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The Warsaw Voice » Business » March 1, 2013
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Optimism Set to Return
March 1, 2013   
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Adam Maciejewski, president of the Warsaw Stock Exchange (WSE), talks to Andrzej Jonas and Andrzej Ratajczyk.

Last year saw considerable volatility on many European stock markets, with indexes alternately dropping and bouncing back sharply. Do you think the same situation will repeat itself this year? Or will more stability return to European trading floors?
I expect that European capital markets will be relatively stable this year and that stock-market operators will be taking measures to increase the activity of investors. The structural changes which have recently taken place in Europe in terms of organizing trading markets for financial instruments, coupled with changes in the economic situation, have resulted in some markets losing much of their liquidity. And now, one of the main challenges the operators are facing is to restore liquidity to the market. I am an optimist by nature. This is why I predict that market activity will be higher this year. The revival will be slow, but it will be there.

How do you assess the prospects of Poland’s stock market?
Last year, the Polish stock market recovered, which is proven by the stock market indexes rising by 20-30 percent. This indeed was a big increase. As regards the sales volume, the situation was worse because the volume shrank a little. Additionally, there were some changes to the structure of trading. Investors focused on the largest and most liquid companies while somewhat “neglecting” smaller companies. As for the prospects of the Polish market, it seems that investors expect an improvement in the situation, as evidenced by the rising indexes. However, stock valuations and the volume of trading will depend not only on the situation in Poland in the coming months, but also on developments in Europe as a whole. And there, the situation is very volatile. We cannot be sure, for example, if the crisis will not hit another country in the near future. But if nothing unpredictable happens I believe optimism will return to most European markets.

Which factor has a stronger influence on the WSE now: the situation on global capital markets or the macroeconomic situation in Poland and Europe?
It is difficult to give a clear-cut answer to this question. There are moments when it is the external conditions that determine the developments on the Polish capital market. But sometimes it is internal macroeconomic factors that influence the situation on the market. It seems, however, that at present external conditions have a stronger impact on what is happening on the WSE.

Your predecessor in the post of WSE president promoted the idea of creating a regional financial hub based on the WSE. Are you going to stick with the development strategy adopted by the previous management board?
That’s obvious. But this strategy needs to be modified a bit to become a part of an economic strategy for Poland. And it has to respond better to the changes that have taken place across the European Union. Additionally, I think the development strategy should be carried out more effectively and dynamically than has been the case so far and with slightly different methods.

The stock exchange reflects the ongoing economic processes rather than creating them. On the other hand, it creates mechanisms that may help the economy grow. I think in Poland these mechanisms are still not effective enough and this has to change. I would like the services provided to Polish businesses by the stock exchange and the capital market as a whole to be effective and cheap.

Can the costs of these services be reduced without harming their quality and the level of security?
This is by all means possible if several conditions are met. The size of the market is one of the key conditions enabling cost cuts. With significant inflexible costs, the volume of trading on the market has to grow if handling fees are to be reduced. Meanwhile, last year, for instance, the volume of trading on the WSE shrank despite a rise in the number of listed companies. In this situation, the only option is to streamline the costs.

A well-devised strategy that clearly assigns roles and tasks may be helpful in achieving the main goal, which is to offer effective services. So far we have been dealing with a vision rather than a strategy. Moreover, it is necessary to decide what character the stock exchange should have. Should it be an infrastructure institution or a commercial company? Today, the stock exchange is in a sense in structural conflict because it is a joint-stock company and at the same time a component of the market infrastructure and as such has to reconcile the interests of various groups. On the one hand, we have brokers and investors who want a reduction in service costs. On the other hand, we have stockholders who are interested in maximizing their profits. In Europe, most stock-exchange operators are commercial institutions. This trend leads to healthy behaviors aimed at achieving the highest possible efficiency and better performance. This is why stock exchanges form alliances, share their technological infrastructure and achieve higher efficiency through cost synergy. The situation where we have two conflicting priorities is difficult for the exchange and I think that WSE shareholders ought to make a decision as soon as possible about what the ultimate model of the market should be.

What other changes should be made to attract investors to the stock exchange?
It is definitely necessary to make far-reaching changes to the NewConnect alternative market. This is one of our priorities. For the time being, it is difficult to talk about any details, but we certainly should be thinking of introducing mechanisms to screen issuers in a better way.

Recently, we have seen various attempts to consolidate international stock markets. One example is the sale of NYSE Euronext, the operator of the New York Stock Exchange, to Intercontinental Exchange Inc. Earlier, there were attempts to merge NYSE Euronext with Deutsche Börse. How do mergers of this kind influence the Polish market? Can the Warsaw exchange become an object of interest for global players?
The latest intensification of stock-market consolidation processes is a result of growing competition—not only between individual exchanges, but also between stock exchanges and other trading platforms. So far these processes have not exerted much influence on the Polish exchange. There are various reasons behind the lack of interest among global players in the Polish market. One of them is the special nature of Polish regulatory infrastructure, which makes it quite hard for the competition to enter the market. On the other hand, the Polish market is still not very big. Poland, and even Central Europe as a whole, does not yet offer a sufficiently large potential to global players, despite the fact that its economic growth is much faster than that of Western Europe.

But this situation will not last forever. When the potential for optimizing the global trade in financial instruments is exhausted, global players will start eyeing medium-sized markets. We will see either competition or cooperation with these markets. But for the global players to treat us as an equal partner we ourselves have to become a strong player by that time.

Are the planned technological and organizational changes designed to strengthen the position of the Warsaw exchange?
Of course. Today exchanges are expanding largely thanks to technological progress. I have three aspects in mind. The first one is making the market more accessible to outside users. We need to create systems with an extensive distribution network. Another important issue is the ability to handle large volumes of trading. And the third element is functional changes. We have already started implementing a new trading system, UTP, which is much more efficient and much faster than the Warset system which we used so far. UTP gives us new technological capabilities and new functionalities. But a real qualitative change will take place at the next stage—after the UTP system has been put in place for derivative markets. In this case, functional changes will be enormous. And I believe that the new solutions will encourage investors to be more active in trading and that they will attract new groups of investors to the market.

Will the new technology ensure a high level of transaction security to investors?
The level of security on the Polish market will meet international standards—it will be no lower and no higher than on the world’s leading exchanges. It is worth adding that a standard security system is composed of a number of mechanisms, of which only some are used in stock exchange systems. Most of these mechanisms are part of the systems used by stock-exchange members, which means brokerages, those who trade on the market. The IT systems of brokerage customers also contain appropriate security solutions. Each of these systems is required to be equipped with risk management tools. And the systems have to be designed in a way that enables them to detect errors made by other users. In practice, this means that if something fails in the system of an exchange member or investor, the stock exchange system will respond immediately and in extreme cases trading will be stopped. This guarantees security.

Adam Maciejewski has extensive expertise in management and capital markets, strengthened through a program of domestic and international training as well as practice. He is a graduate of the Warsaw School of Economics, postgraduate tax studies at the Warsaw School of Economics, and an MBA course at the University of Finance and Management. He has also taken part in the International Institute for Securities Markets Development, a training program run by the Securities and Exchange Commission in Washington, DC. He has been authorized to represent the State Treasury on supervisory boards.

Since 1994, he has worked for the Warsaw Stock Exchange, including as Director of the Trading Department and Director of the Trading and Market Development Department. Since June 28, 2006, he has been a Member of the Management Board responsible for the organization of trading, trading systems, technologies, the derivatives market as well as information products. He supervises a project aiming to make the WSE’s new trading system available to Exchange Members, as well as other business and technology projects that are key to the safety of trading and the development of exchange services. He has been the main negotiator of strategic agreements with NYSE Euronext.

For many years he has specialized in corporate supervision and performed functions on supervisory boards. Currently, he is Deputy Chairman of the Supervisory Board of the Polish Power Exchange and Chairman of the Supervisory Board of WSEInfoEngine. He previously sat on the Supervisory Boards of the National Depository for Securities (2006-2011) and MTS CeTO (2000-2006).

He has chaired the Advisory Group to the National Depository for Securities and the Examination Panel for securities brokers and dealers.

He is the author of many publications on the practical aspects of capital markets.
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