Outlook 2020+

The implementation of the strategy #GPW2022 is an on-going process. The initiatives under implementation are monitored and reported monthly and quarterly to the GPW Management Board and the Supervisory Board.

1. Macroeconomic conditions in Poland and globally

Global growth slowed down in 2019 as international trade dwindled in the wake of the trade wars (USA vs. China) and uncertainties on the economic and political front. Poland’s economy performed much better in 2019 than expected early in the year. GDP growth in Poland was 4.1 percent in 2019.

In early 2020, global economic growth remained low but stable. However, with the spread of the coronavirus, the outlook of the global economy sharply declined. Containment measures imposed by many governments, including transport and service restrictions, combined with declining consumer and business sentiment, weakened the activity across many economies. In this context, many governments announced fiscal measures to mitigate the economic impact of the coronavirus and business interruptions. The leading central banks strongly relaxed the monetary policy.

The conditions in the Polish economy were relatively favourable in H1 2020. On 18 March 2020, the Polish government presented a support programme composed of five pillars (known as an “anti-crisis shield”) to support the economy and mitigate the impact of the coronavirus. According to estimates, the programme is worth PLN 212 billion (ca. 9% of GDP).

2. Implementation of the GPW Group strategy

In 2020, the GPW Group will continue to pursue strategic initiatives under the Strategy #GPW2022 aiming to improve the functioning of the key business pillars of the GPW Group (equity market, debt market, derivatives market, commodity market, information services for investors and issuers) and to further develop new business areas, in particular relating to technological development of the GPW Group. It is our aspiration to continuously grow our customer base, deliver new products to investors, and offer technological solutions which ensure state-of-the-art reliable services on the capital market. According to the dividend policy, GPW is planning to pay dividend equal at least to 60% of the consolidated net profit of the financial year attributable to the shareholders of GPW adjusted for the share of profit of associates. The dividend from the net profit of 2019 was PLN 2.4 per share. The dividend from the profits of 2020-2022 will increase by at least PLN 0.1 per share every year.

Strategic Events H1 2020:

• The GPW Group has launched an agricultural commodity trading platform. The platform is a pioneering project, part of the Government’s Strategy for Responsible Development.
• As of May 2020 market participants have entered into transactions on the Organized Trading Facility (OTF) operated by TGE. The implementation of the OTF was associated with the need to adapt the operation of the Exchange to the MiFID2 requirements. The OTF complements the existing offering of TGE. OTF is a multilateral system, other than a regulated market or an alternative trading venue, which matches third-party bids and offers in a arbitrary manner. The trading on the OTF may cover various instruments (including structured financial products, emission allowances, derivatives) as well as wholesale energy products which must be subject to physical delivery.

3. ESG (Environmental, Social and Governance) development

In 2019, the GPW Group focused on ESG initiatives. Being aware of its corporate responsibility, the GPW Group is planning to contribute to the development and promotion of the rules of sustainable development on the Polish capital market in 2020. In the coming years, we are planning to pursue initiatives supporting issuers and investors in order to ensure necessary communication and understanding of the role and importance of ESG. As a public company, GPW will focus on ESG across its organisation. We are planning to further develop GPW’s product range incorporating ESG aspects and to establish co-operation in CEE to develop new solutions.

The Warsaw Stock Exchange (GPW) has become a member of the UN Global Compact, the biggest global initiative of the UN Secretary General which brings together sustainable businesses. GPW has decided to join the UN Global Compact as a participant in order to use the experience and expertise of the international organisation and, in near future, to promote knowledge of ESG factors among issuers on the exchange and to establish a competence centre for the development of strategic programmes and financial products, including indices, ensuring that the national environment, social and governance goals can be met.

4. Activities addressed to investors

With uncertainty triggered by the COVID-19 pandemic and the resulting market volatility, turnover in all categories of products traded on the markets operated by GPW increased. 73,465 new investment accounts were opened in H1 2020. It is our priority in the coming months to keep up the interest of individual investors in GPW’s offer. With this in mind, we have intensified educational and promotional initiatives addressed to those stakeholders. To boost the interest of individual and institutional investors in SMEs, GPW has decided to expand the Analytical Coverage Support Programme from 39 to 51 companies. Improved access to up-to-date free-of-charge research reports is a key driver that could strengthen interest investor in this segment. In April 2020, GPW initiated a series of virtual roadshows dedicated to investors in Asia, USA, and Europe. The roadshows aim to attract new investors and reach out to global market players with information concerning GPW-listed companies. In view of growing market liquidity, GPW is engaged in negotiations with algorithmic traders who could join the exchange, for instance under the HVP/HVF programmes.

5. Product development

It is always our priority to develop new products. In 2020, we are focusing on boosting interest in passive investments and introducing new ETFs to the GPW market. To that end, we are engaged in talks with several existing and prospective issuers. We continue to add new ETPs available to individual investors, in particular in the most popular commodity segments including WTI and Brent oil. We are working to open trade in single-stock options with physical delivery as an interesting alternative for both institutional and individual investors.

6. New issuers

GPW’s two equity markets saw 22 new listings in 2019 (including five companies transferred from NewConnect to the Main Market) vs. 22 new listings in 2018. Two companies were newly listed on the Main Market and four companies on NewConnect in H1 2020. GPW expects new flotations in H2 2020. To attract new issuers, GPW is implementing a strategic initiative, GPW Growth, which supports the development and transition of SMEs. The first edition of GPW Growth closed in July 2020 and the next edition is open for applicants.

7. Technological development

In view of development trends of trading system technology and digital transition, GPW initiated a research and development project in September 2019 which will develop a proprietary, modular, scalable trading system dedicated to GPW and its subsidiaries as well as foreign exchanges in Central and Eastern Europe (CEE) which are looking for IT solutions matching their needs and specificity. According to the development strategy for the Polish capital market, of which the Exchange is a core institution, a proprietary IT solution optimises costs and risks inherent in the operation of a platform. The project may generate significant capital expenditure of the Company, which will be partly refinanced with a grant from the National Centre for Research and Development. The project aims to replace the legacy system UTP, in operation for seven years, and to change the technology currently in use within 4 – 5 years. The project will deliver a solution matching the needs of the market and the Polish capital market development strategy, ensuring optimisation of IT costs of the system and other costs indirectly linked with trading on the primary and secondary market. The project addresses the needs reported by the GPW Group and other foreign financial market institutions which want to put in place a system offering superior reliability combined with additional functionalities. As a result, the project aims to tailor the trading system to a smaller scale of business carried out by CEE exchanges. That will eliminate fees paid for functionalities which are not relevant to the markets but are provided as an integral feature of systems delivered by large vendors. In addition to a technology upgrade, the functionalities of the new system will provide market participants with new opportunities of development and trade in various instruments. The project research work is divided into several phases, including industrial research, development work, as well as pre-implementation. The industrial research phase scheduled for Q2 and Q3 2020 will design and implement a key system component: the data distribution module.

The introduction of state-of-the-art innovative tools supporting market data analysis and investing as well as further development of modern trading formats such as algorithmic trading is a key trend prevailing on the capital markets. The share of algorithmic trading in equity trading on GPW is close to 10% as compared to approximately 70% on the biggest trading venues in Europe and the USA (2018 figures). The implementation of structured data processing systems on some of the global capital markets has boosted the interest of investors in listed stocks and improved the trading volumes in stocks which used to remain below the investors’ radar.

GPW Data, a project launched in late 2019, follows that trend. The project aims to develop a repository of a wide range of data, including mainly financial and non-financial reports of companies listed on NewConnect in accordance with the electronic reporting standard in the inline eXtensible Business Reporting Language (iXBRL). In the next step, the repository will expand top cover additional categories of information relevant to capital market participants including prices, social reports, macro data.

Another key part of the GPW Data project is to develop an application supporting investment decisions. The application to be offered to investors will be based on machine learning and artificial intelligence to enable capital market participants to make faster optimised decisions when investing on the exchange. The GPW Data system will support fast access to, analysis and processing of market data, as well as the development of investors’ proprietary trading algorithms based on AI.

The GPW Data project budget includes a subsidy provided by the National Centre for Research and Development using EU R&D funds. The project is a part of GPW’s strategic initiatives and it is related to the Exchange’s information services business segment. Its development is key to the diversification of revenue of the GPW Group.