The MSE is so small it trades for just one hour a day but it is experiencing rapid and unprecedented growth.
There are 334 companies currently listed, with 186 traded on a daily basis, but 20 companies account for 93% of the market capitalisation, which has grown by 31% since last year.
The value of all the companies listed is less than $US2 billion and the largest company is valued at around $400 million.
In April, the MSE signed a master service agreement with the LSE to upgrade its IT system and collaborate on regulations.
The MillenniumIT integrated platform will speed processing time and will be installed before the end of the year.
Training for the new software is underway ahead of its launch date on December 15.
MSE chief financial officer Munkhtushig said a draft of the new securities markets law was submitted to the Mongolian Ministry of Justice last month.
New listing rules, based on the LSE rules, are being drafted and will enable one prospectus for companies wishing to list on the MSE and LSE.
New trading and membership rules have been completed.
The new membership rules will enable international members, which hadn’t previously been allowed.
The updated rules will also regulate behaviour and set regulations for brokers.
New clearing and settlement rules will see a move to the widely used T+3 settlement cycle from the T+0 cycle.
Speaking at the Mongolia Investment Summit 2011 Munkhtushig said the MSE had some of the most expensive listing fees in the world compared to other exchanges and the fee structure would also change to be based on market capitalisation rather than the balance sheet.
The MSE is also working on reconfiguring its off-balance index after figures showed it outperformed the Hang Seng by over 1100%.
Despite this, growth is expected to continue on the MSE, with state-owned Erdenes Tavan Tolgoi gearing up for a multibillion dollar initial public offering next year.
During an earlier speech, MSE chairman Bold Baatar said the market capitalisation of all MSE-listed companies could reach $45 billion within five years as more state-owned companies become private.
According to Baatar, around 90% of the economy is unlisted.
He expects one of the upcoming listings to be state-owned iron ore play Turnurtei, which has a project 80km from the Russian border grading 60% iron.
Currently, no foreign companies can list in Mongolia but Hogan Lovells head of corporate Asia Jamie Barr expects that to change shortly.
“Certainly companies have expressed a desire to do so,” he said.