Market environment

Size of the exchange sector

The table below presents statistics of the value of trading in US$ billion generated world-wide by exchanges associated in WFE (World Federation of Exchanges), capitalization, and capital raised by issuers from issues of securities which were subsequently admitted to exchange trading as at the date and for the period indicated in the table.

US$ billion As at / For the year ended December 31,
  2012 2011 2010 2009 2008
Value of trading (order book, for the period) 48,925 63,080 63,091 62,004 89,956
Capitalization (domestic companies,
as at the end of the period)
56,006 47,400 54,884 47,788 32,350
Capital raised by issuers (IPOs and SPOs, for the period) 566 396 1,003 960 977
Source: WFE (World Federation of Exchanges)

According to WFE, NYSE Euronext with a global market share of 30.2% was the world’s biggest exchange by capitalization of the equities market at the end of 2012, followed by NASDAQ OMX and the Tokyo Stock Exchange with a global market share of 8.2% and 6.2%.

Main trends on the capital markets

  • Consolidations of exchanges through mergers, acquisitions and strategic alliances of the biggest exchanges in Europe and world-wide (merger of NYSE and Euronext in 2006; acquisition of OMX in Scandinavia by NASDAQ in 2007; acquisition of Borsa Italiana by LSE in 2007; merger of Russian exchanges MICEX and RTS in 2011; plans of ICE to acquire NYSE Euronext announced in 2012).
  • Addition of new products and services to the offer of exchanges by introducing new types of financial instruments to trading including derivatives, participation units in investment funds and mutual funds, and debt instruments.
  • Diversification of sources of revenue of exchanges by developing new business models and establishing alternative trading systems as platforms of financing and trading for small and medium-sized enterprises.
  • Development of new technologies and growing popularity of MTFs which are very competitive to traditional exchanges owing to low costs and superior trading speed.
  • Development of new business lines (distribution of market data, IT services, trade in exchange commodities).
  • Growing important of legal regulations impacting the operation of exchanges both in Europe and in the USA.

Competitive position of WSE

Determinants of the competitive position of WSE

WSE is one of the fastest growing exchanges among European regulated markets and alternative markets regulated by exchanges, and the biggest national exchange in the region of Central and Eastern Europe. At the end of 2012, WSE listed the highest number of companies among all exchanges in the region of Central and Eastern Europe. WSE also had the biggest capitalization and the highest turnover in shares in 2012 among the CEE exchanges. The Company competes with other European regulated markets and alternative markets regulated by exchanges in attracting foreign issuers; WSE focuses its marketing, regulatory and infrastructure activities on companies from the region of Central and Eastern Europe where, in the opinion of the Company, it has a substantial advantage over other competing exchanges. The competitive position of the Company versus other exchanges is determined by factors including the quality of IT systems which impact the speed, certainty and quality of trade execution, the size of the market, the number of listed companies, a strong sector of institutional investors, and the credibility and quality of regulation.

Currently, WSE is a leading European exchange by the volume of trading in derivatives. The major part of trading in derivatives on the WSE has so far been generated by WIG20 index futures: WSE ranked fourth among European exchanges by the volume of trading in share index futures in 2012. WSE also offers trade in a range of other derivatives including WIG20 options, mWIG40 futures, single-stock futures, currency futures, as well as WIG20 index participation units.

Exchange trade in exchange commodities in Poland is organised by the WSE Group (as of April 2013, all such trade will be concentrated within the Polish Power Exchange, a member of the WSE Group). Wholesale trade in electricity takes place on the spot market (the intra-day market and the day-ahead market) and on the forward market where weekly, monthly, quarterly and yearly contracts for delivery of electricity are traded. The turnover on all electricity markets of the Polish Power Exchange amounted to 131.997 TWh in 2012. This represents 82.57% of energy generated in Poland and over 84.06% of its total consumption.

Share of exchanges in the capitalization of shares in Central and Eastern Europe

Share of exchanges in the capitalization of shares in Central and Eastern Europe

Source: FESE (capitalization of domestic companies and foreign companies for which the above exchanges are the single-listing market)

 

Share of exchanges in turnover in shares in Central and Eastern Europe

Share of exchanges in turnover in shares in Central and Eastern Europe

Source: FESE (turnover in shares on the order book)

 

Top 10 exchanges by increase in the number of listed companies in 2012
  Number of listed companies Change in the number of listed companies v. 2011 Change (%)
Shenzhen SE 1,540 129 9.1%
WSE 867 90 11.6%
BSE India 5,191 79 1.5%
Hong Kong Exchanges 1,547 51 3.4%
NYSE Euronext (US) 2,339 31 1.3%
TMX Group 3,972 27 0.7%
National Stock Exchange India 1,665 25 1.5%
Lima SE 277 23 9.1%
Shanghai SE 954 23 2.5%
Indonesia SE 459 19 4.3%
Source: WFE (World Federation of Exchanges)

 

Competitive environment

Multilateral Trading Facilities (MTF)

The organized market includes regulated markets as well as multilateral trading facilities (MTF), which are mainly addressed to institutional investors and offer trade in shares at a very high trading speed and low trading fees; MTFs are usually operated by investment firms (banks, brokerage houses) or stock exchanges which operate regulated markets.

There are two main categories of MTFs. One category are those MTFs which offer secondary trade in liquid European stocks in a public order book and compete with exchanges by the cost of trading and the speed and efficiency of the trading system. These include BATS Chi-X Europe and Turquoise (of which LSE is its majority shareholder). No such MTF has yet offered trade in Polish stocks. The other category are “dark pools”: trading facilities which allow institutional clients and brokers to trade in large orders, to close trade at reference prices generated in other systems, or to close previously negotiated trades. According to Thomson Reuters, ca. 16.7% of aggregate trade in European equities in 2012 took place on MTFs.

Share of MTFs in equities trading in Europe
  For the year ended December 31,
  2012 2011 2010 2009 2008
Share of MTFs in aggregate equities trading 16.7% 16.6% 14.8% 10.2% 2.9%
Share of MTFs in equities trading on the order book(1) 39.1% 36.3% 30.9% 20.2% 5.6%
Source: Thomson Reuters (1) Includes trading in shares on the public order book, dark pools, and fixings.

 

Markets regulated by exchanges

Alternative trading systems organized by exchanges typically have less strict requirements for listed companies than those imposed by regulated markets. Companies listed in alternative trading systems organized by exchanges are usually smaller than companies listed on regulated markets and typically have been in business for a shorter period of time.

AIM in London is the leader among alternative trading systems organized by exchanges: it lists some 1.1 thousand companies at a capitalization of EUR 72.5 billion as at the end of 2012. NewConnect, the market opened by WSE in August 2007, is the fastest growing such market in Europe.

 

PolPX and other European energy exchanges

The European market is dominated by several large exchanges which have a history of consolidation on the neighbouring national markets and expansion beyond their traditional regions. Nord Pool Spot (active in Norway, Sweden, Finland and Denmark) has expanded to the Baltic States (Lithuania, Estonia); APX-Endex has expanded to the UK and is now present in the UK, Belgium and the Netherlands; EPEX Spot has expanded to France (it now operates in Germany, France, Sweden and Austria); these energy exchanges decide about strategic directions and technical solutions. Smaller exchanges have a smaller impact and their importance may diminish with the consolidation of the European market, especially where they operate on a local market which is small in terms of statistics and territory. With a very liquid energy market and a good geographic location in Central and Eastern Europe, PolPX can aspire to join the group of leading exchanges. PolPX is monitoring the developments on the European market and running business analyses; it may take strategic decisions to implement reorganization (e.g., to spin off the spot market) or corporate transition (closer relations with a selected business partner).

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