Xρηματιστήριο Αθηνών: Ομιλία του Προέδρου κ. Σπύρου Καπράλου

Δείτε το κείμενο της ομιλίας του Προέδρου του Χρηματιστηρίου Αθηνών κ. Σπύρου Καπράλου στο Capital Link Forum στη Νέα Υόρκη:

Ladies and gentlemen,

I am delighted to be addressing you today at the 9th Annual Capital Link Forum. Delighted, because despite the challenges that we face, the Greek capital market is continuing to chart an upwards course.

As you are probably aware, Greece is currently enjoying one of Europe’s highest GDP growth rates despite the efforts to simultaneously decrease the deficit below the 3% target rate and indeed to eliminate it by 2010.

Our Capital Market has benefited from a series of measures over the last couple of years: The gradual reduction of the company income tax rate from 35% in 2004 down to 25% effective from 2007 onwards; the reduction in the stock sales tax, which was of equal significance to our market growth, and which was reduced from 0.3 percent to 0.15 percent.

On the subject of the sales tax, as you all know, a few days ago MiFID went into effect, and I will talk about what the implications of that are a little bit later, but what is important to note is that in the MiFID era, the stock sales tax is a serious competitive disadvantage for our exchange.

Capital market professionals and the Athens Exchange have explained to the government the need for the elimination of the sales tax, and the government seems to have understood why the tax needs to be removed, and we expect that it will soon be eliminated.

The restructuring of the Greek economy is continuing, and the new government, installed following the September elections, has indicated that it is willing to make some tough choices in its effort to solve long standing problems that affect the economy.

Privatizations continued this year, not with new IPOs but with the placement of shares in the Hellenic Telecoms Organization (OTE) and the Greek Postal Savings Bank, through which the government further reduced its stake in the two companies.

As far as listed companies are concerned, we continued to have a flurry of activity this year; Chief among them was the €5.2 bn rights issue by the Marfin Investment Group, a record increase for our market, which follows the €3 bn rights issue from the National Bank of Greece, itself a record when it took place last year. In 2007 so far, our three IPOs, together with the rights issues raised a total of €9.8 bn.

We also continue to see smaller placements done by founder-managers in a number of listed companies, as these shareholders that possess large majorities in their companies have come to understand the importance of increasing the free float and thus the liquidity of their shares.

Volumes have continued to increase: from an average daily turnover of €140 ml. in 2004, to €210 ml. in 2005, €343 ml. in 2006 and €468 ml. so far this year; in other words volumes have more than tripled in less than four years.

Share prices have followed a similar pattern; the Athens General index is up 20% this year, after rising 58% in the previous two years. This increase is across the board, with both large caps and mid caps benefiting; the FTSE/ATHEX 20 is up 19% this year after having risen 54% in 2005-2006, and the FTSE/ATHEX 40, our mid cap index, is up 27% this year after rising 127% in the previous two years.

Ladies and gentlemen,

A lot of changes have also been taking place at the Athens Exchange; let me briefly bring you up to speed as to what is going on, how the Group is responding to the challenges, is modernizing to face the forces of globalization and increased competition.

The reorganization of the HELEX Group was completed in 2006; as part of the reorganization we simplified the Group structure by merging most of our subsidiaries. We have also put in place a new organizational structure, by merging departments that were performing similar activities, a legacy from a time when the Group had 5 subsidiaries.

Important changes have taken place in the markets that we operate. One of the first goals that we set was the restoration of the credibility of the Exchange and the modernization of the Group, as well as the expansion of the Group abroad, in order to strengthen the Greek capital market.

It is as part of this overall plan that we have directed all of our efforts during the past three years.

We have made a series of changes:

• The adoption of a new Rulebook governing the operation of Athens
Exchange

· A new market segmentation, based on financial criteria

· The re-examination of the listing criteria for these new market
segments

· The strengthening of the corporate governance framework for listed
companies

· The improvement of the risk management of the Auxiliary Fund, which
led to the return of capital to Exchange members.

· The extension of the trading hours, to facilitate investors from Western
Europe and the United States.

· The elimination of barriers of entry to remote members.

· The relaxation of listing criteria for shipping companies.

· The complete liberalization of short-selling

· The introduction of volatility interrupters, a tool for better managing
fast markets.

As far as remote members are concerned, a couple of international investment houses are currently testing their systems and the connection to our Exchange, and we believe that very early next year the first remote member from Western Europe will begin operating. And others are sure to follow.

And of course we do not stop here. The next two months are important for our market, because a new product and a new service are going to be introduced. I am talking about the introduction of Exchange Traded Funds

- ETFs to the Greek market and the creation of an Alternative Market, similar to other such markets operating in various European exchanges. The alternative market will be created so that smaller, dynamic companies can enjoy the benefits of being listed, without being burdened will all the costs and compliance requirements of our existing markets. We already have 16 approved nominated advisors for this new market, in which trading will take place for 1 hour each day, and we are in the process of receiving the first applications for listing.

Companies in the Alternative market will enjoy low fees, and the hope is that out of the companies that will list there, several will grow and “graduate” to our other markets.

Regarding ETFs, just a few days ago, Alpha Bank was selected by FTSE International and the Athens Exchange to launch the first ETF on the FTSE/ATHEX 20 index, our large cap index. The product will come to market in January 2008 with a net asset value of €140 million and with a prospect of growing up to €600 million within the first year. ETFs have proved to be a popular product abroad, and we have every reason to believe that they will be well received in our market as well, and that this will only be the first of other ETFs that will follow.

Dear Friends,
International investors approve these positive developments both in the Greek Economy and the Athens Exchange by voting with their money; they currently own approximately 52% of the total Athens Exchange market cap; in the largest cap stocks (FTSE/ATHEX 20) their participation is even greater, and exceeded 57% in September. International investors today account for approximately 60% of the total daily trading activity, by value, in our exchange.

Net inflows to our market from abroad, i.e. buys minus sells, approach €16 bn in the last three years.
As you can see, the Greek capital market has been a magnet for investors consistently over the past few years.

Of course, things are not always easy and we do face significant challenges ahead of us. On the one hand we have consolidation in the industry. The merger of the NYSE and Euronext, to form the first transatlantic exchange, an event unthinkable a few years back, is already old news. The Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME) completed their merger to form CME Group; and Deutsche Börse subsidiary Eurex acquired the International Securities Exchange (ISE).

NASDAQ, after its unsuccessful attempt to gain majority control of the London Stock Exchange, has succeeded in obtaining control of OMX, the Scandinavian markets operator, after coming to an agreement with a former competitor for OMX, Borse Dubai. London Stock Exchange itself has merged with Borsa Italiana, the Italian exchange operator, in order to fend off the hostile takeover by NASDAQ. It has become a strange world indeed!

Once the dust is settled, the big boys still standing will turn their attention to smaller exchanges such as ours, so our “neighborhood” is not expected to remain quiet for long. I would say that it is already not quiet!

And last but not least, let us not forget the intention of 8 leading banks to create Turquoise, a trading platform for equities by mid-2008, in order to compete with the major European exchanges.

These changes are driven in large part by the EU Commission that is pushing European Exchanges and Clearing Houses to increase transparency and reduce the cost of trading. The Markets in Financial Instruments Directive, known as MiFID, went into effect on November 1st 2007; MiFiD allows internalization, i.e. allows exchange members that have opposite orders in a stock to match them internally, without going through the market. While this directive is expected to affect the largest exchanges the most, we are closely monitoring developments, and remaining vigilant.

The Code of Conduct, on the other hand, signed approximately one year ago in Brussels, is a voluntary agreement among European exchanges and clearing houses to unbundle the fees and to allow interoperability among clearing houses.

Responding to these challenges, we took a bold decision late last year to lower our trading fees by 33%, effective January 1st 2007. This is the largest reduction in our fees in the history of our exchange. The goal of these reductions was:

· to reduce the cost of transactions in our market;

· to make the fee structure more transparent and competitive and compliant with the new rules and regulations; and

· to create fixed sources of income for our Group

Ladies and Gentlemen,

Last year, in this forum, I was speaking about the newly established common trading and clearing platform with the Cyprus Stock Exchange. The Common Platform allows both Exchanges to maintain their independence while at the same time creates a single entry point for investors, taking advantage of the collaboration synergies, such as cost  reduction, common access to the same liquidity “pool” and the increased visibility to international investors.

The indications, after the first full year of operation are that the Common Platform is an unqualified success; trading on CSE listed equities has increased considerably since the Common Platform went into production, from €1.6 ml per day in 2005 to more than €16 ml. per day in 2007. It is important to note that approximately 15% of trades at CSE, by value, originate from Greece. Impressive performance indeed!

We firmly believe that a large and liquid regional capital market in southeastern Europe can only emerge through the collaboration of the region’s exchanges, and today Athens Exchange has the know-how, the technology and market size to become the hub of our neighborhood. We believe that we can successfully replicate the model of cooperation with Cyprus with other exchanges in the region, and we expect to have more exchanges joining forces with us.

As we have announced in the past, we will be participating in the upcoming sale of a majority stake in the Ljubljana Stock Exchange, which is expected to be completed by January 2008, and we will participate in the privatization of the Bulgarian Stock Exchange, if and when this event takes place.

Ladies and Gentlemen,
The cornerstone of all our efforts is to firmly establish trust and transparency in every area of the Athens Exchange. And this remains our top priority.

We are confident that our efforts will make our Group more prepared than ever to face the challenges that are coming.

Thank you.