A C T A U N I V E R S I T A T I S L O D Z I E N S I S
FOLIA OECONOMICA 182, 2004
M onika Z ieliń ska *
NEW FINANCIAL INSTRUMENTS AND THE POSSIBILITIES
OF TRADING ON THE WARSAW STOCK EXCHANGE -
DEVELOPMENT STRATEGY OF THE WSE IN THE FACE OF
EUROPEAN CAPITAL MARKET CONSOLIDATION
T he W arsaw Stock Exchange was founded on 16th April 1991 as a new m arket institution in the process o f capital m arket transform ation. C reation o f new econom ic order in Poland allocated a double role to the W SE: on the one hand its developm ent forced and accelerated the process o f form ing the entire capital m arket infrastructure; on the other - the W SE itself had to m eet grow ing expectations o f m arket participants.
In this article author presents the developm ent strategy and possibilities of trading in new financial instrum ents on the W arsaw Stock E xchange according to own interests in use o f some kind o f instrum ents for analysis financial risk.
The history o f the W SE so far has allow ed for collecting the necessary experience, broadening the know-how and fostering the professionalism . H ow ever, though the leading position o f the W SE in C entral and Eastern E urope gives rise to certain satisfaction, it cannot be taken for granted in the future, as the W SE locates itself am ong one o f the m inor local stock exchanges in com parison with the world biggest stock exchanges.
Judging from trading on the W SE in 2002, one should observe that the last year was a very difficult time for the whole capital m arket in Poland. The spot m arket turnover fell by 20% for the second consecutive year. R ecession led to a low er num ber o f listed com panies and brokerage houses. C oncentration o f trading w ith shares o f W IG 20 com panies grew and their share in the prim ary market turnover increased from 8 6% last year to 91% in 2002. B esides, the stock m arket did not attract new investors, w hich was a direct effect o f introducing the so called “B elka’s tax” . W hat seems worth noticing is the change in the structure o f investors. In 2002 in reference to 2001, the share o f national institutional investors increased from 29% to 39% at the expense o f dim inishing the num ber o f individual investors from 37% to 27% , w hile the percentage o f foreign investors was preserved.
C om parison o f spot m arket turnover in 2001 and 2002 on the W SE is presented in T ables 1 and 2.
Table 1. The turnover structure in 2 0 0 1 -2 0 0 2
Financial instruments Session transactions 2002 Session transactions 2001 Stocks
transactions Others* Total (mln PLN) % share (mln PLN) % share 2002 2001 2002 2001 2002 2001 Shares 47 729 9 2.17 6 0 548 9 1.80 15 933 19 895 3 826 4 052 67 488 84 495 Rights to shares 7 0 .0 1 154 0.20 - 2 - - 7 156 Rights issue 24 0.05 109 0.20 2 1 345 - - 2 6 1455 Bonds 3 986 7 .7 0 5 093 7.70 145 40 - 18 4 131 5 151 Investment certificates 27 0.05 4 0.01 - - - - 27 4 Warrants 8 0.02 20 0.03 - - - - 8 20 Total spot market 51 781 100 65 929 100 16 080 21 282 3 826 4 070 71 686 91 281
S o u r c e : w w w .gpw .com .pl The stock exchange data.
Table 2. The turnover change in 20 0 2 in comparison to 2001 (in %)
Financial instruments Session transactions
Stocks
transactions Others* Total
Shares -2 1 - 2 0 - 6 - 2 0 Rights to shares - 9 6 - - - 9 6 Rights issue - 7 8 - 1 0 0 - - 9 8 Bonds - 2 2 261 - - 2 0 Investment certificates 574 - - 574 Warrants - 5 8 - - - 5 8
Total spot market -2 1 - 2 4 - 6 -2 1
* It encom passes public sales offer and substantial packets o f shares. S o u r с e: A s same as Tab. 1.
In the m arket for secondary stock exchange instrum ents the year 2002 was also deprived o f spectacular successes. Due to a close bond betw een the futures market and the underlying instrum ents market, the form er recorded a fall in its turnover as well. T he entire volume o f trading for all the contracts was 3.420.909 w hich indicates a 10% fall in reference to the record-breaking year 2001 with 3.777.197 contracts. The greatest share in the volum e belonged to
futures contracts for W IG 20 (3.057.237 contracts) while the rem aining index contracts reached m uch sm aller num bers. The volum e o f trading for M IDW IG contracts, introduced in February 2002, was only 7672 and unfortunately the T echW ig futures contracts also lost their popularity - in 2002 there w ere only
12.927 traded contracts in com parison with 33.444 contracts in 2001.
A detailed com parison o f trading in futures m arket on the W S E in 2 0 0 1 -2002 is presented in T ables 3 and 4.
Table 3. The structure o f trading in futures market in 2 0 0 1 -2 0 0 2
Financial instruments
Turnover 2002 Volum e 2002 Turnover 2001 Volum e 2001 (mln
PLN) % share (number) % share (mln
PLN) % share (number) % share Index contracts 7 5 521 97.58 3 077 836 89.97 9 6 568 9 7 .9 0 3 679 972 9 7 .4 0 Shares contracts 1 332 1.72 92 097 2.69 923 0 .9 0 6 0 557 1.60 Currency contracts 482 0.62 5 957 0.17 1 155 1.20 14 325 0.40 Index units 62 0.08 245 019 7.16 6 0.01 2 2 343 0 .6 0 Total futures market 77 396 100 3 4 2 0 909 100 98 651 100 3 777 197 100 S o u r с e: A s same as Tab. 1.
Table 4. The change in trading in 20 0 2 in reference to the year 2001 (in %)
Financial instruments Turnover V olum e
Index contracts - 2 2 - 1 6
Shares contracts 44 52
Currency contracts - 5 8 - 5 8
Index units 928 997
Total futures market - 2 2 - 9
S o u r с e: As same as Tab. 1.
O nly the volum e o f trading with futures contracts fo r single com panies increased from 60.000 in 2001 to 90.000 contracts in 2002. T he value o f the volum e neared to 5% o f the value o f the secondary instrum ents volum e. An im portant event during the year was the change in contract specification, which adjusted the expiration cycle to the one used for futures contracts for W IG 20 and decreased the daily quotation from 0.10 to 0.05 PLN. On 18lh M arch 2002 futures contracts for the shares o f Bank Przem ysłow o-H andlow y PB K S.A. were quoted for the first time and on 24"' M arch 2003 they w ere follow ed by such com panies as Bank M illennium PBK S.A., B ank Zachodni W B K S.A., Com puterland S.A., Budim enx S.A., O rbis S.A., Stom il-O lsztyn S.A.,
Frantschach Świecie S.A., Kredyt Bank S.A., Firm a O poniarska D ębica S.A., G rupa Kęty S.A. Further developm ent o f share contracts should be conditioned by their facilitated possibility o f short position and arbitrage. B esides, on 9"’ N ovem ber 2002 the contracts were quoted on two stock exchanges in the USA: O neC hicago and N asdaqLiffe. C urrently, the volume o f trading on each o f them arises to 5,000 contracts daily, which prom ises a gradual grow th in their popularity on the stock exchange.
The m arket o f currency futures contracts still rem ains m arginal on the WSE. It is rather im possible to expect any changes in that respect, as tax exem ption for profits gained from that kind o f transactions by natural persons has not been introduced, although it was postulated a long time ago.
In respect to the tax question, the most im portant issue for the m arket is to prolong tax exem ption for profits made on the stock exchange by natural persons. T he consequences o f introducing a taxation would be deplorable for further developm ent o f the capital market, as the circles connected to that market agree.
O ur approaching accession to the EU may prom pt a greater interest in Polish capital market. It gives a chance to overcom e the recession and stop the fall in the num ber o f operations perform ed by brokerage houses on the W arsaw Stock Exchange. A possible grow th o f their num ber can be connected with the project o f mutual m em bership with Euronext and with enabling foreign m em bers to trade directly on the W SE. It may be an opportunity for the W SE to becom e more attractive and to increase the turnover both on the shares m arket and on the secondary instrum ents market.
T he ongoing integration o f the European m arket, as well as the fact that in 2004 Poland is going to become an integral part o f that m arket, initiated the creation o f a developm ent strategy by the W SE, which until 2005 is to lead the W SE to an adequate position within the European alliances and to help preserve its leading position in C entral and Eastern Europe.
“T he D evelopm ent Strategy o f the W arsaw Stock E xchange until 2005 is based on a report prepared by The Boston C onsulting Group.
A fundam ental conclusion draw n from the capital m arket analysis point to the danger o f m arginalisation o f the W SE and Polish capital market. The conclusion has been draw n from the analysis o f trends and tendencies observed in the m acro scale and from the analysis o f selected problem s, w hich are encountered by sm all and m iddle-size stock exchanges in conditions o f ongoing globalisation and technological progress all over the world. The developm ent strategy lists long-term ed actions undertaken by the W S E in order to benefit from its current position, as well as the trends and possibilities o f the m arket. It also contains a num ber o f initiatives taken in order to reduce the possible m arket threats and to m inim ise the already identified risks.
A significant tendency currently observed on the global capital m arkets refers to agreem ents, m ergers and alliances. T hese are supported by both technological and econom ic factors. Processes occurring on the European markets contribute to the need o f creating a com m on infrastructure o f trading and unifying various stock exchange systems. It seems a task o f fundam ental im portance to work out a concept o f the W SE role and place in the highly com petitive environm ent o f integrating Europe.
A m ong the national phenom ena, processes and tendencies, which seem to be the m ost dangerous and challenging for the capital m arket and the W SE, one can mention low com petitiveness o f Polish com panies, dim inishing flow o f new com panies to the W SE, risk o f transferring trading with Polish shares to foreign markets, risk o f falling interest in Polish com panies am ong investors due to a better com petitive value o f other kinds o f securities (e.g. debentures), a weak system o f encouragem ent to invest into securities, low effectiveness o f the system o f sanctions for crim es com m itted on the capital market. T o confront these threats in the face o f grow ing com petitiveness o f the external environm ent is an elem entary strategic goals o f the W arsaw Stock E xchange” (com pare ww w .gpw .com .pl O G iełdzie - Strategia Giełdy).
The W S E developm ent strategy com prises the follow ing inextricably entw ined elem ents:
> m ission o f the W SE, > long-term strategic goals, > strategic tasks.
1. Mission of the WSE
• Ensuring a transparent, efficient and flexible m echanism o f trading, which should concentrate trading with Polish securities.
• Providing a high quality services for the organisation o f stock exchange trading, stock exchange products and distribution o f inform ation in order to meet the expectations o f investors and issuers.
2. Long-term strategic goals
• M aintaining the position o f the largest stock exchange in C entral and Eastern Europe
• G aining an adequate position within the structure o f integrating capital m arkets in Europe.
• Supporting the developm ent o f efficient capital m arket infrastructure in Poland
3. S tra tegie task s o f the W SE
Strategic tasks o f the W SE encom pass 16 strategic initiatives and 3 com plex tasks such as the strategic alliance, privatisation and restructuring the WSE, which underlie the principles o f the strategy.
3.1. Strategic initiatives of the WSE
Strategic initiatives have been grouped into three categories, which include developing supply, increasing demand and strengthening the infrastructure.
D EV E LO PIN G SU PPLY
• P rom oting and active m arketing o f public offers (prim ary and secondary).
• Sim plifying the requirem ents and the process o f issue. • E nsuring a greater share o f stocks in unlisted trading. • A ttracting foreign com panies to the WSE.
IN C R EA SIN G D EM A N D
• A nalysing the possibilities o f greater access for individual investors to the stock exchange through bank services.
• W idening the circle o f subjects trading on the W SE (m utual m em bership and associate m em bership for international entities)
• Prom oting share trade by means o f the Internet
• A ctive participation in creating the law which should support the developm ent o f capital m arket in Poland.
• R eview ing the structure o f fees on the W SE and co-operating with the N ational D epository for Securities on the fee policy.
• R eview ing the range o f products on the W SE and im proving the process o f product developm ent.
STR E N G T H E N IN G T H E IN FR A STR U CTU RE
• Executing the procedures o f transparency and coherence o f the capital m arket including the im plem entation o f initiatives connected with the “C orporate G overnance” .
• T ighter co-operation with the National D epository for Securities • Integrating the C eTO within the capital group o f the W SE • A com plete utilisation o f the W A RSET system.
• A better use o f inform ation distribution as a source o f incom e.
• E xam ining the principles o f providing “back-office” services for brokerage houses.
3.2. Fundamentals o f the strategy realisation
1. International alliance. 2. Privatisation o f the W SE. 3. R estructuring o f the WSE.
Ad 1. It is a task o f fundamental meaning for the W SE to occupy an adequate position w ithin the structure o f international alliances and agreem ents. A successful im plem entation o f the W A RSET system , a technological solution com patible with the one used by Euronext, can possibly approxim ate the W SE to that co-operating partner. One should how ever rem em ber that currently on various stock exchanges the influence o f technological solutions on business decisions is w eakening. It results from the grow ing m eaning and com m on use o f various techniques, which enable mutual com m unication betw een different electronic dealing system s. A decisive factor for the choice o f strategic partner o f the W SE will be the extent to which the alliance with an international partner will strengthen Polish capital m arket looking forw ard to the accession to the EU.
Ad 2. Privatisation o f the W SE should support the developm ent o f national capital m arket, as well as fulfil the requirem ents o f future com petition on the EU market and facilitate the existence o f the W SE within the European structure. D efining detailed principles and the schedule o f privatisation rem ains the com petence o f the m ajor shareholder, i.e. the Treasury.
Ad 3. A strategic goal is to depart from the “non p ro fit” model and to reform the organisational structure o f the W SE in the direction o f a model oriented for m arketing and sales, in accordance with the tendencies prevailing on the E uropean stock exchanges.
A m odified structure should be able to react efficiently and flexibly to the needs o f capital m arket and support the realisation o f the W SE strategies.
The schedule o f realisation o f the W SE strategy assum es that all the strategic tasks, i.e. strategic initiatives, alliance with an international strategic partner, restructuring and privatisation, will be accom plished until 2004. T he realisation o f several key initiatives, each o f which constitutes a separate project, is arranged in time for the entire period o f strategy im plem entation according to the priorities determ ined by the im portance o f the task and according to the extent to which it is conditioned by the actions o f the W SE itself or by the involvem ent o f other entities.
The realisation o f the W SE strategy shall lead to:
1) A djusting the services within the organisation o f trading, product offer and the system o f inform ation distribution to the grow ing dem ands and needs of the capital m arket participants.
2) Strengthening the position o f the W arsaw Stock E xchange in the region o f Central and Eastern E urope and preserving its leading role in the transform ation o f the market.
3) P roviding the W SE with an adequate location within the pan-European stock exchange structure.
4) D efining the m echanism for representing the interest o f the capital market in the future, (com pare w w w .gpw .com .pl O giełdzie - Strategia Gieldy).
Sum m ing up the strategic goals adopted by the W SE and concentrating on fostering the international co-operation, as well as on the product offer and new possibilities for trading, one should admit that the W SE is consistently im plem enting its developm ent strategy. Already in Septem ber 1998 the W SE becam e a m em ber o f International O rganisation o f Securities C om m issions. In June 1999 it becam e an associate m em ber o f the FESE and in July an agreem ent on m utual co-operation and exchange o f inform ation was signed with the stock exchanges in London and Paris. Since A ugust 2001, the W SE has been co-operating with the N ational Lithuanian Stock Exchange and in February 2002
it signed an agreem ent on mutual m em bership with Euronext.
Every year the W SE broadens the range o f instrum ents offered to investors. In 2002 futures contracts for M IDW IG were quoted for the first time. Investors were also looking forw ard to the planned introduction o f instrum ents for foreign indexes, m ainly the index certificates issued by HVB (B ayerische H ypo- und V ereinsbank A G ) for NasdaqlOO and DJ Euro-Stoxx50. U nfortunately a delay in introducing these instrum ents results from an independent decision o f the issuer. U ndoubtedly, the introduction o f these instrum ents to the m arket would evoke investors’ interest despite the prevailing recession.
W ith respect to contracts for foreign indexes, it seem s im possible for the W SE to receive a licence for the most required indexes such as DAX or DJ EuroStoX X 50. In the im m ediate future contracts for m ajor foreign indexes will be available only directly on foreign stock exchanges. Significant values o f these contracts pose a problem for Polish investors: even the values o f contracts with a reduced m ultiplier, which were introduced recently in order to attract retail investors, are m uch higher than the values o f W IG 20 contracts.
In 2003 the W arsaw Stock Exchange plans to list index options for W IG20, as well as shares options for the best floating com panies. It seem s that during the first year one can expect an option volume approxim ate to the volum e o f futures share contracts. H ow ever, a pessim istic scenario, sim ilar to the one on H ungarian or Portuguese stock exchange, where options had not been accepted, cannot be entirely excluded.
A part from facilitated abroad investm ent, the new exchange law offers possibilities o f quoting foreign currency instrum ents on the W SE. W ithin a year such products m ight appear on the stock exchange, m ost probably these will be
products issued in the European U nion, debentures issued in foreign currency and units o f investm ent funds.
Sum m ing up, the new instrum ents offered to investors on the W SE allow to broaden the range o f m ethods o f analysis risk on financial m arket.
The attractiveness o f Polish capital market and the W arsaw Stock Exchange for all investors shall depend prim arily on the attractiveness o f quoted com panies, high quality o f offered instrum ents and their com petitiveness on the European m arket.
R eferen ces
Data from the stock exchange w ebsite w w w .gpw .com .pl „Biuletyn G iełdow y” (2 0 0 2 ) - yearly edition.
W ó j c i c k i M. (2 0 0 3 ), Instrumenty pochodn e na G P W - pod su m o w a n ie 2 0 0 2 r. i p erspektyw y na rok 2 0 0 3 , „Rynek T erm inow y”, nr 19.
Monika Zielińska
N O W E IN ST R U M E N T Y FIN A N SO W E O R A Z M O Ż L IW O ŚC I O B R O T U NA W A R SZ A W S K IE J G IE ŁD ZIE PA PIE R Ó W W A R T O Ś C IO W Y C H - S T R A T E G IA R O Z W O JU G IEŁDY W ŚW IE T L E K O N SO L ID A C JI
E U R O P E JS K IE G O R Y N K U K A P IT A Ł O W E G O
Giełda Papierów W artościowych w Warszawie pow stała - 16.04.1991 r. - jako nowa instytucja rynkowa tw orzonego w warunkach transformacji system ow ej rynku kapitałowego. Proces tworzenia now ego ładu ekonom icznego w P olsce w yznaczył G iełdzie podw ójną rolę - z jednej strony jej rozwój wym uszał i przyspieszał kształtowanie się całej infrastruktury rynku kapitałowego, z drugiej zaś sama Giełda musiała sprostać rosnącym potrzebom uczestników tego rynku.
D otychczasow y okres działalności G iełdy pozw olił na zebranie dośw iadczeń, pogłębienie w iedzy i utrwalenie profesjonalizmu. Jednak obecna w iodąca pozycja GPW w Europie Środkowo- -W schodniej, rodzi satysfakcję, ale nie m oże być traktowana jako przesądzona na zaw sze bow iem na tle w ielkich giełd św iatow ych warszawska GPW usytuowana jest wśród m niejszych giełd lokalnych.
Atrakcyjność p olsk iego rynku kapitałowego i warszawskiej G iełdy Papierów W artościowych dla w szystkich grup inw estorów będzie zależała przede w szystkim od atrakcyjności notow anych spółek, wysokiej jakości oferowanych instrumentów oraz ich konkurencyjności w wymiarze europejskim.
