Regional central clearing will boost eastern Europe bourses-EBRD
SOFIA (Reuters) - Small and low liquidity bourses in eastern Europe could attract foreign investors and boost volumes and liquidity at a lower cost if they sign up for regional clearing, the European Bank for Reconstruction and Development (EBRD) said.
The bank is facilitating the connection of countries in central and Eastern Europe to one of the four central clearing counterparties (CCPs) that meet EU regulations already set up in Athens, Warsaw, Budapest and Vienna and hopes at least one country will seal such a contract next year.
Central clearing of bourse-traded securities absorbs credit risks and makes it operationally easier for foreign investors and remote players to enter small capital markets like the ones in Bulgaria, Romania, Slovakia or Croatia.
"Investors at present do not have emerging markets in their headlights, not even the smaller EU countries," Hannes Takacs, senior manager at EBRD's local currency and capital markets development said on a visit to present the plans in Bulgaria.
"We want to assist with joint efforts to bring the markets in the region back on the investor radar," he said.
Austria's clearing house is already in talks with the Czech Republic, while the other three clearing entities have already started to approach the countries in the region, Takacs said, adding he hoped the first deal can be signed next year.
Joining an established clearing house that operates under EU regulations can save up to 90 percent of an upfront investment of about 10 million euros needed to create a national clearing house, an EBRD report showed.
"Establishing a clearing house that can maintain European standards does not happen from one day to the next and it also involves very significant investment," said Gyorgy Dudas, chief executive of Hungary's central securities depository KELER.
"Another notion behind this initiative is whether these markets, which are not very large individually, can sustain their separate clearing houses," he said.
The plan is still in the early stages, with both clearing houses and countries weighing risks linked to costs, different legal systems, currencies and the impact on local broker industries.
"It is not impossible, but cannot be implemented by an order from above," said Dariusz Marszalek, an official with the Central Securities Depository of Poland.
Bulgaria, which has a small and illiquid stock exchange, will first debate the issue with local market players, Vasil Golemanski, chief executive of Bulgaria's central depository, said.
"We need to see the financial details first," he said.
(Reporting By Tsvetelia Tsolova in Sofia, Gergely Szakacs in Budapest and Anna- Jaworska-Guidotti in Warsaw; editing by Susan Thomas)
