Moving in right direction
The Greek securities services market has in the past been something of a backwater. But recent market infrastructure and pensions reforms have given global custodians hope that there are good times ahead.
Like many other countries in Europe, Greece is facing a growing pensions liability problem and the government has been battling to reform the pensions landscape.
The lifting of restrictions on investment in foreign markets, for example, should help the pension market to improve and become more efficient, he says.
Alongside the reforms to the pensions laws, market authorities have also been focusing on improving the trading, clearing and settlement infrastructures in the country, with a view to positioning Greece as a regional hub, particularly for the Balkans region, says Alex Kartalis, general manager in Athens for BNP Paribas Securities Services. “Greece is the only country in the region that is a member of the Euro-zone and it has a much bigger market than nearby countries.”
From this month, three new sub-markets will operate on the Athens Exchange. The international market will list all of the large companies and will require strong corporate governance and listing rules as well as market capital.
The main market will list the remainder of companies except for the smaller caps, ones that are either facing financial difficulties or are traded at a very low price, or which have low free float. These companies will be in a sub-market called ‘Special exchange characteristics’. Both of these markets will have less stringent requirements than the international market.
Alexia Kazakou, senior securities market specialist at Citigroup Global Transaction Services in Athens, says an important development has been the establishment of an electronic trading link with Cyprus that will begin in January next year.
“The link will give Greek investors the opportunity to trade and clear on the Cyprus exchange and vice versa, without having to make further investments because the systems for trading and settlement will be the same as investors are currently using.”
Kazakou says the link is the start of the local authorities’ moves to set Greece up as a trading hub for the south-east Mediterranean Sea countries.
In 2003, the Athens Exchange signed memorandums of understanding (MoUs) with 13 exchanges in southeast and eastern Europe. The MoUs included agreements on training, information exchange, technological co-operation and business development.
On the clearing and settlement front, a real-time gross settlement (RTGS) system has been introduced in the fixed income securities market, which enables clients to receive real-time reporting and intraday settlement, says Kazakou.
The RTGS platform went live in June this year and allows real-time, final settlement, delivery versus payment (DvP) and gives users direct access to information regarding their transactions. During its first five days, the system settled more than 85% of all DvP transactions in real time.
The Bank of Greece says these settlement percentages are very high compared with those achieved in other European countries. The Bank of Greece says the success of the RTGS system demonstrates “the excellent organisation and co-operation between the Bank of Greece and the domestic and foreign credit institutions participating in the system; the efficient management of liquidity of the Greek credit institutions, acting either for their own account or as custodians of foreign financial institutions; and the full development of the Greek money and securities markets”.
In May, the Athens Exchange, in conjunction with the central securities depository and the Athens Derivatives Exchange Clearing House, launched a new process for settling failed trades that has the ultimate aim of providing a more favourable investment environment for foreign investors.
Among the measures it has introduced is a new stock lending product aimed at reducing costs, an extension of the time limit for the correction of erroneous transpositions to a custodian and the possibility of implementing the settlement of the failed trade by the next day.
“Based on an evaluation that FTSE International carried out in all developed markets, the new settlements appear to solve the problems that concerned international investors,” says an exchange spokesman.
“One of the changes we would like to see, and that we have been talking to local authorities about, is the creation of an omnibus account structure in Greece,” says Kazakou. “At present nominee accounts are not recognised, which makes it difficult for foreign investors to comply. It would also help if there were a central counterparty for the Greek market. There were talks in November 2002 about this, but there has been little progress.”