WSE moves from abacus to hi-tech
The emergence of two or three Europe-wide stock exchanges doesn't scare Wieslaw Rozlucki, the chief of the Warsaw Stock Exchange (WSE). It's just part of life in the fast lane.
Rozlucki is more analytical than apprehensive about the new mega exchanges being formed throughout Europe. He thinks it's not a matter of resisting them but of making sure you have your own ducks in a row so you can join them, several years down the road.
"If we don't join, we can be sidelined," he said, and thereby risk losing not just large foreign investors but some of the country's biggest companies to the other exchanges. Rozlucki is a bit of a cynic about the catalyst for Europe-wide exchanges. "I think the pressure is from the big U.S. corporations. It takes time to learn about all these smaller countries' systems. So what the hell, why not have one system that fits all? 'Keep it simple,' that's a typical American sentiment, I'm sorry to say."
Nevertheless, he is well aware that 34% of WSE investors are foreigners. To access the country's booming economy, they have to "use Polish brokers, they have to find out the rules," he said.
Rozlucki said that if they do decide multiple systems are too complicated and if other options, such as the new Europe-wide exchanges, are available, "they will move our companies and some of our investors to London, to Frankfurt, to other areas." Such a move would lower the WSE's already low liquidity and make the exchange less attractive to medium and small companies.
So Poland not only has to provide better "low-cost, high-quality services," Rozlucki said, but also has to forge links with the emerging European exchanges.
Rozlucki learned the ropes of shaping a stock exchange from scratch between 1989-1990, and he's picking up new exchange technology with the same nonchalance. He compares transformations in the exchange to the rapid telecom advances of the last decade. "I take my mobile phone and, no matter what country I'm in (in Europe) it works," Rozlucki said. "The logic of the stock exchanges will be the same. For the end investor, it will be the same."
The London-Frankfurt exchange is not the only emerging cross-border European exchange. The French, Dutch and the Belgians are also forming exchanges. Scandinavian exchanges have linked up and "the Baltics have almost concluded talks with Stockholm," Rozlucki said. The London-Frankfurt exchange has indicated it will accept the Milan and Madrid ones as expansion members in the next year, Rozlucki said, "so one would expect the smaller exchange, and we are much smaller, to get some real offers in 2002. On our side, we should be ready to jump."
He's not saying which exchange the WSE would join, if invited. In fact, Rozlucki isn't placing bets on what the exchange-market landscape will look like in two years, especially since "two years ago it was inconceivable that one corporation would run cross-border trading. I think that, two years from now, we will be equally surprised by developments."
What matters is that Poland is ready, with technology and systems and credibility in place, for this next step. The WSE's new third trading system network, to be launched in September, is the one now being used in the French, Belgian and Dutch exchanges. Rozlucki said the new system "has an open architecture," in contrast to the current one, "So we hope it will allow us to keep our strategic options open," he said.
New technology has powered the incredibly rapid transformations in all market economies, blasting open traditional country barriers to global trade and investments. Poland and Hungary, especially, have incorporated that new technology and attendant globalization into their own rapid change as they made tracks toward the West after a half-century "experiment" with Soviet-imposed state socialism. Most calculations before 1989 were done with the abacus; today, businesses and government alike have the most sophisticated computers in place. That is certainly true of the stock exchange and brokerage operations.
A stock exchange is also about confidence. A good one, which the outsiders have judged the WSE to be, has systems in place which give investors, large and small, the maximum amount of information that mysterious "transparency" about what's going on with the specific companies they want to invest in. The Polish Securities and Exchange Commission (KPWiG), modeled after the U.S. Securities and Exchange Commission, does that by demanding a lot of data from companies wanting to be listed and by continuing that scrutiny afterward. And investors real folks as well as international gurus putting money on the WSE set the prices through trade. That's a modern market.
