CAPITAL MARKETS

Since 1994, when I was appointed adviser to the board of the stock exchange, with the special task of separating out from it the National Depository for Securities (KDPW). I was then vice chairman of the KDPW until my appointment as chairman of the stock exchange in June.

Development happened very quickly. Year on year, new flotations appeared from all sectors of the economy, and foreign companies appeared on the market. Today, there are six of them. From the KDPW’s viewpoint, their presence was very noticeable, as we had to arrange special working links with the systems of capital markets in the countries of origin of those companies. New areas of business arose: I remember very well 1996-97 when we were creating the systems to handle derivatives trading. From the vantage at the KDPW, one can observe not only the direct client relationships, but also the entire infrastructure of the back rooms of such institutions as the stock exchange or the broker firms.

It is very good. It is secure, modern, and functions properly. However, it requires greater international exposure and linkages with other European markets, which will be very important for the volume of transactions on the Warsaw exchange.

I think that their considerations included experience, skill and management ability. The WSE should be regarded as a business which should be managed professionally.

A representative group of basic stakeholders, who are members of the stock exchange. Their views are essential and should be more important. Members of the exchange should have a large influence on its development and activity. However, when considering this group’s stake in the capital of the exchange, this involvement is currently minimal.

It is difficult to say whether this is good or not. The Polish stock exchange was set up in 1991 on the state’s initiative as part of the newly-forming free market economy. Of course, one should be thinking of how to make the ownership structure more similar to those seen on the European markets, since this is in our bourse’s interest.

In my opinion, Polish financial institutions should have a larger share in it. Those which are the most interested in the exchange’s operation, supplying clients and issuers of financial instruments. I have in mind, for example, brokers firms, banks which undertake brokering, and capital funds such as investment fund companies, and pension fund companies which manage open pension funds.

A key issue is achieving the largest liquidity in turnover, in other words, the largest possible amount of transactions undertaken. The most important indicator keenly watched by issuers and investors is liquidity. If delivery on this indicator is not guaranteed, then there will be a sudden flight of investors to other European markets. The withdrawal of large companies would be a catastrophe for the Polish capital market: liquidity would be shaken and small and medium enterprises would find it more difficult to raise capital.

We are amongst the region’s leaders. The exchange’s liquidity is variable but we are always in the top three. We would like the Warsaw exchange to become one of the strongest in the region and for this to be a permanent situation.

This is one of the avenues taken by exchanges mounting such merger, which does not necessarily lead to an increase in the value of market turnover. This route does not guarantee an expansion of the market. It is important to create the right regulatory and financial conditions.

It is not that easy. A company will want to be listed first on its domestic exchange, because there it is closest to its investors. There they have the right systems already in place and all the financial market intermediaries. But it is sometimes the case that a company is carrying on business outside its local market and has regional aspirations. It can also be so large that it cannot find an attractive enough position in its own market and seeks opportunities to expand. So, there are various opportunities and reasons for which foreign companies may want to enter a different exchange’s market and we must take advantage of them. Having six such companies listed on the Warsaw exchange makes us stand out positively amongst bourses in our region. They give good testimony to the feasibility of raising capital on the Warsaw Stock Exchange.

I am not obliged by any deadlines, as my period of office lasts three years and I would like to achieve all I can in this time.

I would like to strengthen the market, and to improve the profile of trading through increasing the number of new public company listings. We have a very good potential for demand which exceeds the current supply. It is mainly the pension funds which are interested in new issuers. It is not very good if, as has happened in the last few months, we don’t have any new market debuts. This situation was probably partially caused by certain regulatory barriers which must be eliminated quickly, so that the market can be well-disposed to issuers and investors. I would particularly like to focus attention on the exchange’s external business environment. However, internally the market is a well-organised, modern machine. I will be working on making the exchange an attractive alternative to banks as a source of raising finance. Please also remember that the Warsaw exchange stands out positively in terms of security of transactions and the reliable functioning of the market. The regional centre concept which you mentioned is an exceptionally important objective and I will be concentrating on it above all. Also, in the not too distant future I will start working on proposals to change the ownership structure of the exchange, although I should stress that this does not affect the importance of the market in the region..

The stock exchange must change and adapt to the market and the regulatory environment. All European exchanges are evolving and we are all following each others’ examples. In effect, it is all about ensuring that there should be uniform standards of delivering financial services on financial markets throughout the European Union. This is the aim of the project which is described as a harmonisation between systems of trading and settling transactions. The Warsaw exchange is not going to become an independent and self-satisfied entity, convinced of its own excellence. On the contrary, we should be referring to European Union blueprints.

I am trying to assess the state of Poland’s economy on an on-going basis, as it has a direct effect on the development of the stock exchange’s market. After Poland’s entry into the European Union, divinations that Poland’s companies would lose in the face of competition and would start to go under, did not materialise. The opposite transpired: we are seeing dynamic development, increasing production and a growth of exports and services. We also have a convincing growth of investments. We have the foundations for further growth in a well qualified workforce. Poland is seen as a country for secure investment. Therefore, I assess the current state of the Polish economy very highly, which can be seen too on the stock exchange. The fundamentals for further growth are clearly visible.

DECYDENT & DECISION MAKER no. 67, June 2006