Experts explain what is holding back a liquid options market in Uzbekistan, what conditions are needed and when the stock market may be ready.
In this article:
- What options are
- Why Uzbekistan still has no options market
- What is needed to launch one
- When an options market could appear
Although developing a derivatives market was listed as a priority in the strategy of the Tashkent Republican Stock Exchange (UzSE) as far back as 2017, a full derivatives market has yet to emerge in Uzbekistan. Public data on call and put option trading, their volumes and participants is absent, and the market remains focused on basic instruments such as stocks and bonds.
Kursiv examined the factors delaying a liquid options market in Uzbekistan, the conditions required for its launch, and the prospects for this segment. But first, a brief overview of what options are and how they work.
What are options?
An option is a financial contract giving the holder the right, but not the obligation, to buy or sell an asset (such as a stock, index or currency) at a predetermined price in the future. Depending on the type, this right can be exercised either on a specific date (European option) or at any time before expiry (American option).
Options can be used to hedge risks or to speculate on asset price movements. The two main types are:
- Call option — the right to buy an asset at a fixed price
- Put option — the right to sell an asset at a fixed price
If the market price moves in the holder’s favour, they exercise the option and make a profit. If not, they can let it expire and lose only the premium paid.
Options allow investors to:
- Hedge risks — for example, buying a put option to protect against a fall in stock price below a certain level
- Use leverage — options let investors profit from movements in expensive assets without buying them outright, reducing the required investment 10–20 times, making them attractive to those with smaller capital
- Earn additional income — large investors holding the underlying asset can sell call options and collect the premium as extra income
Why Uzbekistan still has no options market
Derivatives were highlighted as a priority in the UzSE’s 2017–2025 strategy, but the segment has not developed in practice.
Shodibek Kenjaev, investment banker at Kapital-Depozit, explains that the market has been in transition since then: regulators changed, capital market strategies were adjusted, and government focus remained on the banking sector. As a result, derivatives remained more a strategic plan than a practical reality.
He identifies the main reason for the absence of an options market as the immaturity of the stock market itself. This is evident in several ways:
- Lack of proper infrastructure for derivatives
- Limited demand from institutional and private investors, with stocks and bonds still prioritised
- The market is still developing, with participants gradually moving from speculative trading to risk management and hedging
- Legislative and methodological frameworks for derivatives need further development
Behruzbek Ochilov, director of investment banking at ALKES, shares a similar view. He notes that Uzbekistan’s market was previously too small, illiquid and narrow for derivatives to become mainstream. The focus was on establishing basic assets — stocks and bonds.
Historically, options in Uzbekistan were created as corporate tools rather than market instruments. Legislation mostly treated them as employee or management incentives, tied to specific shares and general meeting decisions, with strict volume limits.
«This model did not support active secondary trading or the use of options for investment hedging. Legally, options exist more as a corporate governance tool than a stock market instrument in the classical sense,» Ochilov adds.
What is needed to launch a liquid options market
Experts agree that derivatives can only appear as a natural evolution of the stock market, not as an isolated initiative.
Kenjaev lists key requirements:
- Strengthening the stock and bond markets, increasing issuers and trading depth
- Successful international IPOs to boost trust and corporate standards
- Growth of institutional investors and risk management culture
- Modernising infrastructure and clearing to meet derivatives market standards
- Investor education on options as hedging and trading tools
«Only on this basis can an options market emerge with real liquidity, not just in name,» Kenjaev says.
Ochilov highlights the need to shift from an issuance-based approach to a contract-based model, common in developed markets. As the market grows, options should move from a corporate incentive tool to a market mechanism for risk management. This requires gradual adaptation of regulatory and exchange logic rather than a sudden derivatives launch.
Currently, Uzbek legislation treats options as derivative securities tied to state registration and prospectuses, suitable for corporate options but unsuitable for market derivatives, which internationally are treated as contractual instruments. This allows them to be used for hedging, portfolio management and short-term trading.
«The market is already moving in this direction. Instruments with embedded options are increasingly used, especially in bonds. Put and call mechanisms or early redemption rights built into prospectuses function economically as options and are used by investors to reduce risks,» Ochilov notes.
He cites corporate bonds like Uzum Nasiya, where investors had the right to sell bonds back to the issuer under pre-set conditions, demonstrating that demand for option mechanisms is forming in a legally robust form.
When might an options market appear in Uzbekistan?
Kenjaev observes that by 2024–2025, Uzbekistan’s stock market shows qualitative progress: growing investment interest, an expanding bond segment, and a wider range of instruments. Step by step, the market is evolving.
If this trend continues, a practical derivatives market launch could be discussed around 2027–2028.
«The prospects are positive: the more risk management tools investors have, the more stable the market becomes. In developed markets derivatives improve price efficiency and let investors protect positions instead of leaving the market in volatile periods. Uzbekistan will inevitably reach this stage — it’s a matter of timing and infrastructure readiness,» Kenjaev says.
Ochilov agrees that the options market in Uzbekistan has positive prospects. As issuers grow, liquidity rises, and investment strategies become more complex, the market will need tools not just for raising capital but for risk management.
Currently, options exist in two forms:
- As a corporate incentive tool in law, but not used in practice
- As embedded economic options in bonds and quasi-bond instruments (including some preferred shares)
«The next step will be a gradual shift to market options as a distinct asset class, provided the regulatory and exchange model focuses on hedging and risk management, not just corporate purposes. This is a natural progression for a maturing market,» Ochilov concludes.
