Internal Drivers – strategical initiatives

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GPW took active efforts to unlock the full potential and grow its core markets in equities, debt, derivatives, commodities, and information services. The goal is to reinforce the key business segments of the exchange and to develop those areas where GPW has a competitive advantage and can effectively use the potential of its employees and assets. This section presents the key initiatives of the strategy GPW.2020 implemented in 2016 to grow the Group.

Technology and security

  • 100 percent availability of GPW’s trading system: in 2016, similar to previous years, GPW maintained 100 percent availability of the services provided by GPW’s trading system (defined as the ability to place orders, execute trades, set prices, and publish market data).
  • Colocation and support services: the colocation service was opened to GPW’s clients in Q1 2016 and the first client, ERSTE Securities Polska, started to use the service in April 2016. The service is dedicated to algorithmic traders seeking the closest possible access to GPW markets for themselves and for their clients in order to place orders and receive market data. The service provides all clients with the same latency of communications with the trading system UTP at no more than 500 microseconds (μs). The objective of launching the service is to expand the offer of access to GPW markets and to improve the liquidity of financial services. Furthermore, since 2016, GPW provides clients with two services supporting colocation: remote hands (where clients’ hardware may be installed in colocation in the absence of the client) and precision time protocol (where GPW provides time synchronisation to colocation clients).
  • New trading systems on POLPX: in September 2016, POLPX accepted two new systems provided by Nasdaq: the trading system X-stream Trading and the energy auction application SAPRI (POLPX and Nasdaq signed the trading system X-stream Trading contract in December 2014; the SAPRI annex was signed in February 2015). POLPX’s new trading system will support efficient processing of growing trading volumes and the future addition of new commodities and derivatives. SAPRI, Nasdaq’s energy auction application, will be used by POLPX in European cross-border energy auctions including PCR (Price Coupling of Regions). The solutions will be rolled out in production in H1 2017.
  • IRGiT’s new clearing system: in June 2016, the Warsaw Commodity Clearing House (IRGiT) implemented a new clearing system, X-Stream Clearing from NASDAQ. The system replaced the legacy solution CONDICO Clearing. The new clearing system X-Stream Clearing provides a range of improvements including: clearing of multiple trading platforms; clearing of new types of instruments, such as “balance of” instruments; full flexibility of the selection of trade, clearing, and collateral currencies; improved management of non-cash collateral; netting of margins across groups of companies; facilitated management of the calculation of taxes including excise duties on natural gas. The implementation of IRGiT’s new system will ensure effecting processing of cross-border trade and the addition of new services. The clearing system X-Stream Clearing supports the clearing of multiple financial instruments, especially commodity-based instruments.

Equities

  • Trading fee reductions:
    • As of 1 January 2016, GPW reduced the transaction fees on trade in shares, rights to shares and ETF units in the part charged on the value of an order up to PLN 100 thousand from 0.033% to 0.029%. It is a promotion without a fixed deadline offered on the Main Market and NewConnect. GPW decided to reduce the trading fees as a result of changes in the system of financing supervision of the capital market.
    • As of 1 November 2016, GPW reduced fees for Exchange Members on transactions in shares as well as market data from the GPW Main Market and the Alternative Trading System NewConnect. The fixed fee on an order was reduced from PLN 0.20 to PLN 0.15. The reduction is a promotion without a fixed deadline applicable to all broker’s orders executed on the order book and in block trades in shares, rights to shares and ETFs. The reduction mainly applies to small orders placed by retail investors and via DMA.
    • As of 1 July 2016, GPW introduced a new price list on the Main Market for market makers of shares and participants of the High Volume Provider (HVP) programme which promotes passive orders building up the order book. The new price list offers very attractive low transaction fees for professional market players participating in the building of the order book. The new transaction fees for market players placing buy and sell “maker” orders (which remain on the order book) are much lower than for buy and sell “taker” orders (which hit other orders on the order book). The new price list is optional so market makers of shares and participants of the HVP programme may use it or continue with the existing price list and promotions. The new “maker/taker” price list is designed to incentivise GPW’s professional clients to place more passive orders. This will improve the pricing conditions (expanded order book, smaller spreads) for trade of individual and institutional investors.
    • A reduction of fees for market makers of non-WIG20 shares, extended by the GPW Management Board until 31 March 2017, was effective throughout 2016. The promotion is designed to support liquidity of trade in shares of companies which do not participate in WIG20 and to support the local brokerage industry. The promotion is a part of the strategy encouraging investor activity with a flexible pricing policy aligned with the needs of different groups of GPW clients.
    • In 2016 was in force the promotion of market makers operating on futures on the WIG20 index. The promotion involves reducing transaction fees for the most active team, in case of exceeding the threshold of 15,000 contracts per month animator pays for each transaction on contracts PLN 0.50, and in the case of exceeding the 30,000 contracts in the month of 0.40 PLN. The promotion aims to encourage animators to greater investment activity. The Management Board decided to continue the promotion and its validity was extended until 31 March 2017.
    • The 2016 program also in force was SuperAnimator for TOP7, which aims to support liquidity and the intensification of turnover on the largest companies.
  • 35 IPOs of companies on both stock markets (including 7 transfers from NewConnect to the Main Market) and continued focused activity promoting the exchange as the venue to raise growth capital for companies and local governments. In 2016, GPW continued the “Capital for Growth” programme launched in 2015 and changed its format to one-on-one meetings with companies interested in raising capital on the exchange. Furthermore, in October 2016, GPW signed a memorandum of understanding to create a Polish-Belarussian IPO Centre. The objective is to establish a professional education, consultation and legal advisory centre facilitating the access of Belarussian companies to financing via the Polish capital market.
  • Sustained high liquidity of the Main Market in shares as measured by velocity due to:
    • acquisition of new clients including exchange members, market makers and participants of the liquidity support programmes (HVP and HVF);
    • continuation of transaction fee promotion programmes;
    • improvement of the infrastructure and accessibility of the Polish market for global investors (KDPW_CCP’s first foreign clearing member, ABN AMRO Clearing Bank N.V., started operation on the Warsaw Stock Exchange in June 2016 and clears transactions on GPW’s cash and derivatives markets, opening access to the local capital market for investors who use the bank’s post-trade services globally);
    • continuation of initiatives promoting the Polish capital market and companies listed on GPW as well as investing in instruments listed on GPW (the Ambassador programme launched in September 2016 attracted 11 biggest banks active in Poland; the programme promotes the capital market among bank advisors to help them communicate the opportunities of investing on GPW among their retail clients and other bank officers).
  • Continued initiatives enhancing the quality of NewConnect and making it more attractive for investors in the NewConnect 2.0 programme
    • On 3 July 2016, GPW amended the ATS Rules as required to align the regulations with the EU Market Abuse Regulation (MAR).
    • On 28 September 2016, a new segmentation of the NewConnect market replaced the segments NC Lead, NC HLR and NC SHLR with the segments NC Focus, NC Base and NC Alert. NC Focus includes shares of 90 companies, NC Base has 250 companies, and NC Alert has 68 companies. With the new segmentation, GPW modified the terms of market making by market makers who support liquidity of trade in financial instruments listed on NewConnect. The new segmentation helps investors to identify companies listed on NewConnect in terms of their condition and the related investment risk, makes the market more transparent, and encourages investors to seek new investment opportunities.

Debt market

  • Number of new non-Treasury issues in 2016: 23 including 6 issues worth more than PLN 100 million.
  • Catalyst reform: working towards an optimal model of the Catalyst market, GPW reviewed solutions available in Europe and consulted with market participants. GPW intends to simplify the Catalyst structure by creating two segments: Treasury securities and other debt.
  • Intensified acquisition and promotion of Catalyst among local governments and companies.

Derivatives market 

  • New single-stock futures: to address investor demand, GPW introduced several new classes of single-stock futures in 2016:
    • Futures on the stock of Eurocash S.A. were introduced into trading on 1 March 2016.
    • Five new single-stock futures were introduced into trading on 19 September 2016 on the shares of: Grupa Azoty S.A., ING Bank Śląski S.A., Ciech S.A., mBank S.A., Kruk S.A.
  • New FX futures: GBP futures were introduced to trading on the GPW Main Market on 21 November 2016.
  • Intensified promotion and education concerning interest rate futures: in 2016, GPW held a range of meetings and workshops dedicated to investment portfolio managers, active traders, banks and brokers in order to present the practicalities of interest rate futures, transactions with market makers, and the benefits of trading on GPW.

Commodity market

  • Electricity market:
    • POLPX maintained its position of Nominated Electricity Market Operator (NEMO) on the local energy market, safeguarding the Polish market against acquisitions by the largest foreign exchanges.
    • On 1 July 2016, POLPX signed a market maker contract with Polenergia Obrót, the fourth market maker on POLPX after Enea Trading, PGNiG and Tauron Polska Energia.
  • Gas market:
    • Continued development of liquidity on the market in gas: in 2016, POLPX successfully focused on building up high liquidity on the market in gas, especially the spot market. The volume of trade in natural gas was 114,468,886 MWh in 2016, the highest annual figure in the history of the Polish Power Exchange. The high turnover on the gas market allows POLPX to add gas-based derivatives to its product range. Consultations with market participants helped to define a preliminary structure of gas futures. Their structure will be similar to the products already offered by POLPX and to derivatives traded on the European gas market: they will be based on continuous trading with physical delivery of gas.
    • In 2016, SGT instruments for the Polish section of the Transit Gas Pipeline System (SGT) Yamal-Europe were introduced to trading on the Day-Ahead Market in gas and a new index of SGT transactions was launched (TGEsgtDA).
    • In July 2016, the Intraday Market in gas opened on the POLPX brokerage platform InfoEngine, which supports orders 24/7/365. The launch of trade on InfoEngine is yet another step in the development of the Polish market in gas.
  • Property rights market:
    • Blue certificates: following an amendment of the Renewable Energy Sources Act in 2016, the Register of Certificates of Origin introduced a new instrument, PMOZE-BIO: the certificate of origin of electricity from agricultural biogas. With the start of trade in PMOZE-BIO, POLPX launched the publication of the price indices TGEozebio for trades on the order book and TGEozebioTP for block trades.
    • White certificates: the volume of trade in white certificates increased with the extension of the support system for certificates of energy efficiency and simplification of their issue procedures.
  • New business lines:
    • CO2 platform: POLPX received the approval of the Polish Financial Supervision Authority to operate a CO2 allowances platform on 20 December 2016. In the next step, POLPX will participate in a tender for the operation of an auction platform for Polish emission allowances. As the last step, POLPX needs to be entered into the list of auction platforms in Annex III to Commission Regulation 1031/2010. Operation of an auction platform will help to develop the market operated by POLPX which offers trade in emission allowances and to improve liquidity of the market. With the launch of the auction platform, financial instruments on delivery of emission allowances will be introduced into trading.
    • Reporting of OTC trades under REMIT: as of 7 April 2016, POLPX supports reporting of OTC trade in the system RRM TGE. The system addresses the requirements of the Regulation of the European Parliament on wholesale energy market integrity and transparency (REMIT), whereby participants of the wholesale market in electricity and gas have to report orders and trades on organised trading platforms in such commodities. The obligation to report OTC trades took effect on 7 April 2016. In June 2016, the Agency for Cooperation of Energy Regulators (ACER) granted to POLPX additional authorisations to report wholesale trade in transmission of natural gas and basic data REMIT LNG.

Information services     

  • Taking over the function of the organiser of WIBID and WIBOR reference rate fixings: in November 2016, GPW decided to take over the functions performed by the Financial Markets Association ACI Polska as the organiser of WIBID and WIBOR reference rate fixings. The transition will take place in phases including: starting the organisation of fixings; obtaining the authorisation to perform the functions of administrator; reviewing the rates methodology. The change of the organiser of fixings is related to the Regulation of the European Parliament and of the Council which imposes major requirements on institutions which calculate reference rates.
  • Continuation of initiatives boosting the sale of data from the commodity market and non-display data: in 2016, following focused acquisition initiatives, GPW had 43 new clients for non-display data (used in algorithmic trading, risk management, portfolio valuation, and other non-display applications). The sale of POLPX data also developed. In 2016, POLPX acquired the first industry data vendor who specialises in processing and distribution of commodity market data: the Norwegian company Montel.
  • Making GPW’s offer more attractive through reductions of fees for market data for Exchange Members: in November 2016, GPW reduced the monthly fee for the best bid/ask for retail investors by 25 percent irrespective of the number of subscribers.

Operational excellence 

  • Cost optimisation: the GPW Group’s operating expenses decreased by PLN 24.2 million year on year as a result of the implementation of a savings programme which covers administration, IT, HR, real estate, and external services.
  • Integration of the GPW Group: in 2016, GPW continued the Group’s programme launched in 2015 to ensure effective and efficient services for GPW Group companies in different areas with improved quality, standardised methods and scope of work, elimination of duplicated processes, adequate use of available resources, cost reductions, standardisation and simplification of information flows. The following projects were initiated among others: unification of accounting and financial processes, unification of HR and payroll processes, development of a single controlling methodology, a shared system of electronic document flows, and common rules of corporate identity across the Group.

2016 in the GPW Group v. ambitions under the strategy