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WorldDecember 2 2013

New broom seeks to boost Bucharest bourse

The ousted chief of Warsaw Stock Exchange, Ludwik Sobolewski, has come in from the cold in his new role as head of the rival Bucharest bourse and is already making his presence felt. 
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New broom seeks to boost Bucharest bourse

The start of 2013 is a period Ludwik Sobolewski would probably prefer to forget. The long-time chief executive of the Warsaw Stock Exchange was sacked amid allegations of a conflict of interest, ending roughly six years at the helm of one of the largest bourses in central and eastern Europe. Mr Sobolewski allegedly approached companies listed on the exchange to invest in a film starring an actress who was also his girlfriend, according to reports.

He says that he views the episode as a personal conflict between himself and the Polish government, adding that he tried to manage the conflict of interest and he did not hide anything. But in the depths of winter, the architect behind the rise of the Warsaw Stock Exchange found himself very firmly out in the cold.

The sudden availability of one of central and eastern Europe’s top stock exchange executives did not go unnoticed outside Poland. By the middle of the year, Mr Sobolewski was back and this time heading up one of Warsaw’s local rival bourses in Bucharest.

Modest beginnings

The story of the Bucharest Stock Exchange has up until now been fairly modest. At the end of August, in terms of domestic market capitalisation, it sat behind the likes of Budapest, Prague and Vienna, and was one-10th the size of Warsaw, according to figures from the stock exchange.

Mr Sobolewski knows that increased liquidity is key to bringing more success to the exchange and has identified several key areas where change can affect its fortunes. Building confidence in the investment process is one of the first things on his list. He also aims to try to better educate the Romanian market and make the exchange an important tool for the economy.

The accessibility of the market, particularly to foreign players, poses another challenge to the development of the exchange. Mr Sobolewski wants to bring trading hours more in line with London by the end of the year and ease regulation relating to initial public offerings and the opening of securities accounts. He also aims to bring down the associated costs.

To push through these changes, Mr Sobolewski knows he will need help from influential people in the upper echelons of Romanian society, but he is confident he has the backing of key players. “One of the most optimistic phenomena I found in Romania is that although the market is very small, there is quite a big community of people that support this market,” he says.

“People from the administration are also there in this circle. A lot of people really pay attention and at least declare that they will help, that they will remove barriers, create better regulations and so on.”

Gaining ground

The government privatisation programme is something that is undoubtedly helping the Bucharest Stock Exchange and perhaps represents the best opportunity for the bourse to gain ground on local rivals. The successful listing of power generator Nuclearelectrica and the more recent flotation of gas producer Romgaz have added prestigious companies to the exchange. But the fact relatively low stakes were floated, between 10% and 15%, is something Mr Sobolewski hopes to convince the government to address in future.

Aside from the growing equities business, the exchange will attempt to develop its bonds market, according to Mr Sobolewski. “Bonds will probably be one of the most important projects in the quite near future,” he says. “Surprisingly, there was a strong demand for corporate bonds... in the recent past, but there is no special platform or exchange [in Romania].”

He also says he has held talks with the Romanian government about launching organised trading in government bonds. But the new enthusiasm for bonds does not stretch to the bourse’s derivatives market, which is set for suspension, with Mr Sobolewski focused on creating liquidity in the underlying instruments first.

He is, however, keen to promote a merger with domestic rival Sibiu Stock Exchange, which provides a venue for derivatives trading among other things. “It is something that should be done. It doesn’t make sense to have two exchanges in a country such as Romania,” he says.

The new man in charge in Bucharest sees promise in the prospect of building the venue’s expertise in three main sectors – energy, IT and agriculture – and believes that the bourse could even start to think about attracting companies from markets such as Greece, Hungary, the Balkans and even Kazakhstan.

And does competing with his former employers in Warsaw add some extra motivation to his task in Bucharest? Diplomatically, he prefers to emphasise the mutual benefits of Bucharest’s growth.

“I concluded that it would be better for [central and eastern Europe] to have more than one visible spot on the map within this investment territory,” concludes Mr Sobolewski. “I have this personal conviction that developing Bucharest, in a sense, [will] make something good for Warsaw and maybe... something good for the whole region.”

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