The Warsaw Stock Exchange works to reinforce its position as the CEE leader through expansion of the international client base including issuers, brokers, investors and data vendors, and through initiatives designed to promote the Polish market and Polish companies among international investors.
In 2017, GPW continued to develop liquidity support programmes (HVP and HVF) where the biggest volume of trading is generated by remote exchange members. GPW continued to promote the Polish market and GPW-listed companies internationally by holding investor events in partnership with brokers and investment banks around the world and by participating in international conferences and investor meetings. The investor event series Polish Capital Market Days initiated in 2015 included seven meetings in 2017: in London, Stockholm, Warsaw, Paris, Frankfurt, Stegersbach and Prague.
In 2017, steps were taken to develop the commodity market, its participation and contribution to the integration of European energy markets.
GPW representative offices outside Poland
The Representative in London was hired in June 2013 to enhance GPW’s acquisition activities on that market. In 2017, the Representative focused on supporting relations with GPW’s business partners including exchange members, investors and providers of technology services for GPW and its clients.
The Representative Offices in London has no separate legal personality and does not carry on any profit earning independent business operations. In all its activities, the Representative Office acts on behalf and for GPW to the extent of powers of attorney granted by the GPW Management Board.
Development of a network of foreign investment firms – exchange members
In 2017, GPW expanded its acquisition activities addressed to GPW’s business partners including existing and prospective exchange members, investors and providers of technology services.
Interactive Brokers, one of the world’s biggest online discount brokers, started operation on the Warsaw Stock Exchange in June 2017 as the first remote exchange member to serve retain investors. Deutsche Bank AG became a remote exchange member in June 2017. Polski Dom Maklerski was admitted as an exchange member in October 2017. Societe Generale added trade in derivatives for the account of clients to its operation on GPW in June 2017. GPW had 53 members, including 28 local members and 25 remote members, at the end of 2017. The share of remote exchange members in trade increased modestly. The share of remote members in EOB trade in shares was 31.7% in 2017 compared to 31.1% in 2016.
Share of local and remote GPW members in EOB trade in shares on the Main Market
Attracting foreign issuers
One of the key goals of the GPW Group is to strengthen the position of the regional financial hub by making the Warsaw Stock Exchange the market of first choice for investors and issuers in Central and Eastern Europe. GPW took many initiatives to promote the Polish capital market among issuers in the CEE region.
In 2017, GPW organised and held six training sessions for Belorussian companies in Minsk which introduced the details of raising capital on the GPW markets. The workshops followed from the Polish-Belorussian IPO Centre project, initiated in late 2016 to facilitate access of Belorussian companies to modern sources of financing on the Polish capital market.
As at the end of 2017, the GPW markets listed shares of 56 foreign companies, including 49 foreign companies listed on the Main Market and 7 companies on NewConnect, with a total capitalisation of PLN 752.2 billion compared to PLN 558.9 billion in 2016. Foreign companies listed on GPW as at 31 December 2017 originate from 19 countries, mainly the Netherlands (9 issuers), Luxembourg (7 issuers) and Germany (5 issuers). 27 companies are dual-listed and 23 are single-listed on GPW.
Share of foreign investors in trading on GPW markets
According to GPW’s research, foreign investors generated 53% of turnover in shares on the GPW Main Market in 2017, the same as in 2016.
Share of investors in trade in shares on the Main Market (%)
Foreign investors’ activity on the futures market increased by 1 percentage point to 19% in 2017 compared to 18% in 2016.
Share of investors in trade on the futures market (%)
International activity of TGE in 2017
TGE joined the European energy market projects and signed multilateral co-operation agreements (PCR, INC, CORE/CEE), operating agreements (MRC) and accession declarations (XBID AS). Irrespective of the legal form, TGE accepted the project co-management rules, co-financing rules, operating procedures and mutual exchange of information. Each project has an internal decision-making structure which is typically managed by a Steering Committee. Operations are managed by an Operating Committee. Working Groups are responsible for legal and technical issues including design work, tests, procedures, and financials. Working Group members usually communicate through conference calls while the Steering Committees meet regularly. Each project follows governance procedures or rules of internal order which define the format and frequency or dates of meetings, the rules of documentation, and other organisational issues.
In 2017, TGE representatives actively participated in the activity of working groups of the following international projects: Price Coupling of Regions - PCR, Multi Regional Coupling - MRC, Interim NEMO Committee - INC, CORE/CEE, Cross-Border Intra-Day – XBID/ XBID Accession Stream. Unfortunately, HR shortages, in particular with respect to exchange operations, IT and legal affairs, stood in the way of complete representation in all working groups. According to the rules and mutual obligations, each company which is a project or market participant is represented in each working group to protect its interests. While all meetings are minuted and comments or objections can always be raised, direct presence at meetings is the most productive for of participation.
In Q1 and Q2 2017, TGE and its PCR Project partners tested new software releases using hardware purchased and installed by TGE according to advanced technical standards of the PCR EUPHEMIA algorithm. An additional MPLS line was put in place to ensure redundancy of TGE’s interactions with other exchanges which are MCR operators or co-ordinators.
The trading system X-Stream Trading was rolled out on the Commodity Forward Instruments Market and the Property Rights Market in May 2017. The legacy system CONDICO continued to be used for both trading sessions on the Day-Ahead Market. NASDAQ’s SAPRI was rolled out in mid-November and supports the Day-Ahead Market together with X-Stream Trading (X-Stream Trading for the morning session, Sapri for the afternoon session) under new cross-border market operating agreements for the connections with Sweden and Lithuania with the participation of NORD POOL, PSE, SvK and LITGRID.
TGE started PCR production on the European Day-Ahead market on 15 November 2016. 16 November was the first day of energy deliveries in the new technological model. This completed the TGE PCR go-live as TGE became an MRC operator/co-ordinator. Since 15 November 2017, TGE is an active market broker as one of five exchanges: TGE, EPEX SPOT, OMIE, GME, NORD POOL. This allows TGE to work as NEMO on the markets with no NEMO monopoly in the multi-NEMO functionality.
In 2017, TGE together held discussions with the stakeholders of the intraday market for connections of Poland with Sweden and Lithuania: PSE, SvK, LITGRID, EPEX SPOT and NORD POOL, concerning co-operation and a potential agreement to develop a Local Implementation Project (LIP) which would allow TGE to join XBID on the intraday market.
On 5 June 2017, the President of the Energy Regulatory Office approved Multi-NEMO Arrangements (MNA) drafted by PSE for the Polish energy market. As a result, TGE together with EPEX SPOT and NORD POOL opened negotiations with PSE to prepare operating agreements, a new version of the Transmission Network Code (TNC) and other regulations necessary to safely operate the multi-NEMO day-ahead market. It is expected that two new NEMOs will launch operations competitive to TGE on the Polish spot electricity market in October 2018.
In December 2017, the Interim NEMO Committee (INC) presented draft agreements for the day-ahead market: ANDOA (NEMO Co-operation Agreement) and DAOA (NEMO – Transmission System Operator Agreement), and agreements for the intraday market: ANIDOA (NEMO Co-operation Agreement) and IDOA (NEMO – Transmission System Operator Agreement), as well as ANCA (All NEMO Co-operation Agreement) for NEMOs which will apply to all exchanges, a master agreement for the European market to replace the existing PCR co-operation agreement.
Price Coupling of Regions – PCR (day-ahead market)
PCR is an agreement of the co-owners of the market coupling algorithm. PCR is a decentralised model. As a single auction mechanism, it combines price areas managed by energy exchanges operating in the different areas. The model solution provides price coupling of day-ahead markets on all borders of EU Member States. The project standardises IT solutions by developing a shared trading algorithm (EUPHEMIA) and a data exchange and communication system (PCR Matcher & Broker (PMB)) used to calculate electricity prices and allocate transmission capacities in Europe.
Towarowa Giełda Energii S.A. is a full member of PCR since Q4 2015. In December 2016, TGE received all required acceptance certificates necessary to obtain the PCR operator and co-ordinator status. TGE is a co-owner of the IT solutions together with the exchanges NORD POOL, EPEX SPOT, GME, OMIE, OTE and OPCOM. TGE is entitled to actively participate in regional market projects and implement EU mechanisms of the electricity market.
Multi-Regional Coupling – MRC (day-ahead market)
Multi-Regional Coupling is a market created with the integration of regional markets in 2014-2015 and has been gradually extended. MCR is a pan-European project of operating integration of day-ahead markets in electricity and Europe’s biggest and most liquid market which covers ca. 90% of European demand for energy. Following accession in July 2015, TGE is a full member of MRC. TGE is an active MCR operator since 15 November 2017. Poland participates in MCR via the links Swe-Pol Link and Lit-Pol Link. TGE’s participation in the project is part of its on-going business.
CORE Day Ahead Flow Based Market Coupling (previously CEE FB MC) (day-ahead market)
The project involves the calculation of available transmission capacities for connections between the region’s national markets by transmission system operators. The project covers Central and Eastern Europe and integrates the region’s national markets (CORE) with MRC. It will design algorithms used by transmission system operators to calculate available cross-border transmission capacities according to the flow based allocation methodology. The implementation should open the Western and Southern borders of Poland to the cross-border exchange market in H2 2019.
XBID, XBID AS and XBID LIP (intraday market)
The European intraday electricity market XBID is expected to launch in Q2 2018. TGE participates in the work of XBID Accession Stream, a group of companies preparing to join the project, and is an XBID observer.
The final decision on the format and date of TGE’s XBID accession will follow consultations with the Energy Regulatory Office and the Polish Financial Supervision Authority. TGE is working locally with the exchanges NORD POOL and EPEX SPOT and with the operators PSE, SvK and LITGRID to open a cross-border intraday market in the Local Implementation Project in order to create the technical capacity of TGE to join XBID in 2019.
In Q4 2017, TGE announced that it is reviewing the option of opening additional auctions on the intraday market under the model proposed by NORD POOL. The solution requires the implementation of the EUPHEMIA algorithm and the SAPRI software and possibly also X-Stream software. Conceptual work will be initiated in 2018.
MNA – Multi-NEMO Arrangements (Polish day-ahead market)
Meetings of stakeholders including PSE, TGE, EPEX SPOT and NORD POOL took place in Q4 2017 in order to confirm their arrangements and project work. PSE co-ordinates the project work under the MNA.
INC – Interim NEMO Committee – co-ordination and project work (intraday and day-ahead markets)
The Interim NEMO Co-operation Agreement (INCA), signed by all NEMOs – European energy exchanges which operate electricity spot markets, including TGE, took effect in March 2016. The Interim NEMO Committee (INC) was appointed. The CACM Regulation requires all NEMOs to prepare a range of documents and submit them for approval of the regulators according to a predefined timeline. The first and most fundamental document is the MCO Plan which describes the operation of the single day-ahead market and intraday market in electricity. The MCO Plan was submitted in April 2016 and approved by the regulators, including the Energy Regulatory Office, in June 2017.
The GPW Group as a member of international organisations and initiatives
The Warsaw Stock Exchange has co-operated with the Federation of European Securities Exchanges (FESE) since 1992. GPW was granted the status of associated member in 1999 and has been a full member of FESE since June 2004. FESE represents 35 exchanges which organise trading in equities, bonds, derivatives and commodities through 18 full members from 27 countries as well as 1 affiliated exchange and 1 non-European observer member.
Capital Market Union
In 2015, the Warsaw Stock Exchange was involved in consultations of the Capital Market Union project, designed to create a single capital market across the 28 European Union member states. GPW welcomed the Green Paper which provides for a greater role of the capital market in financing of the EU economy, especially SMEs. In the opinion of GPW, the main objective is to support initiatives which facilitate market access, improve market transparency and encourage mid-term and long-term investing. However, the Capital Market Union concept should take into account the importance of regional capital markets to the national economies.
Sustainable Stock Exchanges (SSE)
GPW is a member of the Sustainable Stock Exchanges (SSE) since December 2013. SSE is a UN initiative of global exchanges which promote the development of corporate social responsibility and sustainable development on their home capital markets. SSE was created in 2009 by the United Nations to exchange members’ experience in the development and promotion of corporate social responsibility and responsible investment among investors, public companies, regulators and capital market infrastructure institutions. GPW was the ninth exchange to join SSE, the first one in Central and Eastern Europe. SSE had 68 members at the end of 2017.
FIX Trading Community
GPW became a member of the FIX Trading Community in 2014. It is a non-profit industry-driven body which brings together close to 300 financial companies: banks, exchanges, brokers, the buy side, ISVs. The organisation supports dialogue and exchange of information concerning the best practice and standards of messaging on the financial market. The flagship achievement of the FIX Trading Community is the creation and development of the FIX messaging protocol broadly used in the financial industry.
Association of European Energy Exchanges EUROPEX
EUROPEX is the association of European commodity and financial energy exchanges which represents exchange markets in electricity, gas and derivatives. TGE is a EUROPEX member since 2005. TGE takes active part in the working groups Power Markets, Gas Markets, Environmental Markets, Financial Markets, Integrity & Transparency.
The mission of EUROPEX is to enhance competition on the European market by ensuring transparent price setting and implementing a single European market in electricity and gas enabling convergence of prices as well as benefits for customers. EUROPEX participates in the development of market solutions and engages in dialogue with EU authorities and other European institutions which contribute to the development of the markets.
Association of Power Exchanges (APEx)
The Association of Power Exchanges (APEx) is an international organisation of world energy exchanges and transmission system operators. It has 50 members around the world. APEx supports the development of energy markets. Its key initiatives include development of a platform for exchange of information and experience among its members. TGE is an APEx member since 2000.
Association of Futures Markets (AFM)
AFM is an organisation of 21 financial and commodity exchanges around the world. AFM has its principal offices in Budapest, Hungary. AFM holds its AFM Annual Conferences as a platform for exchange of information and experience between exchanges. The mission of the Association is to promote and encourage the development of new derivatives markets and to support their growth. TGE is an AFM member since 2014.
Co-operation with European exchanges in working groups of the PRICE COUPLING OF REGIONS (PCR)
Price Coupling of Regions (PCR) was established to develop a solution that would link day-ahead markets in electricity using a unique algorithm for the calculation of energy prices across Europe (Euphemia) and to ensure effective allocation of cross-border transmission capacities. This is key to achieving the overarching EU objective of creating a harmonised European electricity market in order to improve liquidity, efficiency and social welfare.
TGE’s co-operation and participation in the Polish-Lithuanian Chamber of Commerce
In 2015, TGE became a member of the Polish-Lithuanian Chamber of Commerce which works to create conducive conditions for Polish-Lithuanian economic initiatives, dynamic trade exchange between the two countries, investment flows, and elimination of barriers to co-operation of businesses in Poland and Lithuania. The Chamber supports the exchange of expertise and experience among its members. The Chamber holds monthly club meetings for its members to facilitate networking and knowledge sharing.
EACH – European Association of CCP Clearing Houses
IRGiT representatives take part in plenary meetings, teleconferences and work of the Policy Committee, the Risk Committee and the Legal Committee of the European Association of CCP Clearing Houses EACH. IRGiT takes active part in consultations of draft European regulations.