Two moves adopted to increase transparency in company finances and in dealings on the Athens Stock Exchange and which will be implemented next year are expected to cause a shock in the already weakened bourse but strengthen it in the long-term, officials and market analysts hope. The one measure, long-known to the markets, is the obligation by Greek firms to adopt International Accounting Standards (IAS) in their financial statements by the end of 2003. As a stop-gap measure, the observations of chartered accountants, now confined to notes accompanying the financial statements, will be incorporated into first-half results. The second measure, to be approved Monday by the Athens Stock Exchange, concerns the distinction of listed shares between high-liquidity and low-liquidity ones. Low-liquidity stocks will be traded for fewer hours – not more than three in a row – and an automatic mechanism forcing auctions of such stocks will be triggered as soon as they surpass a certain volatility level within the session. This measure intends to prevent sudden lurches of the market caused by speculative moves applied to low-liquidity stocks. The application of IAS is certain to depress the earnings of most companies, thereby negatively affecting share value. Some banks that published two financial statements this year, one following the established Greek standards and the other following IAS, showed clearly that earnings claimed under the old standards are inflated. Long-term, however, the adoption of IAS will provide investors with a truer picture of company finances and may lead some of the most flagrant practitioners of accounting tricks out of the market, which would be a good thing. Listed companies will also be obliged to revise previous statements according to IAS. An amendment to an existing law will give added powers to the Capital Market Commission to scrutinize financial statements and impose fines for false accounts. The division of stocks into high and low-liquidity ones will apply from June 1, 2003. It will based on trading volumes in the first four months of the year. What constitutes a «high-liquidity» stock in a market generally acknowledged to have been deserted by investors? An Athens Stock Exchange study, based on data from October and November sessions, concluded that 221 stocks fell into the high-liquidity category, while 138 were low-liquidity – which makes one wonder whether the ASE has set the bar too low. Some of the 221 stocks are clearly speculative ones, whose relatively high trading volumes are not compatible with the companies’ size. For this reason, a special «high volume» or «high turnover» index will be introduced in order to warn investors which stocks owe their good fortune to short-term, speculative moves.