Interview with Mr. Ivan Steriev | Macedonian Stock Exchange

Thursday, 3 December 2020


FEAS Secretariat spoke with the CEO at Macedonian Stock Exchange Mr. Ivan Steriev about the key strategic initiative of MSE, Listed SME research hub, SEE Link, the impact of COVID-19, and more. 

Armenuhy: Hello, this is FEASTalks and I am Armenuhy Hovakimyan, Deputy Secretary General of the Federation of Euro-Asian Stock Exchanges. Today I am in Skopje virtually and with me there is the CEO of Macedonian Stock Exchange, Mr. Ivan Steriev. Thank you, Mr. Steriev, for joining me.

Mr. Steriev: Hello, Armenuhy. Thank you for inviting me. 

Armenuhy: As this complicated year is coming to the end and we are going to the next year. What are the key strategic initiatives of Macedonian Stock Exchange that you are working in at this moment? And what are the goals for 2021?

Mr. Steriev: Although this year is very difficult due to the pandemic and all of these consequences, life goes on. So we have to think about the future, of course. And on your question, I can stress few of the strategic projects we are planning or already implementing regarding the forthcoming period.

The projects that are focused on improving the situation on the supply side of our market, e.g. are the development of the new code for corporate governance. We obtained some support from EBRD on this, as well. We, together with the consultants that were hired by EBRD (they are from the UK) are working on this new Corporate Governance Code with the aim that 2021 will be the year in which first, we will pass the Code formally, and then we will go with the comprehensive programme of training of our listed companies. Currently, we have around 100 listed companies.

So it’s quite an ambitious plan with some very important changes in the content of the Code. In our case, for some of the companies, the Code is mandatory. We should see what will be the future impact of the Code on these companies.

Some other things on the supply side. We are trying to set up a kind of pre-listing program, but for now, this is only at the very beginning because financing should be completed on that.

We are working on this new Corporate Governance Code with the aim that 2021 will be the year in which first, we will pass the Code formally, and then we will go with the comprehensive programme of training of our listed companies.

And also we are very active in promoting a functional crowdfunding scheme. Actually, we are in partnership with the Zagreb Stock Exchange. Because they, together with the Estonian company Funderbeam, already have an operational scheme. And we are trying to find some companies for this, of course, that will not be corporations, they will be limited liability companies. 

We think this is very important for our market in the long term because first, we are promoting this kind of financing culture. And also if we are successful, some of these companies in the long term can apply for listing as well.

On the demand side of the market, strategically, we are, as in all these years behind us, very devoted to the regional cooperation – SEE Link company. That is order routing cross-border platform here in Southeast Europe. Through that platform and through the regional cooperation in general, we were trying and we will try to attract more foreign investors in the market. Because not only in this COVID year but also before this year in particular, our market is mostly relying on domestic investors, on retail investors.So, we are lacking foreign portfolio investors and this is our main priority. 

And maybe at the very end about this question, we are also facing next year, a year in which the complete harmonisation of the legislation should take place. So, although Macedonia is not the EU country, strategically our government decided to go into full harmonisation of the legislation. So, although this is not our project, of course, as a stock exchange, the consequences for us and our members will be comprehensive and we will have to accommodate to all that.

So, I guess in 2021, the new legislation will come into effect and we will have to adjust our operation itself.

Armenuhy:  Very ambitious plans. Good luck with this.

Mr. Steriev: We are doing our best.

Armenuhy: Coming back, as you mentioned EBRD and the regional cooperation. The next question is about the one initiative you together with 6 partners and with EBRD launched this year. It was Listed SME research hub. Your exchange is among one of the partners. What’s the first impression and the feedback of this project after five months? 

Mr. Steriev: Thank you for this question, because if we are speaking about this year, one of the main achievements and positive developments were exactly deriving from this project.

So, we have our three blue-chip companies subject to this research project, again, supported and financed by EBRD. The company that is doing this research is Wood Investments. And actually, in our case, in the past, we did not have, unfortunately, systematic and continuous research of our shares. Now we have this in this project. And what is most important, it is not for the clients of this brokerage company, financial intermediary, but it is free of charge and publicly available to everybody. It is published in English language. So, actually, it is with potentially global reach.

We had inception reports of two of the three companies from Macedonia that took part in the project, one bank and one pharmaceutical company.They were publicly available in September and October. And it was really a very good impact. We were quite satisfied. The first recommendation was ‘buy and hold’, with price targets that were slightly above the current market price. So, definitely the turnover dynamics accelerated after publishing this report. Of course, now, in the next two years, it will be quarterly updates, flash notes and everything. So, it is very good for our market and the process of price discovery. I hope it will be additionally improved.

Also, which is strategically very important, we hope that these reports will also be a kind of stimulation or guideline for domestic financial intermediaries to start to do the same in the future with our main companies. So, for us it is a very good project and a good achievement until now.

Armenuhy: And what about the other project that you mentioned already, the SEE Link. Are these two projects connected? And what about SEE Link?

Mr. Steriev: SEE Link is a little bit older project compared with this one (the companies’ research) as SEE Link is in the same time project, but also it is a company. The company is based here in Skopje. The company is owned by Zagreb Stock Exchange from Croatia, Bulgarian Stock exchange (Sofia) and Macedonian Stock Exchange (Skopje).

We are owners of the company, but the company is actually running an order routing software platform who is connecting brokers’ systems or broker offices of our members. We were initiating members, but then a few other exchanges from our region joined which are Ljubljana Stock Exchange (Slovenia), Belgrade Stock Exchange (Serbia) and two exchanges from Bosnia, Banja Luka and Sarajevo Stock Exchanges. So now actually seven markets are involved. Few brokers from each market and they’re using this order routing platform to connect between themselves.

It is still an early phase, although a few years have passed. There are many challenges with the settlement, in particular. There are sporadic trades via the platform, from time to time. We learned that through this corporation, which is now not only in words, but it is more tangible, we have a company as I said, that we can not only work on this order routing platform for promotion and development but also opening other projects in order to strengthen the regional corporation. 

So, the research project was in a way add-on on the order routing platform. We discussed with EBRD who is a great supporter of the markets here in the region and in order to minimize information asymmetry between the markets we are trying to give the brokers and investors additional information about the regional companies. This research project was actually initiated by SEE Link and SEE Link’s website became the main source for dissemination of this companies’ research report. There is actually both indirect strategic connection between SEE Link and this project and also direct connection as we are actually disseminating this report through our website. The last development is that we will or EBRD will broaden the scope of the countries which are covered by this research project. SEE Link website will be a dissemination point now for some companies from the Baltic countries that are part of the research project. 

Armenuhy: So, you are growing with all your projects and I like the idea of combining all these strategic things in one global view. I really like this! 

All these strategic things are also related to technology. Where is your country standing in terms of adopting new technologies and new trends? In these trends adoption process where is your stock exchange? 

Mr. Steriev: We are from a small country. The size of the economy and the market is quite limited and, of course, although we’re following all these modern technology trends and developments, frankly the needs of the market and of the market participants are not in the extent like in the developed markets. 

On the other hand, one of the main challenges of all small markets is how to finance all these technology improvements. Directly answering your question – our main focus is to find ways to improve the technology of all market participants and not only ours as a market operator but also to our members. We are trying this in a centralized manner. For example, our Stock Exchange is, at the same time, the main IT provider of our member firms. The broker offices software of our members are actually provided by us. And we are trying to add as many features as possible and needed to this market and finance that and reimburse from the members afterwards. So, for example, the last project that we are considering, it is in the research phase, as in Macedonia liberalization of foreign exchange regime was done recently and our members for the first time had the opportunity to trade on behalf of their clients abroad, we are now trying to use the position we have as a software provider to our members in order to connect this software with some foreign markets, to put into this platform the market data, execution moduls etc. It is not very unique that stock exchange is supporting its members to trade at the other markets, but in our case, as this is an inevitable process, and we are software providers of our brokers, we are trying first, to assist them, and then open some new revenue streams for us.

Armenuhy: Great to know that you are also a provider and vendor for the whole market which is a trend for stock exchanges now to become also a technology provider. Good luck with this also. 

Mr. Steriev: Thank you! It’s quite a challenging and complex job.

Armenuhy: And about other challenges of this year. The challenges of the pandemic. How are you keeping the communication with your staff, with your members, with your partners to make them be positive, to move forward and to overcome these challenges?

Mr. Steriev: The short answer is – we changed the manner of communication. As everywhere everything is virtual via the internet, via all these platforms.  We are trying to have permanent communication with our members both bilateral but also in a multilateral way from time to time. 

We organized the kind of workshop via Zoom platform with all directors of our members and we are doing that from time to time. Trying even to reconnect brokerage community among themselves in this new environment.  More or less, this is the mechanism, not only for us as an exchange, but that all exchanges have in this new environment. 

And also, maybe I can share with you this as well, based on my previous answers we are using our position as a software provider because we also have these electronic trading modules for clients. Trading via Internet. As it is our software because of the pandemic we are giving that free of charge to the retail investors this year. This is very well received from the investor community because with this we are also protecting their health because it is home trading. 

As this year the turnover is quite okay considering the overall environment, the lost revenue is compensated with the increase of the turnover. This was very appreciated by our brokers and investors. 

Armenuhy: And the last question: in your personal opinion, what will life look like after a pandemic and what are the major challenges that we will face in the future?

Mr. Steriev: Very, very deep and essential question. First, it will depend on whether this pandemic solution will be gradual, which is most likely, or there will be some kind of sudden positive event or moment. I assume that it will be gradual because it is more rational to be like that. As consequences from the pandemic will not disappear very fast at one moment some of the consequences of the pandemic time will be kind of consequences after the peak of the pandemic as well.

Regulation of the IT sector will be more an issue in the future because it will be a logical question why societies are regulating the finance industry, pharmaceuticals, energy… and IT sector is becoming a crucial infrastructure.

To be more precise, some of the industries like the hospitality industry, travel and these sort of things, they will have their problems and will need an adjustment after the peak of the pandemic for sure. As some of these industries are quite interconnected with some other industries this will affect these businesses as well. That will actually change some habits both of the consumers and business people. It will be an interesting process as some of the changes will be irreversible, I suppose.

Second point that I can stress, which is widely known, is that digitalization, IT aspects of both businesses and private lives will be even more important. Which, on the other hand, will mean that maybe societies will have to watch developments of the IT sector and maybe the regulation of the IT sector will be more an issue in the future because it will be a logical question why societies are regulating the finance industry, pharmaceuticals, energy… and IT sector is becoming crucial infrastructure. So, maybe this issue will be raised. 

You know this is a very big question. I can touch other aspects, but I guess with this we can close my answer.  

Armenuhy:Thank you very much! 

Mr. Steriev: Thank you for the invitation, once again. We are very fond that we were part of the FEAS history. Currently, we are an Observer member. We are considering changing that and becoming again a member. So, glad to be with you!

Armenuhy: Thank you very much and we hope to have you and your stock exchange with us as a full member. Though you are a very good friend of FEAS and this is for the whole lifetime. Thank you very much.

Mr. Steriev: Thank you!