Bucharest could become the eighth stock exchange in southeastern Europe to sign up to the regional platform SEE Link, chief executive Ludwik Sobolewski told Emerging Markets on Tuesday.
“We are observing this project very closely and the geographical composition is becoming very interesting,” he said. “We are now seriously considering joining.”
This marks a change of heart by Sobolewski, who was dismissive of the initiative when it was launched in 2014. At the time, the only members were Croatia, Macedonia and Bulgaria.
The membership has expanded rapidly this year, however, with four new bourses applying to join since January. Serbia and Slovenia signed up in February, followed by Bosnia in March.
SEE Link’s biggest achievement came in late April, with the signing of the Athens Stock Exchange. Jacek Kubas at the EBRD, which sponsored the project, said the inclusion of Greek stocks would be key to attracting more international investors to the platform.
“Once Greece is physically connected to the platform, we will likely see the global players come in,” he says. “Athens has a good reach to international investors and brokers.”
The platform passed another milestone on March 29, when the first trade — between Bulgarian and Macedonian brokers — was completed. SEE Link also launched its first indices in April, comprising companies from the founding member bourses.
SEE Link is not only an order routing platform but it also consists of two blue chip equity indices, SEE LinX and SEE LinX EWI, in a move to enhance the visibility of regional markets. Further indices are planned to reflect the new membership composition keeping it balanced so the stocks from the smaller countries still have an impact in the indices. Kubas stressed that they would not be purely based on market capitalisation. “There is a danger that if Greece joins, stocks from countries such as Macedonia could have little impact on the indices,” he said. “We therefore need a bit of a balance, so there will be caps on the larger stocks.”
The next step will be to physically link the four new exchanges to the cloud-based platform, which Kubas says will take four to six months. “After that we will need to make SEE Link fully operational by setting up interbroker agreements among the brokers in SEE Link countries, and hopefully in the near future we can look at post-trade aspects,” he says.
MITIGATING RISK
Looking further ahead, Kubas said the platform could help funnel urgently need equity funding to small and medium-sized enterprises (SMEs) across southeastern Europe.
“There are now blockchain-based SME exchanges popping up,” he said. “We could potentially use this technology to mitigate some of the single-name risk of smaller companies for investors.”
SEE Link is also keen to continue to expand its membership, according to Andre Kuusvek, director of local currency and capital markets development at the EBRD.
“With this type of linkage between markets, the bigger the better,” he said. “The more you can increase the liquidity pool and the list of investible securities, the more interest you can generate among the global investment community.”
He said the recent expansion of the platform had enhanced its appeal for regional exchanges such as Bucharest. “The influx of new members is making SEE Link much more attractive as a platform,” he says. “When it started, it was relatively small compared to Bucharest but now it is a completely different ballgame. It is now a truly regional initiative.”
The platform’s model could also be replicated elsewhere in the EBRD’s countries of operation, according to Kubas. “We haven’t investigated it yet but this concept might well work for smaller exchanges in regions such as North Africa, the Caucasus and Central Asia,” he said.