy and transport ties between the two countries, the importance of synergy in the financial sector is growing. In particular, with the development of the Trans-Caspian International Transport Route and strengthening regional cooperation, new horizons are opening for interaction between stock exchanges and financial institutions of Kazakhstan and Azerbaijan.
In an exclusive interview with Report, Deputy Chairman of the Management Board of Kazakhstan Stock Exchange (KASE) Yermek Mazhekenov spoke about expanding cooperation with Azerbaijani partners, technological integration with the Baku Stock Exchange (BSE), prospects for ESG instruments, and the potential role of the Turkic Investment Fund.
Report presents the interview:
- How would you characterize the current state of economic and financial interaction between Kazakhstan and Azerbaijan, especially given the growing cooperation in transport and energy sectors?
- Overall, we observe a steady positive dynamic in bilateral interaction between Kazakhstan and Azerbaijan in key sectors such as energy, logistics, and finance. Joint efforts to develop the Trans-Caspian corridor and related energy initiatives create a favorable macroeconomic environment that contributes to deepening cooperation in capital markets. This creates opportunities for adaptation and development of exchange infrastructure in both countries. At the same time, the assessment of these processes' impact on exchange infrastructure is ongoing and constantly being refined.
- How important is the development of strategic partnership with Azerbaijan's financial institutions, particularly with the Baku Stock Exchange, for KASE?
- For KASE, building partnerships with Azerbaijan's financial institutions, including BSE, is considered one of the directions for developing international cooperation. We are carefully studying opportunities for experience exchange and technological synergy. It is important for us that all initiatives comply with the principles of market efficiency and regulatory requirements.
- Is there any work being done on signing memorandums of understanding or other formal agreements between KASE and Azerbaijani entities - such as the Baku Stock Exchange or the Central Bank of Azerbaijan?
- Regular expert dialogue is maintained between KASE and the relevant financial institutions of Azerbaijan. The signing of memorandums of understanding and other agreements is on the agenda of bilateral meetings and is being discussed as part of further development of cooperation.
- Are there any instruments related to Azerbaijani issuers or assets on the KASE platform? Are there plans to expand the product line considering interest in the South Caucasus region?
- Currently, instruments directly related to Azerbaijani issuers are represented in a limited way on the KASE platform. The issue of expanding the product line is in the analysis stage in terms of investor demand, compliance with regulatory standards, and issuers' readiness. In case of sustained interest from both issuers and investors, our infrastructure is technically ready to launch the appropriate instruments.
- How technically compatible are the trading platforms of KASE and the Baku Stock Exchange? Are steps being considered to unify trading and post-trading systems to improve the efficiency of cross-border interaction?
- KASE and BSE platforms are based on comparable international standards, but differ in technical aspects and architectural solutions. The possibilities of unification or technological adaptation of trading and post-trading systems could be the subject of separate study and discussion, especially in the context of developing cross-border infrastructure and deepening cooperation between our exchanges.
- How realistic is the prospect of creating a common central depository or implementing unified clearing mechanisms between Kazakhstan and Azerbaijan? What institutional or technological barriers exist?
- The idea of creating a common central depository or implementing unified clearing mechanisms requires deep legal, technological, and regulatory elaboration. At the current stage, such initiatives are not being discussed on a practical level. However, in the future, with political will and institutional readiness, such solutions could become part of a broader strategy to deepen financial integration.
- How viable is the concept of a unified financial space between Kazakhstan, Azerbaijan and other countries in the region - within the Turkic Investment Fund, OTS or other multilateral formats?
- The formation of a unified financial space with the participation of Kazakhstan, Azerbaijan and other countries of the Turkic region is a promising but complex task. It is the subject of intergovernmental and expert discussions. The implementation of such initiatives is possible only if there are agreed political and legal frameworks, unified regulatory approaches and sufficient institutional maturity of markets.
- What institutional, technological and regulatory steps are necessary to transform Kazakhstan and Azerbaijan into regional financial hubs capable of competing at the Eurasian level?
- To build a full-fledged architecture of a financial hub, it is necessary to systematically improve the legislative and regulatory framework, develop market and technological infrastructure, implement international standards and improve the qualifications of specialists. The development of a digital ecosystem plays an important role, as well as creating conditions for attracting foreign investments through modern financial instruments.
- Is there a dialogue between KASE and Azerbaijani partners in the field of sustainable financing - such as green and social bonds, transitional instruments, as well as in the field of integration of ESG standards?
- Yes, we maintain a professional dialogue with our Azerbaijani partners in this area - both on sustainable financing issues and on the implementation of ESG practices. We exchange experience in the issuance of green and social bonds, as well as approaches to ESG information disclosure. As you know, KASE has already implemented the issuance of ESG bonds, verified by the Green Finance Center operating on the basis of the Astana International Financial Center. We are open to further deepening cooperation, taking into account regulatory requirements and market readiness. Currently, promising areas of cooperation are under study.
- How do you assess the potential for applying blockchain technologies, tokenization, and digital currencies in cross-border operations between the financial markets of Kazakhstan and Azerbaijan? Are there already implemented or planned pilot projects in this area?
– The implementation of blockchain technologies, asset tokenization, and digital currencies in cross-border operations is viewed as part of a global technological trend affecting all financial markets. These areas are in the focus of relevant departments and may be subject to study, taking into account current regulatory restrictions, cybersecurity requirements, and the maturity of market infrastructure. So far, specific pilot projects are not being implemented, however, we do not rule out the possibility of launching them under favorable conditions.
- Is there consideration of conducting joint road shows, investment forums, or educational programs between KASE and the Baku Stock Exchange to increase the investment attractiveness of both markets?
– Yes, organizing joint events - such as road shows, investment forums, as well as educational initiatives - is considered a promising direction for deepening cooperation with the Baku Stock Exchange. Such formats not only allow for expanding presence in regional and international markets but also contribute to increasing investment literacy and trust from market participants.