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The Warsaw Voice » Business » December 1, 2014
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WSE Not Ready to Merge with Other Bourses
December 1, 2014   
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The Warsaw Stock Exchange wants to be the bourse “of first choice” for investors and issuers in Central and Eastern Europe, under an updated strategy that calls for the growth of the Warsaw stock exchange as a result of increasing the liquidity of market trading rather than mergers with other bourses.

The WSE is the region’s largest stock exchange and one of the fastest growing stock markets in Europe. In terms of the number of new listings as well as the growth of annual turnover, the WSE is ahead of all other markets that outperform it in terms of capitalization. In 2012 and 2013 the volume of trading on the Warsaw Stock Exchange grew by 23 percent. To compare, the value of transactions on the Vienna Stock Exchange increased by 7 percent during the same time, and the volume of trading on the Germany’s Deutsche Boerse rose by 3 percent. But this year, due to a lack of large privatizations, the WSE’s development has clearly weakened. While in Europe and beyond the third quarter of the year brought record activity in terms of initial public offerings, only 10 companies debuted on the WSE and the total value of the initial price offerings was only 161 million euros.

The WSE group’s updated development strategy unveiled in October aims to strengthen the international position of the Warsaw Stock Exchange, make it more attractive to market players and build the WSE’s value for shareholders. “The main goal of the WSE.2020 strategy is to make the WSE the exchange of first choice for investors and issuers in Central and Eastern Europe,” said Paweł Tamborski, president of the WSE.

The Warsaw Stock Exchange aims to achieve its strategic objectives by turning toward customers. At the same time, it will strengthen its existing key business areas. Under the strategy, the development of the WSE group will be based on six pillars: a liquid stock market, a well-developed debt market, a competitive derivatives market, and a commodity market attractive to investors, as well as a comprehensive range of information products for investors and issuers, and the opening of new business segments. “We are confident that we can grow our business primarily through increasing the attractiveness of our products and services and adapting them to the real needs of our customers,” said Tamborski.

The WSE group’s strategy takes into account planned regulatory changes on the European financial market. It has also been adapted to market trends and customer expectations. Grzegorz Zawada, WSE Vice-President for Strategy and Development, said, “We have consulted the strategy with our customers and partners. Their comments were valuable tips for us as to in what direction the group should develop to actively promote the development of the capital market in Poland.”

In order to develop the stock market, the strategy includes plans for active enlistment of new issuers, investors and exchange members, simplification of procedures, promotion of short selling and securities lending, liquidity activation programs and strengthening the NewConnect market as a source of new companies for the Main List market. The WSE aims to increase the attractiveness of the debt securities market by simplifying the structure of the Catalyst market and encouraging banks to be more active on this market.

Under the strategy, about 550 companies are expected to be listed on the Warsaw Stock Exchange’s Main List market by 2020, up from 384 today. Mirosław Szczepański, WSE Vice President for Operations, said, “We will focus our efforts on enlisting attractive Polish and foreign companies, mainly from our region.”

In line with customer expectations, the exchange’s plans also include developing the market for derivatives, such as products based on bonds, the interest rate, electricity and natural gas, and other related instruments. The group is focusing on developing the commodity market, including the gas trading segment, using the potential of energy companies and financial investors. The WSE also wants to enlist active financial investors for other areas of the market.

Under the strategy adopted by the management board, the WSE plans to focus on the Polish capital market and on taking full advantage of its potential, while giving up—at least for the time being—a previous plan to enter into a capital alliance with the CEE Stock Exchange Group AG, led by the Vienna bourse. Economic calculations were behind the decision to abandon the plan to merge with the CEE Stock Exchange Group, which, in addition to the Vienna stock exchange, brings together the bourses in Prague, Budapest and Ljubljana. Investing time and money in an uncertain venture would be at this point taking unnecessary risks, the management board decided. The WSE does not have enough clout to dictate the terms of a potential merger. Although it is the leader in the region in terms of the size of the stock market, it still has a long way to go before it catches up with the biggest players in Europe. In 2009 Deutsche Boerse sought to take over the WSE, but experts warned at the time that the intentions of such an investor could not be fathomed. After acquiring the Warsaw Stock Exchange, Deutsche Boerse could have brought about the marginalization of the Polish market through transferring the largest companies to its own trading floor, for example.
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