Built-In Problems in the New European Regulations for the Bulgarian Capital Market

The capital market attracts many investors and public companies, therefore their protection is a major objective of the regulations system. This is a complex system, subject to continuous improvement due to market and technology developments.New markets face the choice of adopting the modern regulations of previous markets or building their own system, adequate for their yet undeveloped and illiquid capital market. Introducing complex restrictions operating in the most developed markets, given the low administrative capacity of the supervisory authorities and insufficient capital base of issuers and financial institutions, gives rise to problems.The complex norms are "too much of a good thing" and lead to the outflow of both public companies and investment intermediaries and investors, due to over-regulation of the investment environment. This phenomenon is called "bilateral restriction of access" and it leads to restricted access to capital of local companies and depriving investors of high-quality assets.The liquidity of the young markets is low, however, this is one of the main attributes of the attractiveness of each capital market. Part of the new norms introduced since 2018 have significantly worsened key indicators of liquidity and environment uncertainty, so their impact on new capital markets is negative. The new Markets in Financial Instruments Directive (MiFID2) and two EU Regulations, enacted since January 2018, have deepened the problems of over-regulation and have additionally created new ones related to market liquidity as far as the young Bulgarian capital market is concerned.