International activity of the WSE Group

Building the international importance and reputation of the Polish exchange is part of WSE’s growth strategy. The implementation of the strategy aiming to strengthen the international position of WSE results in a growing number of foreign issuers, brokers and investors.

Development of a Network of Foreign Investment Firms – Exchange Members

Thanks to promotion activities, participation in international conferences, own conferences organized in main world financial centres or at international road shows, WSE proactively promotes the Polish capital market amongst global investors and financial intermediaries. The efforts of WSE focus on attracting domestic and foreign exchange members. These are mainly international investment banks as well as regional financial intermediaries, which are increasingly interested to get access to the WSE trading system as more companies from the Region are listed on the trading floor in Warsaw.

The Exchange changed the classification of WSE exchange members in 2012 by introducing local and remote members in order to better reflect the regulatory environment and the actual activity of such companies on the local capital market. Local members of WSE include all domestic and foreign companies which have an establishment in Poland which handles exchange orders or pursues activities related to the handling of orders. Remote members are companies without a branch in Poland or with a branch which pursues activities unrelated to the handling of orders. As a result of the change, two companies (Credit Suisse Securities (Europe) Limited and Wood&Company Financial Services A.S.) were moved from the category of remote members to the category of local members. Consequently, the Exchange had 60 members at the end of 2012, including 33 local members and 27 remote members. The Exchange had 31 and 29 members, respectively, according to the earlier classification. The share of remote members in session trading in shares was ca. 11% in 2012 v. ca. 8% in 2011 (the share was 24.9% and 23.4%, respectively, according to the earlier classification).

Foreign (local and remote) Exchange Members are mainly companies from many  European Countries. Remote membership allows foreign brokers to have direct access to the WSE system without physical presence in Poland and without the intermediation of local brokers. At the end of 2012, this solution was used by intermediaries from Austria, Bulgaria, Cyprus, Czech Republic, Estonia, France, Germany, Hungary, Lithuania, Netherlands, Romania, Slovakia, Sweden and UK.

Share of local and remote WSE members in session trading in shares on the Main Market
  For the year ended December 31,
  2012 2011 2010 2009 2008
Local   89% 92% 88% 94% 91%
Remote 11% 8% 12% 6% 9%
Source: WSE

According to WSE research, foreign investors generated 48% of turnover in 2012, modestly more (1 percentage point) than in 2011.

Investors’ share in turnover on the Main Market in shares
  For the year ended December 31,
  2012 2011 2010 2009 2008
Foreign investors  48% 47% 47% 36% 43%
Domestic retail investors 18% 18% 19% 27% 18%
Domestic institutional investors 34% 35% 34% 37% 39%
Source: WSE

Foreign investors became more active on the futures market in 2012. The volume of turnover generated by foreign investors amounted to 1.8 million contracts in 2012, a decrease of 19% in comparison with the volume of over 2.2 million contracts in 2011.

Investors’ share in turnover on the futures market
  For the year ended December 31,
  2012 2011 2010 2009 2008
Foreign investors   17% 16% 14% 11% 10%
Domestic retail investors 47% 46% 50% 52% 53%
Domestic institutional investors 36% 38% 36% 37% 37%
Source: WSE

Attracting Foreign Issuers

The Group aims at strengthening its position of the regional financial hub through focusing its marketing activities on companies from the CEE Region. In the Company’s opinion, WSE has competitive advantages over other stock exchanges in the Region which include, among others: a recognizable brand, a reliable trading system, quality of transactions performed, market liquidity, market environment protecting interests of investors and facilitating access for foreign investors and brokers, and access of issuers to a diversified base of domestic and international investors.

In its proprietary Program WSE IPO Partner, WSE works together with a network of foreign banks, brokerage houses and other intermediaries with a view to promoting the Polish capital market abroad, which materially enhances WSE’s possibilities of approaching a bigger group of issuers and market participants. As at December 31, 2012, the WSE IPO Partner program covered 28 entities from 13 countries.

As of May 30, 2012, the Exchange calculates and publishes the WIG-CEE index, which at the end of 2012 comprised 31 companies listed on the WSE Main Market and NewConnect rom Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Romania, Slovakia, Slovenia and Ukraine. The WIG-CEE index was introduced as a result of the growing number of issuers from the region and as part of the strategy of strengthening WSE’s position in Central and Eastern Europe. After WIG-Poland and WIG-Ukraine, WIG-CEE is the third index calculated by WSE where the main criterion of eligibility is the issuer’s country of origin; it is the first regional index.

As at December 31, 2012, the markets operated by the Exchange listed shares of 51 foreign companies, including 8 listed on NewConnect, with total capitalization of nearly PLN 211 billion. The share of foreign companies in total session trading in shares on the Main Market was 2.8% in 2012 as compared to 3.3% in 2011. Initiatives aiming to improve the liquidity of trading in shares of foreign companies are, next to attracting foreign issuers, a priority of WSE in the context of the Company’s international activities. This goal is pursued among others by promoting good practice and top standards of investor relations among foreign companies and by organising conferences where foreign issuers meet with managers of asset management companies which invest on WSE.

Of the 51 foreign companies listed on the WSE markets, 12 are Ukrainian companies. The first Ukrainian company was newly listed on WSE in 2006. The opening of the Representative Office in Kiev in 2008, the inclusion of the first Ukrainian company in the WIG20 index, and the creation of the Ukrainian company index in 2011 are only a selection of the whole chain of events initiated and realized in co-operation with Ukrainian businesses. The strong reputation of the Warsaw Stock Exchange among Ukrainian entrepreneurs is a result of the efforts made since 2006 when WSE decided that Eastern neighbourhood is an important direction for the future of the Polish capital market. WSE is today the market of first choice for Ukrainian companies seeking growth capital. It offers them the reputation of a mature and dynamic market and access to foreign capital but at a cost of raising capital which is significantly lower than on other European exchanges.

Commodity Market

Regulatory environment

The strategic programs and action plans of PolPX correspond to the implementing measures proposed by the European Commission and the European Council for the European internal electricity market and regional markets. The Agency for Coooperation of Energy Regulators (ACER) created in March 2011 together with National Energy Regulators is initiating changes in the national market models. The periodic targets for the regional markets and the European market are to be pursued jointly and co-ordinated by ACER and the National Regulators according to a clear distribution of functions and responsibilities by technologies and markets (close co-operation of Operators and Exchanges).

The European Commission and the European Council have confirmed the expected target date of the internal energy market to be opened by the end of 2014. Integration will be implemented at the regional level to be followed by supra-regional integration. The goal of the implementation of the European market is to connect national markets under optimum models using optimum uniform pricing algorithms in the process, enhancing the cross-border capacity of energy exchange using optimum capacity algorithms, maximising social welfare for the participants by rationalising the cost of production and purchase and price convergence, as well as regional and EU-wide synergies of services ensuring energy security.

PolPX co-operates with the Association of European Energy Exchanges (EUROPEX), the European Federation of Energy Traders (EFET), the Union of Electricity Industry (EURELECTRIC), as well as stakeholders on the regional markets of Central Eastern Europe (CEE), Central Western Europe (CWE) and North Western Europe (NWE). PolPX is actively engaged in projects, adjusts its technical infrastructure to market needs by improving the algorithms of existing IT systems, and negotiates with licensors and owners of IT systems which allow to create a European market.

PolPX initiatives building the Internal Electricity Market (IEM)

PolPX co-operates with the Energy Regulatory Office (URE) and the Transmission Grid Operator PSE on an international scale in the preparatory work for the creation of a single European market in the area of day-ahead and intra-day electricity markets together with the stakeholders of the CEE, CWE and NWE regional markets in the following projects:

  • Price Coupling of Regions (PCR) – day-ahead market;
  • CEE regional market project – day-ahead market;
  • project connecting the Polish market to the day-ahead market of three exchanges (Czech, Slovak, and Hungarian) opened in September 2012;
  • Cross-border Intraday (XBID) project – intra-day market;
  • co-operation with the Scandinavian exchange Nord Pool Spot (NPS) – day-ahead market opened in December 2010 and intra-day market to be opened.

The costs of PolPX’s participation in the projects of building the regional markets and the European market may be refinanced according to preliminary approval of the President of the Energy Regulatory Office. For the energy exchange, these include the implementation costs (participation in costs already incurred by Western European exchanges), investment costs (computer hardware and software) and current and future operating costs (service fees, the cost of market systems operated by exchanges).

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