I would like to thank Lino Spiteri for his article on the Malta Stock Exchange published in The Times Business of July 12. During the past years, the Exchange has made great strides to reach the present stage of viability. On the other hand, the Exchange is still lacking both in terms of the number of companies listed as well as in the product range available to investors. I can assure him that this is not due to lack of trying on the part of the Exchange.
I believe that there are two key issues that have to be addressed when trying to convince companies to approach the market.
Most entrepreneurs are concerned that issuing shares to the public would possibly result in loss of control over their company. The majority of local companies are small and family-owned and introducing outside shareholders who do not form part of the family group is widely seen, rightly or wrongly, as a loss in the degree of family control. The costs and effort involved in upgrading the management and operational structures to the levels required in a listed company, may sometimes also appear to be too onerous. In other words, the local culture of setting up public companies is very fragile, and this, of course, impacts negatively on the activities of the capital market in Malta.
I personally believe that the disciplines required of a listed company, the higher standards of corporate governance and the enhanced levels of disclosure and transparency actually promote better management of the company and lead to higher profitability.
Companies tend to prefer raising finance through the commercial banks rather than having to go through the regulatory rigours and incurring the professional and advertising costs required when going directly to the market.
During the last 18 months, we have approached a good number of local companies in order to explain what the listing process actually entails for the company. An obvious example where the market facilities provided by the Exchange can be utilised is by providing an exit route to the minority shareholders of fourth and fifth generation companies who are locked in and sometimes subjected to the will of the majority shareholders. Furthermore, the pricing mechanism of the market ensures that those shareholders, who actually choose to go down this exit route, can do so at a fair price.
We are obviously also targeting our efforts on those projects requiring significant levels of finance. At the same time, however, we have also approached a number of foreign companies operating in Malta to come to our market with a corporate bond. I firmly believe that if such companies had to offer their securities to the public, they would be providing a tangible sign of the "commitment to the local economy" mentioned by Mr Spiteri .
The current state of the market is such that equity trading volumes are down on the record levels touched last year. Overall turnover levels were, however, sustained by higher levels of fixed income security trading, mainly government paper as can be seen from the trading summary covering the first six months of the year.
Markets tend to operate in cyclical patterns and the alternating dominance of the bulls and the bears is at the basis of stock exchange market movements worldwide. Of course, the size of the market is a constraining factor to the smooth interplay of supply and demand and this is why our main priority is to bring new companies to the market. The adoption of the Euro next January will obviously effect the operations of the Exchange. It has also affected its future plans and its market strategies, just as much as it will influence the decisions of Maltese investors and issuers who are, of course, the main actors in the market.
I think that it is pertinent to note here that trading at the Malta Stock Exchange represents a fraction of the global trading in financial assets that is carried out by Maltese investors. In order to be able to compete successfully with other investment alternatives as they come onstream with the removal of traditional barriers such as the exchange rate risk, we also need to be more efficient, providing better and wider services and at lower costs.
In the light of the rapidly evolving environment, the Exchange is implementing a number of measures, both in terms of strategy and infrastructure, designed to strengthen and streamline its operations and to widen the available range of services so as to be competitively placed to meet the new challenges and opportunities coming on stream as we move towards the Single Market in Europe.
We are reviewing our corporate structure, building on what we see as our major strengths; our human resources, a sound operational framework, compliance with international standards and a strong public image carefully fostered over the past 15 years. At the same time, we are working hard to bring in new listings and to offer new products and services to our clients, efficiently and at a lower cost not only on a domestic level, but also internationally.
We are well advanced in our plans to create a group structure aimed at creating a flexible organisation in terms of the transparent segregation of the key activities of the Exchange and, at the same time, establishing the appropriate platform for bringing on board the private sector. The restructuring exercise will move the Exchange from the current rigid governance structure set out under the Financial Markets Act into a modern and flexible company-style governance model under the Companies Act.
At the same time, we are also looking at new rules based on those of the hugely successful AIM market in London. We are continuously investing in our technological infrastructure in order to increase levels of connectivity with mainstream EU markets. We are making efforts to introduce foreign companies on our market and to widen the range of financial instruments available to investors by taking advantage of new legislation relating to securitisation and pension schemes. We are glad to see the government take the initiative with regards to the issue on the market and the eventual listing of a Lm20 million securitisation instrument as announced in the Budget speech.
I am sure that the signal given by government will be picked up by the private sector and that the business opportunities that have become available as a result of this legislation will widen the range of financial instruments available on the market. The choice will also become wider once a number of equity and bond issues hit the market in the next few months.
We have recently introduced short-term paper on our market in the form of Treasury Bills and we are currently working on the introduction of market-making and short-selling facilities on our market. In short, we are working in different directions to make the Exchange an institution worthy of the utmost respect both locally and internationally as a modern, effective and highly relevant instrument in the development process of the country.
• Mr Zammit Tabona is chairman of the Malta Stock Exchange.
I believe that there are two key issues that have to be addressed when trying to convince companies to approach the market.
Most entrepreneurs are concerned that issuing shares to the public would possibly result in loss of control over their company. The majority of local companies are small and family-owned and introducing outside shareholders who do not form part of the family group is widely seen, rightly or wrongly, as a loss in the degree of family control. The costs and effort involved in upgrading the management and operational structures to the levels required in a listed company, may sometimes also appear to be too onerous. In other words, the local culture of setting up public companies is very fragile, and this, of course, impacts negatively on the activities of the capital market in Malta.
I personally believe that the disciplines required of a listed company, the higher standards of corporate governance and the enhanced levels of disclosure and transparency actually promote better management of the company and lead to higher profitability.
Companies tend to prefer raising finance through the commercial banks rather than having to go through the regulatory rigours and incurring the professional and advertising costs required when going directly to the market.
During the last 18 months, we have approached a good number of local companies in order to explain what the listing process actually entails for the company. An obvious example where the market facilities provided by the Exchange can be utilised is by providing an exit route to the minority shareholders of fourth and fifth generation companies who are locked in and sometimes subjected to the will of the majority shareholders. Furthermore, the pricing mechanism of the market ensures that those shareholders, who actually choose to go down this exit route, can do so at a fair price.
We are obviously also targeting our efforts on those projects requiring significant levels of finance. At the same time, however, we have also approached a number of foreign companies operating in Malta to come to our market with a corporate bond. I firmly believe that if such companies had to offer their securities to the public, they would be providing a tangible sign of the "commitment to the local economy" mentioned by Mr Spiteri .
The current state of the market is such that equity trading volumes are down on the record levels touched last year. Overall turnover levels were, however, sustained by higher levels of fixed income security trading, mainly government paper as can be seen from the trading summary covering the first six months of the year.
Markets tend to operate in cyclical patterns and the alternating dominance of the bulls and the bears is at the basis of stock exchange market movements worldwide. Of course, the size of the market is a constraining factor to the smooth interplay of supply and demand and this is why our main priority is to bring new companies to the market. The adoption of the Euro next January will obviously effect the operations of the Exchange. It has also affected its future plans and its market strategies, just as much as it will influence the decisions of Maltese investors and issuers who are, of course, the main actors in the market.
I think that it is pertinent to note here that trading at the Malta Stock Exchange represents a fraction of the global trading in financial assets that is carried out by Maltese investors. In order to be able to compete successfully with other investment alternatives as they come onstream with the removal of traditional barriers such as the exchange rate risk, we also need to be more efficient, providing better and wider services and at lower costs.
In the light of the rapidly evolving environment, the Exchange is implementing a number of measures, both in terms of strategy and infrastructure, designed to strengthen and streamline its operations and to widen the available range of services so as to be competitively placed to meet the new challenges and opportunities coming on stream as we move towards the Single Market in Europe.
We are reviewing our corporate structure, building on what we see as our major strengths; our human resources, a sound operational framework, compliance with international standards and a strong public image carefully fostered over the past 15 years. At the same time, we are working hard to bring in new listings and to offer new products and services to our clients, efficiently and at a lower cost not only on a domestic level, but also internationally.
We are well advanced in our plans to create a group structure aimed at creating a flexible organisation in terms of the transparent segregation of the key activities of the Exchange and, at the same time, establishing the appropriate platform for bringing on board the private sector. The restructuring exercise will move the Exchange from the current rigid governance structure set out under the Financial Markets Act into a modern and flexible company-style governance model under the Companies Act.
At the same time, we are also looking at new rules based on those of the hugely successful AIM market in London. We are continuously investing in our technological infrastructure in order to increase levels of connectivity with mainstream EU markets. We are making efforts to introduce foreign companies on our market and to widen the range of financial instruments available to investors by taking advantage of new legislation relating to securitisation and pension schemes. We are glad to see the government take the initiative with regards to the issue on the market and the eventual listing of a Lm20 million securitisation instrument as announced in the Budget speech.
I am sure that the signal given by government will be picked up by the private sector and that the business opportunities that have become available as a result of this legislation will widen the range of financial instruments available on the market. The choice will also become wider once a number of equity and bond issues hit the market in the next few months.
We have recently introduced short-term paper on our market in the form of Treasury Bills and we are currently working on the introduction of market-making and short-selling facilities on our market. In short, we are working in different directions to make the Exchange an institution worthy of the utmost respect both locally and internationally as a modern, effective and highly relevant instrument in the development process of the country.
• Mr Zammit Tabona is chairman of the Malta Stock Exchange.