FIRST SOUTH EAST EUROPE CORPORATE GOVERNANCE ROUNDTABLE Stock

FIRST SOUTH EAST EUROPE CORPORATE GOVERNANCE ROUNDTABLE Stock Exchanges in South-Eastern Europe Dr Panayotis Alexakis, President Athens Stock Exchange & Athens Derivatives Exchange Bucharest, September 21 2001

Selective information on Athens Stock Exchange and Greek Capital Market. Ø Ø Ø Ø Hellenic Exchanges S. A. (listed in ASE) Athens Stock Exchange (ASE) Central Securities Depository (CSD) Athens Derivatives Exchange (ADEX) Athens Derivatives Clearing House (ADECH) Thessaloniki Stock Exchange Center (TSEC) Systems Development and support (ASYK) Training Center 2

l Products Ø General Indices (2), Sectoral indices (16), FTSE –ASE indices (3), Derivatives (futures, options, stock lending – borrowing) International indices, MSCI developed market indices (from 31. 05. 2001) Ø Ø 3

l Brokerage Firms: 90 l Listed companies: 352 4

Sectorial Breakdown 5

Capitalisation to GDP (%) 1998 1999 2000 64. 2 177. 2 99. 7 2001 (End August) 90, 4% 6

Evaluation of the General (main market) index 7

Current Situation l Developments in local (national) exchanges. l Objectives to be followed. Depth of the markets, raising of regulatory standards, convergence. l Vision of each exchange: safety and reliability. l Mission of each exchange: lever for economic development. 8

l The economic potential of the region. l Strong growth prospects, need for company finance. l The importance of efficient stock market mechanism in order to activate and channel savings by both local and foreign investors. 9

What are the developments in the European securities market l Rising of competitiveness among exchanges. To attract investors and good companies. 10

The challenges of Stock Exchanges l Increase visibility l Attract new issuers and investors l Broaden product range l Define strategy Vertical silo? Horizontal integration? 11

Strategic Options l Go it alone? ØIndependence, identity, flexibility, adjustment ØInvisible to investors, marginalisation, way lose liquidity, costs. 12

l Mergers among exchanges ØAccess to international markets, to advanced trading and clearing systems, reduction of costs synergy, liquidity Ø Lose market control, volume of transactions on certain stocks – lose visibility, possible conflicts of interest, lack of local strategy. 13

l Alliances with other exchanges 1. Use of single trading – clearing systems, liquidity, marketing agreements, control over strategy, benefit from partners strength. 2. Between independence and merger, not a full integration, no full benefits, loose agreements, costs. 14

l Mergers with other small exchanges Ø May improve liquidity, reduce costs, control, flexibility. Ø Lack of genuine critical mass, visibility liquidity. 15

There is no one, best, solution. Different economic conditions for each country, legal framework, rules, governance, systems, level of capital market development, convergence. All render cooperation agreements a difficult issue. However, we must be optimistic, for future cooperation. 16

Objective: To attract liquidity, remote members, cross membership, cross listing. The European securities markets pass the message: Cooperation between exchanges, cooperation among members (brokerage firms, cross membership, common trading systems). 17

South – Eastern European Stock Exchanges l There is future for them in Europe. This mainly stems from the economic potential of the region. That means that local exchanges manage this potential so that it is not lost to other exchanges. Marginalisation has to be avoided. 18

Strategy to be followed l Good listed companies of the appropriate size, free float and marketability of stocks, in addition specialisation of exchanges on certain economic sectors identified for S. E. Europe Exchange. Emphasis on company disclosure, corporate governance. l Reliability. Good regulatory framework, effective supervision, transparency. 19

Safety: Efficient trading, clearing and settlement systems. l Investor confidence raising in local and regional market. Extensive education and training of potential local investors. Seminars, printed material, books, booklets, leaflets, advertisement, investor guides, encouragement long – term investor horizon. l 20

l Role of brokerage firms, analysis, underwriters, mutual funds on investor training, investor portfolio management, company listing. l Cooperation among exchanges and integration which is the fastest way for local stock market development 21

Form of cooperation: Start with the softest approach: Minimum regulatory framework on stock market issues. ü Cross membership, with local trading and clearing. ü Local trading and clearing remains. National stocks keep traded on local exchanges. ü However, through interface development, each exchange presents on line real time information on other exchanges, investors of each country can invest on other countries stock exchanges. ü 22

ü At the same time foreign investors can consider more directly S. E. Europe stock market as one market. ü Construction of transnational (combined) stock indices and marketing of them. 23

l Let us start with working groups technological cooperation, regulatory issues, education and training cooperation, product development, company listing, membership issues. l ASE is ready to cooperate on this direction. 24

l ASE strongly holds that there is mutual benefit for all exchanges which operate autonomously in this proposed integration framework. l ASE holds that S. E. Europe exchanges have to act for this cooperation as fast as possible, keeping investors and S. E. European companies active in our exchanges. 25

For more information: http: //www. ase. gr Thank you for your kind attention 26