* Restrictions in place for local investors
* Decree on timing expected, timing not clear
* Athens Stock Exchange has been closed since June 29 (Adds comment by European official)
By Angeliki Koutantou and Lefteris Papadimas
ATHENS, July 28 (Reuters) - The Greek stock market will reopen on Wednesday or Thursday after a month-long shutdown but with restrictions on trading by local investors at the request of the European Central Bank, the Greek securities regulator chairman told Reuters on Tuesday.
The Athens Stock Exchange (ASE) has been shut since June 29, after the government closed its banks and imposed capital controls to prevent them from collapsing in the face of mass withdrawals.
Greece sent a first proposal to the ECB last week to reopen the stock market as soon as possible because it risked its place in global securities indexes if it remained closed for too long.
But the process was delayed because the ECB wanted assurances that Greek investors would not pull money out of banks to convert them to shares or bonds, putting a further strain on the country’s struggling lenders which depend on the ECB’s emergency funding (ELA) to remain afloat.
On Tuesday, Greece gained the European Central Bank’s approval to reopen its stock market with no restrictions for foreign investors but with limitations for local ones.
“The commission will convene tomorrow morning to decide if the Athens Stock Exchange will reopen on Wednesday or Thursday,” the chairman of Hellenic Capital Market Commission Konstantinos Botopoulos told Reuters.
A ministerial decree on the bourse’s operations is expected to be issued, opening the way for trading.
Greek regulators on Monday offered the ECB two plans for the re-opening: one allowing unrestricted trading, the same as proposed last week, and a second that imposed restrictions on trading by Greek investors to prevent capital fleeing banks, sources said earlier.
Botopoulos said the ECB approved the second plan. “What we have won in the negotiations is that the restrictions will last for a limited period of time,” he said.
A European official said the process for the reopening of the market was delayed due to fears that it could result in a crash, as well as continued uncertainty about Greece’s political future and that of its banks.
“What nobody knows is what happens if you reopen. Is there going to be dumping of Greek assets? No one can say that everything is under control,” the official said.
A senior official at the regulator said local investors would be allowed to buy shares by using existing cash, such as that stored at home for security in the face of the crisis or money transfers from abroad, and not by withdrawing money from their Greek bank accounts.
Some market participants had warned that unlimited trading for domestic investors would have posed a serious risk for lenders.
“The problem is that if the trading starts without restrictions, then many Greeks could withdraw their deposits and turn them into shares or bonds,” Takis Zamanis, chief trader at Athens-based brokerage Beta Securities, told Reuters.
The European Securities and Markets Authority (ESMA) said a ban on the short selling of Greek shares, as requested by the Greek securities regulator, would remain in place. The ban, which also affects electronic trading of Greek government bonds, is set to stay in effect until Aug. 3.
Greece’s main equity index was down 16 percent from its 2015 peak, hit in February, when the bourse was shut down.
FTSE Russell, which compiles indexes across major asset classes, said last week it was retaining Greece securities in its indices for another 10 business days to see if the Greek bourse reopened. (Additional reporting by John O’ Donnell and John Geddie; Writing by Angeliki Koutantou; Editing by Janet Lawrence)