Marinos Christodoulides - Cyprus Profile

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Insights | 15 February 2019 | Cyprus Stock Exchange

Marinos Christodoulides, Chairman, Cyprus Stock Exchange (CSE)

The Cyprus Stock Exchange has a new dynamic board determined to take the Exchange to the next level. At its helm is Chairman Marinos Christodoulides, who says the key to future success is adapting to market conditions and opening new lines of service to attract more market participants.

What are the key goals of the Cyprus Stock Exchange (CSE) for 2019?

Our key goal for 2019 is for the CSE to play a vital role in the economy of Cyprus and in its business landscape. We are striving to attract new companies to list on CSE’s markets, so they may develop and expand their activities through raising the required capital. In this way new investment opportunities will also be provided to investors. In addition to its traditional activities, the CSE is at present focusing on new alternative areas and sectors, to enhance the markets, services and products that it offers.

What is the CSE’s long-term strategy to develop the Exchange further?

It is generally accepted that the economy of Cyprus and its businesses are facing a drastically changing world, with new challenges, opportunities and threats, and there is a need to adjust and compete accordingly. Therefore, the strategy of the CSE Council is to position the Exchange in line with the new directions of the economy and sectors that are showing strong performance. I strongly believe that the securities market should be able to provide the necessary tools and prospects to market participants to achieve their targets.  It should also provide regional market participants and companies the proper venue for listing and investing in a transparent and robust environment, within a business-friendly and effective system.

I would like to mention some areas in which the CSE is concentrating its efforts, which are mainly the funds industry, and the shipping and energy sectors. At present, the CSE together with the Athens Exchange, with which it has a common trading platform, is examining the possibility of creating a new Multilateral Trading Facility (MTF) market for listing bonds by shipping companies. Extensive market research has been conducted by a consultant appointed for this project and the CSE Council will soon review the relevant conclusions and suggestions to reach a decision for this project.

As far as the energy sector is concerned, the CSE has invested in the Hellenic Energy Exchange and holds a 10% stake in this Exchange. We believe that the respective needs of Cyprus in relation to the electricity market could be satisfied through the CSE’s involvement and through trading on the Hellenic Energy Exchange, where it would benefit from the expertise and services this Exchange already offers, as well as from significant economies of scale.

I should also mention that the Ministry of Finance has assigned an internationally recognised consultancy firm to prepare a study for the strategic planning of the Cyprus Stock Exchange, which is expected to be delivered by the summer of 2019.

Could you give a brief overview of the Regulated Market and the Emerging Companies Market?

The CSE currently operates a Regulated Market and a market in the form of a Multilateral Trading Facility – Emerging Companies Market (ECM) – for shares and bonds, which operates under the Cyprus Securities and Stock Exchange Law and the Investment Services and Activities and Regulated Markets Law (MiFID).

The Main Market, Alternative Market, Corporate Bonds Market, Government Bonds Market, Collective Investment Schemes Market and the Depository Receipts, are all segments of the Regulated Market. At present, listed on the Regulated Market are 66 International Securities Identification Numbers (ISINs) for shares, 27 ISINs for bonds and 18 ISINs for funds.

The ECM Market has segments for shares, bonds, shares whose registry is not kept by the Cyprus Central Securities Depository and Central Registry (CSD)and bonds whose registry is not kept by the Cyprus CSD, with 34 ISIN’s for shares and 27 for bonds listed in total.

Currently 22 Broker Firms, 15 Custodians and 56 Nominated Advisors are participants of the CSE.

What kind of instruments can be traded on the CSE and which ones are proving the most popular?

Shares, Rights, Warrants, Corporate Bonds, Government Bonds, Collective Investment Schemes and Global Depositary Receipts (GDRs) can be traded on the CSE. The most popular are shares and bonds.

How has the value of shares, bonds and other instruments traded on the Exchange performed in the last few years? And what figure does the total market turnover value stand at today? 

Unfortunately, the value of shares, bonds and other instruments traded on the Exchange, in general, was not at satisfactory levels during the last few years due to the effect that the adverse financial and economic conditions had on a large number of the listed issuers. For 2018 the turnover amounted to €132 million, which represents a year-on-year increase of 58.1%, compared to the turnover of €83 million in 2017. The daily average turnover for 2018 was €0.5 million per trading day in 2018, compared with €0.3 million in 2017.

What economic sectors are at present on the Exchange?

The Exchange has companies from quite diverse fields and namely I would like to mention the following sectors: basic materials, oil and gas, technology and telecommunications, consumer goods such as food & beverage and personal & household goods, consumer services such as retail, media, travel & leisure, from industry we have companies from the construction & materials segment, and financial sector players such as banks, insurance firms and real estate companies. The financial sector was the largest economic group with 65.47%, followed by the technology sector with 12.65% of the equity market capitalisation.

Has investor interest in domestic instruments that are listed and traded on the CSE seen a boost in the last year? How is the CSE promoting itself to potential new investors?

Unfortunately, investor interest in the CSE securities market stayed at low levels in 2018. Traditionally, the market interest was mostly concentrated in the banking sector. However, due to the adverse economic conditions that have prevailed in the market in recent years, this sector has suffered a lot. It has not yet managed to overcome its problems – especially due to the high level of non-performing loans – to be able to enter into sustainable growth and profitability and become a promising investment proposition for investors.

The CSE is promoting itself through different presentations in Cyprus and abroad to interested parties, potential new customers and market participants, as well as through personal visits and presentations to prospective issuers. In such presentations, the advantages of listing in Cyprus and especially on the Cyprus Stock Exchange, are analytically presented. We also have all relevant information, including the various listing requirements, available on the Exchange’s website to be as transparent as possible.

How is the CSE supporting the development of the investment fund industry in Cyprus?

Thank you for asking this question and giving me the opportunity to expand on this topic, which is at the centre of interest for many professionals in the market. Funds are a new and promising industry in Cyprus and much effort has been made by the authorities and market participants to attract both local and international funds for registration-licensing in Cyprus with the aim of promoting the country as a funds jurisdiction. The favourable environment provided by Cyprus’ attractive tax regime, the legal framework which is harmonised with EU Directives, and our numerous skilled professionals, provide a basic prerequisite for enabling the future growth of the funds industry.

The industry has already started to see growth and the Cyprus Securities and Exchange Commission (CySEC) has already approved and supervises a respectable number of funds, with a few billion under management. The Cyprus Stock Exchange has promoted several initiatives concerning funds. The CSE already operates two markets for listing of funds, the Market for Tradable Collective Investment Schemes and the Market for Non-Tradable Collective Investment Schemes. Listing provides visibility and transparency to investors, and the Exchange provides fast and simple listing procedures and a competitive pricing policy. 

In addition, the CSE is in the final stages of preparation to offer registry services to fund managers, which means maintaining the registry of unit holders in the CSE’s Central Depository and Central Registry in a dematerialised form, and handling redemptions and transfers of funds’ units.

Finally, I would like to mention that the CSE is also evaluating a very interesting project offering custody services for funds, either through the CSE itself, or through another entity which may be established.

What other economic sectors could benefit from using the services of the CSE, and how?

In addition to the sectors previously mentioned, additional economic sectors that could benefit from fund raising through the CSE and also increase their visibility to investors, are Renewables, Research and Innovation, the Education Sector and the Private Hospitals Sector.

What are your expectations for the CSE in the next five years?

We would like to see the Cyprus Stock Exchange becoming a more dynamic market, with potential for growth and further expansion. In my opinion, our efforts towards repositioning the CSE as an important tool for economic and business growth and expansion should also be assisted by market stakeholders and the authorities, with the provision of relevant incentives.

The CSE Council’s strategy is to continue to have simple listing procedures within its legal and regulatory framework and be quick and efficient, as well as to offer a competitive pricing policy. Additionally, it aims to continue to be responsive to new market needs, through a coherent policy of adapting to market conditions. I would like to mention that the CSE has an advanced legal and regulatory framework that complies with all EU Directives and internationally accepted practices. It offers a range of markets and products to accommodate various market needs.

Cyprus is a country that continuously and systematically strives to offer a diverse and investor friendly environment for foreign investments and its Exchange, as a recognisedtrading venue in the European Union, can additionally, act as a regional gateway for investors in our region. Thank you for giving me this opportunity to inform your readers about the Cyprus Stock Exchange.

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