The Cyprus Stock Exchange (CSE) has set its sights on becoming the region’s leading specialist securities exchange and gateway to the EU capital market for small cap and non-European issuers.
A specialisation in niche markets has helped the development of the Cyprus Stock Exchange (CSE), and today international investors and issuers are increasingly recognising the CSE as a credible European listing location and a provider of high-quality ancillary services. With Cyprus’ economy returning to growth, projects in sectors such as energy, tourism and real estate, as well as a burgeoning fund industry, are spurring investor interest.
Full Suite of Services
The CSE offers fully computerised online trading, clearing and settlement, as well as access to the Athens Exchange through its Common Trading Platform. Through the same platform, Greek market participants (Brokerage and Custodians) are able to have access in the Cyprus Securities Market. The CSE has also introduced a new service, whereby non-listed companies can submit their registries for handling to the Cyprus Central Depository and Central Registry. A regulatory framework has also been prepared for the introduction of Global Depository Receipts (GDRs). These certificates are traded in international and developing stock exchanges and represent the ownership stake in a company which can be converted at any time to shares. A new innovative initiative has been the introduction of a system for the electronic online submission of applications for Listing by the issuers via the CSE’S website (online Application Portal).
A key strategy of the Cyprus Stock Exchange is one of regional growth and collaboration with neighbouring stock exchanges. The signing of Memorandums with other exchanges has provided the opportunity to collaborate on a wide spectrum of reciprocal issues of interest. These collaborations also contribute to creating comparative advantages and healthy competition, while also increasing awareness of smaller regional exchanges to large international institutional investors, in a bid to attract investments.
The total volume of trading on the CSE during 2015 was around €150 million, compared to €75 million in 2014. Total market capitalisation, including the Bonds Market, reached €5.7 billion in December 2015, compared to €8.4 billion at the end of 2014, showing a decrease of 32%. The financial sector was the largest group, as far as market capitalisation of the equity market, with 74.71%, followed by consumer services with 11.69%. The total number of securities traded in 2015 reached 2.6 billion, which constitutes a significant increase of 32.73%, compared to the previous year. Shares traded contributed around 26% of the total volume, while Corporate and Government Bonds contributed just over 74% of the total turnover. Investors primarily focused their interest on the shares of Bank of Cyprus Public Company Ltd and also on shares of Hellenic Bank Public Company Ltd, with 65% and 7.4% of the total value respectively.
Growing Economy Spurs Investment
The improving economic climate and the increase of business activities in Cyprus also bring benefits to the CSE. Specific sectors of the economy, such as banking, are under transformation and have successfully been recapitalised by the private sector – a fact that has instilled much confidence in the market and created new opportunities for the future. Other sectors of the economy, such as tourism, real estate and the implementation of large scale projects, are also expected to spur increased investor interest in the future. Another significant prospect is the oil and gas sector, where in the medium term a number of international organisations are expected to launch exploitation and commercial activities thanks to the hydrocarbons find in the EEZ of Cyprus. These promising sectors could enable foreign investors to geographically diversify their investments and operations. Similarly, new business and investment opportunities would arise as a result of a possible settlement on the political problem of Cyprus.
New Market Initiatives
In April 2015, the CSE brought significant changes to the categorisation and structure of its markets, with the aim of aligning itself with relevant international trends and the economic and market conditions in Cyprus. The new segments on the Regulated Markets are the Main Market, the Alternative Market, the Market of Bonds (Corporate), the Market of Government Bonds and the Market for Funds. In addition, the Emerging Companies Market (ECM) of the Cyprus Stock Exchange offers simplified listing criteria at a lower cost and is successfully attracting companies both locally and internationally. The boutique size allows the Exchange to provide a more personalised service at very competitive fees, particularly to companies too small to list on a larger exchange or who wish to gain initial experience with EU capital markets. The ECM Market is comprised of the Equities Segment and the Bonds Segment, and has proved resilient and successful in the last years, despite the adverse economic climate. With staunch efforts to continuously improve its service to the market and broaden the range of products and services, the Cyprus Stock Exchange has also amended the Council’s Regulatory Decisions and the OASIS Trading System, with the aim of creating two new markets in the Emerging Companies Markets: a Shares Market for issuers whose Registry is not kept with the Central Depository/ Registry and a Bonds Market for issuers, whose Registry is not kept with the Central Depository/ Registry.
Building an International Profile through Investment Funds
A CSE listing provides a number of advantages for fund managers and investors. The CSE is an EU-regulated and recognised exchange, which provides a better fund profile and credibility to investors. It has fast and simple listing procedures with minimum bureaucracy, advanced technology, infrastructure, flexibility and effectiveness at a low cost. There is great potential for listing Collective Investment Schemes, both UCITS and Alternative Funds (AIFs) on the Exchange, allowing fund promoters to attract greater interest from institutional investors. The CSE’s top priorities include the development of an Exchange Traded Funds (ETFs) Market. This, together with its other advantages such as Cyprus’ 12.5% corporate tax, access to European and other regional capital markets, could significantly help to further raise the CSE’s profile. The listing of UCITS units or shares and various other types of units of collective non-private investment schemes on the CSE became possible in 2012, following a relevant amendment of the Cyprus Stock Exchange Law. The Exchange amended its regulatory decisions to cover the listing process of these investment schemes (with or without trading) in December 2013. In regard to Alternative Investment Funds, Cyprus’ new fund framework allows the licensing of AIFs marketed to retail investors. Following an initiative taken by the CSE, an amendment to the legislation was brought into effect to also provide for the listing of AIFs on the CSE.
The CSE has a competitive pricing policy for both market participants and investors, with the potential to increase a fund’s investor base. Funds that obtain a listing can be more effectively marketed to investors and can therefore be considered as an eligible investment proposition for particular institutional investors, overcoming specific restrictions from investing in non-listed securities, or in investments that are not listed on a recognised exchange. A CSE listing also provides visibility and transparency to investors with the prices of Listed Funds posted on the CSE’s website and additionally disseminated to the market through the Exchange by major data vendors. Adequate price mechanism is provided, either through net asset value (NAV) postings or market prices, if traded. This parameter is important for fund managers who require a publicly quoted Securities Exchange price for their investments.
The Cyprus Stock Exchange has already accepted its first listings of 16 non-negotiated Collective Investment Funds – more specifically, two single scheme UCITS funds and 14 sub-funds of one UCITS umbrella scheme. In September 2015, an additional sub-fund was accepted, increasing the total assets under management of these Listed Funds to €60 million. With the sector gaining momentum, more funds are expected to follow. Since the beginning of 2014, Cyprus has already received a number of enquiries from fund managers interested in listing their funds on the Exchange, following the amendment of CSE’s regulatory decisions covering the listing process of investment schemes (with or without trading).
A Future of Growth
The small yet dynamic Cyprus Stock Exchange is continuously diversifying its activities and services, and is committed to enhancing the competitiveness and accessibility of Cyprus for foreign investors. The CSE is establishing itself as an integral part of the country’s growth strategy, supporting efforts to strengthen Cyprus’ role as both a regional business hub and a financial centre.
Updated: February 2016