Key drivers for development in 2012

Development of the Group in 2012

The Exchange focuses on sustainable development of all its business lines. In the shares and derivatives segment, the Group continues the liquidity measures to increase the number of market makers and to improve the market making conditions understood as the reduction of bid and ask spreads and the increase in value of offers, as well as to develop short selling and related securities lending on the cash market.

Activities carried out to solicit market makers and to enhance interest of the investors in those segments of WSE Group’s business will be also executed in respect to bond trading operated by WSE and BondSpot.

WSE will continue activities aimed at attracting Polish and international issuers. The Company intends to strengthen its role as one of the most attractive European exchanges. For a number of years, WSE has been the exchange of first choice for businesses in various sectors, of different sizes and at different stages of development in the CEE Region.

The implementation of the new trading platform scheduled for November 2012 will improve the efficiency and expand the functionality of trading on markets in financial instruments operated by WSE.

Liberalisation of the power and gas market and implementation of the climate and energy package solutions in the context of the acquired controlling stake in Towarowa Giełda Energii S.A. allow WSE to actively engage in these initiatives. In the Company’s view, there is a major opportunity to develop new markets in exchange commodities and to expand the offering of instruments, which should help to increase both the number of market participants and the trading volume. In addition, liquid markets in exchange commodities will open opportunities for the development of new financial instruments.

The Group’s product offer will be expanded by new classes of derivatives and structured instruments; the number of commodity market products and instruments will be increased.

Key drivers for development

The key drivers which may impact the Group’s development dynamics include:

External Drivers

Macroeconomic situation in Poland and worldwide

According to the Eurostat forecasts 1, Poland’s GDP growth will be 2.5% in 2012 (average forecast for EU is 0.6%), and 2.8% in 2013 (more than double the value of the average forecast for EU at 1.5%). The above-average dynamics of Polish economy growth creates favourable conditions both price increases of shares listed on WSE and for increased interest in securities listed on WSE on the part of domestic and international investors. WSE growth is also determined by the global economic situation and the conditions on foreign financial markets, which may impact the perception of the Polish economy and financial market by foreign investors.

Changes in infrastructure, laws and regulations

Omnibus accounts

The Act amending the Act on Trading in Financial Instruments and Certain Other Acts (Omnibus Account Act) adopted on September 16, 2011 introduced omnibus accounts into the Polish legal system. Under the Omnibus Account Act, as of January 1, 2012, entities which are authorised to operate securities accounts under the Act on Trading in Financial Instruments (e.g., brokers) are also allowed to operate omnibus accounts for certain foreign institutions. Omnibus accounts are used to record dematerialised securities and financial instruments in organised trading (other than derivative instruments) which are not held by the institution which holds the omnibus account but by other persons (e.g., a client of that institution). Under the Omnibus Account Act, a person designated by the holder of an omnibus account to the entity which operates the omnibus account as the person holding the rights attached to the financial instruments recorded in the omnibus account is considered in the territory of Poland to be the person holding the rights attached to the financial instruments in the designated number. According to the intentions behind the Act, the introduction of omnibus accounts will eliminate a barrier to further development of the capital market in Poland and may increase the number of potential investors on the local market.

Pension funds

In May 2011, the Act Amending Certain Acts Relating to the Operation of the Social Security System took effect. The provisions of the Act which are key from the perspective of WSE include:

  • reduction of the contributions transferred to OFE (Open-ended Pension Funds) from 7.3% of the gross pay to 2.3 % as of May 2011 and gradual increase of the contribution up to 3.5% in 2017;
  • gradual increase in the cap for investments in stock from 40% of the total assets as at the end of April 2011 (42.5% as of May 2011) up to 90 % in 2034 (in 2011-2014, the cap will increase by 2.5 p.p. and subsequently by 2.0 p.p. per annum).

Current regulations in Poland impose a cap on investment of open-ended pension funds in financial instruments listed on foreign exchanges which are not listed on WSE, which limits the opportunities of open-ended pension funds to invest in stocks listed on foreign exchanges to 5% of their total assets. The compatibility of the cap with European legislation was examined by the Court of Justice of the European Union (CJEU). On December 21, 2011, CJEU decided that the cap in the Polish law is not compatible with EU legislation: it  is discriminatory and not proportionate, which would justify an exception from the free movement of capital. The Act on Open-Ended Pension Funds will have to be amended accordingly following the CJEU decision. Elimination or reduction of the limitations on investment in financial instruments issued by foreign issuers which are not listed on markets organized and operated by the Group, especially the Main Market, may reduce the investment of open-ended pension funds in instruments listed on WSE.


The State Treasury at the end of 2011 held significant stakes of shares in many listed companies (e.g. 35.2% in PZU, 41.0% in PKO BP, 69.3% in PGE, or 31.8% in KGHM). WSE is an effective platform for privatization of large companies controlled by the State Treasury. It is expected that, in the nearest years, the State Treasury will be still privatizing through WSE, which should contribute to higher capitalization and turnover on WSE.

1 European Commission’s European Economic Forecast – Autumn 2011

Internal Drivers

Level of fees

WSE operates in a competitive sector, which is characterized by a trend for consolidation and a fast pace of changes and innovations. In WSE’s opinion, its fees are competitive in the CEE Region. On a periodic basis, WSE reviews the fee structure and adjust it to the current market situation.

Implementation of the new trading system

Competitiveness of stock exchanges largely depends on the level of technology involved: efficiency, capacity and speed of the trading system and infrastructure. The Exchange is in the process of implementing a new trading system, which is planned to be launched on 2 November 2012. Following the implementation, the trading system will offer speed and scalability superior to the existing system, offering a much broader range of functionalities. In the Company’s view, this will contribute to an increase in trading volumes and a broader range of financial instruments and may attract to WSE new investor and broker groups, e.g. investors active in high frequency trading and algorithmic trading. In the Exchange’s view, following the implementation of the new trading system parallel to the development of the security clearing infrastructure, the attractiveness of WSE as a trading platform will increase for investors, issuers and brokers.

Short Selling

In 2010, WSE introduced new regulations with a view to facilitate short selling. The Company expects that the development of short selling and related securities lending will allow investors to use a broader range of investment strategies including arbitration, thus making a positive impact on trading in derivative instruments and the market of single-stock futures and options, and enable the introduction of single-stock option to trading. Short selling should also improve liquidity of trading on the cash market and make prices more effective.

At 2011 year-end, short selling was allowed on WSE members’ own account or on the clients’ account in respect of shares of 33 companies and 38 bonds listed on WSE (36 shares and 40 bonds at 2010 year-end). Market makers could enter into short sale transactions in respect of shares of 140 companies and 38 bonds (141 shares and 40 bonds at 2010 year-end).

Several initiatives are in place in order to foster investor interest in short selling. In 2012, KDPW in co-operation with WSE is planning to launch a system supporting securities lending for short selling.

The European Union is currently working on new short selling regulations. The draft regulations are largely compatible with the solutions applicable in Poland, which however may need to be modified in some respects.

KDPW_CCP - Clearing House for the Organised Market

In July 2011, KDPW transferred to its subsidiary KDPW_CCP all functions involving clearing of trade in dematerialised securities and trade in other financial instruments as well as operation of a clearing liquidity system including guaranteed clearing of trade on the regulated market. The clearing house KDPW_CCP operates under its Rules approved by the Polish Financial Supervision Authority (KNF). KDPW_CCP is a modern clearing house and operates as a central counterparty (CCP) clearing trade by means of mechanisms which ensure systemic mitigation of default risks.