The newly-established European Wholesale Securities Market is an opportunity to establish a new business stream and product line for the Malta Stock Exchange, besides enhancing its international profile, MSE chairman Arthur Galea Salomone tells The Times Business in an interview.
The Malta Stock Exchange is pleased to have served as a catalyst for yet another important development in the financial services sector
The European Wholesale Securities Market (EWSM), formally launched on Tuesday, is a joint venture between the Malta Stock Exchange and the Irish Stock Exchange.
“The Malta Stock Exchange has been seeking to internationalise its operations and attract foreign listings to Malta for some time. We considered a number of options and came to the conclusion that, in the current context, pooling our resources with another exchange is the more effective route to take. The European Wholesale Securities Market will in fact combine the best of each partner’s processes and technical skills,” Dr Galea Salomone says.
“We will contribute our regulatory, licensing and technical infrastructure as well as our expertise as a secondary market operator. The Irish Stock Exchange will bring their experience and reputation as product developers, market promoters and service providers. By pooling our resources in this manner, EWSM will be in a position to provide a highly professional outfit, a competitive pricing structure and a compelling offering for international customers. Together we will be able to achieve what the shareholders could not have achieved as cost effectively had they gone it alone. It’s a case of 1 + 1 = 3.”
Dr Galea Salomone says the EWSM will target arrangers and issuers of wholesale fixed income products intended for professional investors. EWSM will therefore have a different customer base to the MSE’s existing business which is domestic market oriented.
“EWSM is neither an Irish market nor a Maltese market. It is an international market aimed at a global client base. We believe that its establishment in Malta will not only be beneficial to the Exchange but it will create broader opportunities within the services sector, enhancing the development of Malta as an international financial services centre of repute.”
He says the Malta Stock Exchange has had a very good working relationship with the Irish Stock Exchange that dates back to the MSE’s establishment 20 years ago when it looked towards Dublin to assist in the setting up of some of its compliance processes.
“While the Irish Stock Exchange is much larger than the MSE, there are many commonalities between the two Exchanges and, therefore, the ISE is a natural partner for us. Both countries are EU and eurozone members. We share a similar legal and regulatory system, as well as a common language. The Irish Stock Exchange, on its part, has seen Malta’s steady growth as a reputable financial services centre in Europe, the robustness of Maltese financial services regulation and the strengths of the MSE, all of which factors rendered Malta an optimum venue for this new market.
“The international financial services industry is of course very competitive but the European Wholesale Securities Market is an example of cross-border co-operation that makes good use of the EU’s single market for financial services and makes commercial sense for both partners,” he says.
Asked if the MSE explored this concept with other stock exchanges before opting for Ireland, Dr Galea Salomone says that it was immediately evident that for an initiative of this nature the Irish Stock Exchange was a natural choice. The ISE’s expertise in bringing structured debt products to market is internationally recognised, he points out. In addition, the shared language and complementary skills created very attractive conditions to establish a joint venture with the Irish exchange.
He adds: “The Malta Stock Exchange co-operates with other exchanges and organisations in areas of mutual benefit, an example is our recent partnership with Deutsche Borse in relation to the Xetra trading system, which will now facilitate access to our market. We have also launched a new Clearstream settlement link. The Clearstream settlement network now covers more than 50 domestic markets and hence access to the Maltese securities market has been greatly enhanced. We are therefore leaving no stone unturned to put in place an infrastructure which facilitates internationalisation.”
He says the Irish Stock Exchange’s knowledge and expertise were “invaluable” in bringing the European Wholesale Securities Market to fruition.
“Throughout the last months, there has been very intensive collaboration with our colleagues at the Irish Stock Exchange in the planning and delivery of this new market. We’re very pleased to team up with the Irish Stock Exchange for this joint venture. This partnership complements the MSE’s domestic business in Malta and helps us diversify our business, generate new income streams and grow our business to the benefit of both joint venture partners. We would be very happy to explore additional avenues of co-operation but right now our focus is to create a successful European Wholesale Securities Market via this joint venture.”
Dr Galea Salomone says revenues in the start-up phase will be modest but their aim is that the new market, over time, will account for revenues which in the context of our operation will be material.
“We are confident that the joint venture will satisfy a demand that is not currently served by existing markets. Our challenge is to market the European Wholesale Securities Market successfully to potential customers. These are difficult times, admittedly, but challenging times provide opportunities and we believe that the knowledge and expertise of the shareholders, coupled with the experience and guidance of the board of directors provide the right ingredients to enable EWSM to deliver a cost-effective and efficient market.
“As co-promoters of this new market, the Malta Stock Exchange is pleased to have served as a catalyst for yet another important development in the financial services sector.”
He says the European Wholesale Securities Market is an example of cross-border co-operation that makes good use of the EU’s single market for financial services and makes commercial sense for both partners.
The European Wholesale Securities Market is aimed at arrangers and issuers of wholesale fixed income products in EU countries. The securities eligible for admission to trading on the newly established market will be debt securities which are deemed suitable for professional investors operating in wholesale markets only and will not be sold to retail customers. EWSM is an EU regulated market, established and authorised in Malta, which will be supervised by the Malta Financial Services Authority.
The Malta Stock Exchange has a 20 per cent stake in the newly formed company, besides acting as market operator and provider of secondary market services to EWSM. The Irish Stock Exchange, which has an 80 per cent stake in the company, will act as the market promoter besides providing primary market infrastructure and other corporate services to the EWSM.
Michael Bonello, former Governor of the Central Bank of Malta, was nominated by the MSE to the board of directors of the EWSM, while the two directors nominated by the Irish Stock Exchange are Padraig O’Connor, chairman of the Irish Stock Exchange and Fabrice Demaringy, who from 2002 to 2008 was the secretary general of the Committee of European Securities Regulator, the predecessor of the European Securities and Markets Authority.