Financial market

Competition of financial instrument trading venues has largely increased as a result of on-going liberalisation of the exchange industry over the past few years. Operators of regulated markets compete for new issuers, investors, liquidity and trade. Another challenge for exchanges is posed by OTC markets and multilateral trading facilities (MTF). They offer trade in the same stocks as those listed on traditional exchanges combined with very short lead times for the execution of orders as well as low trading fees. Some MTFs have been licensed as exchanges, for instance CBOE Europe Equities. At the same time, exchange operators are undergoing mergers and acquisitions on the financial market. In March 2017, the EU Competition Commissioner blocked the merger of the two largest European exchanges, London Stock Exchange and Deutsche Boerse, announced in March 2016, in view of concerns that the merger would largely limit competition of exchanges in Europe, especially that the merged exchanges would in fact have a monopoly with respect to some financial instruments and clearing operations. In November 2017, Euronext announced the plan to take over the Irish Stock Exchange, which is expected in Q1 2018 subject to regulatory approvals.

Comparison of equity trade in Europe on exchanges and MTFs [EUR billion]



Source: FESE – European Equity Market Report, WFE for Borsa Istanbul

In 2017, MTFs created under MiFID after 2008 generated 29.1% of turnover in stocks on the electronic order book in Europe. The share of MTFs in turnover decreased in the last two years from 34.1% in 2016 (the highest annual percentage) and 31.3% in 2015.

The total value of trade on the electronic order book in Europe (including exchanges and MTFs) was EUR 11.0 trillion in 2017, a decrease of EUR 2.0 trillion or 1.8% year on year. However, the change of the value of trade was different for traditional exchanges and MTFs. The trading in shares on MTFs decreased from EUR 3.8 trillion to EUR 3.2 trillion in 2017 (down by 16.3% year on year). The trading in shares on exchanges increased by EUR 0.4 trillion or 5.7% to EUR 7.8 trillion in 2017.

Concentration of turnover in stocks on the electronic order book on exchanges and MTFs in Europe in 2017

Source: FESE – European Equity Market Report, WFE

According to the FESE European Equity Market Report, MTFs had a much higher concentration of trade in stocks in 2017: the top three MTFs in Europe generated ca. 96.6% of turnover in stocks on all MTFs while the top three exchanges generated 64.7% of turnover in stocks in the European exchange industry.

The top five venues which generated the highest turnover in stocks on the electronic order book in Europe in 2017 (72.7% or EUR 8.0 trillion) included: CBOE Europe Equities (19.2%), London Stock Exchange Group (18.6%), Euronext (15.5%), Deutsche Boerse (11.8%), Nasdaq Nordic and Baltics (7.6%). GPW generated 0.51% of the total trade in stocks in Europe in 2017.

Number of Listed Companies

European exchanges listed a total of 9,993 domestic companies at the end of 2017. The Spanish exchange BME had the biggest number of listings (3,110 companies) accounting for more than 31% of all European listings. GPW ranked fifth with 861 domestic companies representing 8.1% of the total number of domestic companies listed on European exchanges. GPW’s regulated market lists 482 companies (432 domestic companies and 50 foreign companies) and NewConnect lists 408 companies (401 domestic companies and 7 foreign companies). There were 15 IPOs on the main market and 19 IPOs on the alternative market in 2017.

Number of listings on European exchanges in 2017

Source: FESE, WFE

Capitalisation of Stock Markets

In 2017, the total capitalisation of all exchanges globally increased by 21.8% to USD 85.3 trillion at the year’s end (source: WFE). The biggest increase in capitalisation (25.7%) was reported on the exchanges in Asia and Pacific whose share in the total capitalisation of all exchanges globally was 34.0% at the end of 2017. The US exchanges which have the biggest share in the total capitalisation of all exchanges globally (42.8%) reported an increase of capitalisation by 17.8% to USD 36.5 trillion. Exchanges in EMEA (Europe, Middle East, Africa), including GPW, reported an increase of capitalisation by 24.0% to USD 19.8 trillion. With an increase of capitalisation by 43.0% year on year (in USD), GPW was the sixth biggest EMEA exchange. The biggest global exchange was NYSE with a capitalisation of domestic companies at USD 22.1 trillion, followed by NASDAQ with a capitalisation of USD 10.0 trillion, Japan Stock Exchange – USD 6.2 trillion, Shanghai SE – USD 5.1 trillion, London Stock Exchange – USD 4.5 trillion, Euronext and Hong Kong SE – USD 4.4 trillion each, Shenzhen SE – USD 3.6 trillion, and Deutsche Boerse – USD 2.3 trillion. The share of those nine exchanges in the capitalisation of global exchanges was 73.3% in 2017.

Capitalisation of domestic companies on European exchanges in 2017 [EUR billion]
Change in capitalisation of domestic companies on European exchanges in 2017

The capitalisation of European exchanges was EUR 13.5 trillion at 31 December 2017 (source: FESE, WFE), an increase of 11.7% year on year. The capitalisation of the biggest European exchanges grew at the average rate: LSE Group reported an increase in the capitalisation of domestic companies by 12.8% and Euronext by 11.5%. Mid-sized exchanged reported the biggest increase in the capitalisation of domestic companies: CEESEG - Vienna by 32.1%, GPW by 28.4%, Budapest Stock Exchange by 23.8%. The share of the top five European exchanges (by capitalisation) remained stable at 88.3% in 2017. GPW’s share was 1.24% in 2017 compared to 1.07% in 2016.

Equity Trading

According to WFE, the total value of trading in shares of domestic companies on the electronic order book was USD 82.7 trillion globally in 2017, a decrease of 4.5% year on year, mainly driven by an 8.4% decrease in the value of trade on US stock exchanges which generated 48.7% of total trading in shares globally in 2017. The value of trading in shares on EMEA exchanges increased by 3.3% mainly due to an increase in the value of trading on Euronext and Deutsche Boerse. Asian exchanges reported a year-on-year decrease in the value of trading in shares by 1.9%.

The value of trading in shares on the electronic order book on GPW increased by 27.8%, the second best result of all European exchanges. The value of trading in shares on the electronic order book on European exchanges was EUR 7.8 trillion in 2017, an increase of 5.2% year on year. The biggest European exchanges reported a single-digit increase in the value of trading in shares; the value of trading on BME remained unchanged; the value of trading on LSE decreased by 1.0% in 2017. In nominal terms, the increase in the value of trading was mainly driven by Deutsche Boerse, Euronext, Nasdaq and SIX Swiss Exchange (in total, by EUR 363.5 million). Borsa Istanbul, CEESEG – Vienna and GPW, whose value of trade increased at a double-digit rate year on year, ranked high in nominal terms as well with an increase in the value of trading year on year by EUR 51.3 million, EUR 15.5 million and EUR 6.4 million, respectively.

The biggest turnover in shares on the electronic order book on the European market was generated by the LSE Group (EUR 2.1 trillion), followed by Euronext (EUR 1.7 trillion) and Deutsche Boerse (EUR 1.3 trillion), the same top three exchanges as in 2016. The concentration of the top five exchanges with the highest turnover in shares in 2017 was 84.3% of the total turnover in Europe. GPW’s share in turnover was 0.71% in 2017 compared to 0.59% in 2016.

Value of trading in shares on European exchanges in 2017 [EUR billion]
Change in the value of trading in shares on European exchanges in 2017

Velocity ratio

Velocity measured as turnover to average monthly capitalisation on European exchanges was 58.6% in 2017 compared to 64.1% in 2016 (WFE data in USD). GPW’s velocity ratio was 34.7% in 2017 compared to 35.1% in 2016. Both capitalisation and turnover on GPW increased proportionately and so the velocity ratio remained stable despite of the significant year-on-year-change of both these values.

Velocity ratio on European exchanges in 2017

Source: WFE

To summarise, 2017 was very successful for GPW compared to other European exchanges. The capitalisation of domestic companies increased by 28.4% and consequently GPW’s share in the capitalisation of European exchanges increased from 1.07% in 2016 to 1.24% in 2017. The value of trading in shares increased by 27.8% year on year and GPW’s share in the value of trading in shares on European exchanges increased from 0.59% in 2016 to 0.71% in 2017.