Bucharest Stock Exchange Posted
FEAS Secretariat spoke with the President of the Board of Governors of Bucharest Stock Exchange Mr. Radu Hanga about the new developments of the capital market, major challenges during the global pandemic and how BVB is handling with them.
1. How is Bucharest Stock Exchange keeping up with the new developments and improvements of the capital market?
It is already widely accepted that in the last decade stock exchanges have become technology companies rather than financial companies. In this sense the pace of the development and innovation has been very quick and definitely it is not easy, particularly for a small exchange such as BVB to keep up with the changes. Not to mention the regulation layer which adds a lot of complexity.
I think it is critical, and this is our approach, to try to follow these changes in the context of your individual strategy and local specifics.
Our strategy is focused on supporting the growth of the Romanian companies by creating a stronger link between them and the available capital through developing the Romanian capital markets environment.
2. How will the partnership with EBRD in the scope of equity research program enhance the Romanian market?
The research project financed by EBRD covers a critical cog in the capital market landscape. Building a favorable capital markets environment for smaller companies has been a critical objective for many stock exchanges for quite some time. Nevertheless, the lack of research and the lack of incentives from the broker perspective to cover these smaller companies (particularly after the MIFID II implementation) proved to be a stumbling block. Without research, the visibility and the potential of these smaller companies is greatly diminished.
This EBRD project is trying to fill this gap and to provide high quality, independent research reports for some attractive companies that had very limited analyst coverage until now.
Furthermore, BVB is also considering steps in the same direction, looking for solutions to increase even more the research available for the Romanian companies and to make these reports more easily available for the investor community.
3. BVB recently launched the series of “Made in Romania” webinars. What are the main outcomes of these webinars and how are you valuing the importance of online webinars during the global pandemic?
Made in Romania is our flagship program dedicated to support the Romanian companies and it was a natural decision to launch the webinars, as all offline events moved to online, so that we continue to promote the capital market towards entrepreneurs as a perfect channel for financing the development of Romanian businesses. The webinars are addressed to both entrepreneurs and investors or potential investors, as they find out more about the guest companies to the webinars.
These webinars are gravitating around an interview with entrepreneurs that used the capital market to attract financing and we are presenting the human face of their businesses as well, their stories and their plans. Briefly, we let the entrepreneurs talk about financing on the capital market from their experience and they are accompanied by intermediaries that assisted them in the financing rounds.
The outcome is promising as the feedback from intermediaries is positive and they get more leads both from entrepreneurs interested in accessing the capital market as well as from potential investors that are interested in starting to invest on the stock market.
4. What are the major challenges that your organization has faced during the global pandemic?
As an organization, we thrive on communication, networking and visibility. We organize and we participate in many events regularly and we always try to stay as connected as possible to our partners and generally to the economic environment. We had to adapt to a fully online environment and we are still looking for the best options to be as visible and involved as possible.
On a business level, we can also say that pandemic slowed down some of our projects and it particularly brought a lot of uncertainty for the primary markets activity, which looked quite promising in the beginning of the year.
On the other hand, the volatility generated by the pandemic had a positive impact in trading volume, which went up by almost 30% yoy.
5. Today’s world is facing several challenges and how we all come together as a community will make a difference in moving forward. How are you encouraging your employees to stay positive and to avoid negativity in the workplace?
We at the Bucharest Stock Exchange are a small team and we work close together to pass through these uncertain times.
In the last months we as an organization, with the support and the implication of all our colleagues, adapted to the constraints brought by the pandemic. Many things changed, working from home became the new normal for part of the team. The digital transformation of the business and the importance of technology in the relation with the clients is more than ever on top of our priorities.
6. Does BVB have a business continuity plan or contingency plan in place to handle global outbreaks of pandemics?
We are particularly concerned with ensuring a robust and secure environment, including in volatile conditions, as well as with ensuring an adequate level of market stability.
Bucharest Stock Exchange has a plan for maintaining and continuing the activity, which takes into consideration various scenarios. The stock exchange will operate according to the Bucharest Stock Exchange Code.
There are various protection mechanisms implemented within the trading system of the Bucharest Stock Exchange, which ensure an orderly trading, such as: variation limits, automatic mechanisms for interrupting trading at the individual level of a listed company (volatility interruption).
The “volatility interruption” mechanism – applied to the most liquid shares listed on BVB – has the role of allowing active participants to absorb the flow of information and to act directly, depending on the new dynamics, offering the possibility that price variations in such conditions to be determined in a “participatory” way. These mechanisms act in conditions of increased volatility as market protection mechanisms, and the activations recorded in the current period had a prudential role and aimed at increased operational safety. Such mechanisms are widely found on European stock exchanges, being in line with ESMA’s specific requirements related to “circuit breakers”.
Stock markets have gone through financial crises in the past, and the experience gained by Bucharest Stock Exchange during the 2008-2009 financial crisis showed us that the market must remain open regardless of the magnitude of price volatility. Thus, investors, both institutional and individual, can adjust their portfolios, in an open, transparent informational and operational framework. Stock markets play a key role in ensuring price formation, transparency and liquidity. As well, another important role of the stock exchange is the access to complementary sources of financing for companies, which was seen in the past when other sources of financing were contracted.
7. After overcoming the COVID-19 outbreak, will you implement new strategies in your workplace to prevent the impact of possible virus outbreaks in the future?
BVB Business Continuity Plan includes measures for cases where the activity can no longer be carried out from the headquarters, a plan that involves among others the remote work, even from home. Given that the Business Continuity Plan is reliable and that high-risk scenarios have been taken into account in its creation, we can assure all capital market stakeholders that our activity is not disturbed by the evolution of COVID-19 in Romania.
8. In your personal opinion, what will life look like after COVID-19 pandemic? What are the major challenges that humanity will face in the near future?
I do think that the pandemic will have a meaningful impact in the way the world (and the business world) is going to move forward at least in a few dimensions.
First of all, what we see lately is that the distance is back. A world that seemed to become smaller and smaller in the last decades is now becoming more locally oriented, a trend that was already visible in the last years if we think about the US-China trade war and which is now accelerating.
The globalization process will probably suffer a setback on short-to-medium term even if long term it will probably return as a dominant theme.
Second, we see an accelerated trend towards a more contactless, digital economy.
This is again something which was already happening (we can think about the emergence of e-commerce giants like Amazon and Alibaba or the revolution brought by players like booking.com in the travel industry) and we expect to gain speed in the coming years and its adoption level to increase significantly in other industries (as medicine) and even at government level.
Third, what we will probably see is more government intervention even in the most liberal economies, as a consequence of the huge monetary stimulus we witnessed around the globe. This will probably also be temporary but will surely affect the way the business world operates in the coming years.
Fourth, at the business level we already saw significant changes in the ways companies are operating – more agility and flexibility, more attention to the digital distribution channels. These changes are probably here to stay and are going to make the difference between the winners and the losers of this crisis.
Overall, I think that once the dust of this crisis will settle we will pay more attention to the positive changes we have made and the world will become more resilient and dynamic going forward.