Letter from the President of the Exchange Management Board

president.pngLadies and Gentlemen,

In 2010 the Warsaw Stock Exchange has consolidated its position as leader in Central and Eastern Europe. This has been achieved thanks to quantitative growth, as well as a systematic broadening of the range of services we offer to investors and to issuers of financial instruments. The WSE is an exchange which creates good business conditions for Polish and foreign investment firms, for Polish and foreign enterprises, and for all the other firms that play a role in capital markets.

This report presents all the key aspects of the WSE’s activities over the last year. Most of the activities referred to are a continuation, sometimes in a form previously unanticipated, of activities and processes initiated in previous years. All these years of activity are united by the WSE’s development strategy, in which we focus on giving the Polish capital market more than just a local role, aspiring to the status of an international market to the highest degree possible.

The business achievements of 2010 include, among others, the signing of a contract for the implementation of a new transaction system, the introduction of new methods for increasing the liquidity of the equity market (the original idea of a competition for super-market-makers, and the introduction of short selling), preparations for increasing the scale of trading on the derivatives market, preparations for extending the duration of trading sessions, and the strong development of the Catalyst market launched on 30 September 2009. The Exchange has benefited from large-scale primary transactions leading to the exchange débuts of such companies as PZU and Tauron.

In the same year, through a process of privatization, public offering and introduction of shares for trading, the WSE itself became an exchange-listed company, generating a huge level of interest and demand from foreign financial institutions and individual domestic investors. Since that event the WSE has been fully answerable to the public financial market, and this also brings new opportunities relating to reinforcing the international presence of the WSE and making its services more widely available.

In 2010 we took action to develop all of the WSE’s lines of business, and also to create new fields of activity. The latter included the introduction of exchange trading in electrical energy. This is the start of a process of bringing on to the exchange financial instruments for trading in commodities and in rights based on commodities. This is an important addition to and element of the multifaceted market structure which has been built up over the years, consisting of markets for shares, for treasury, municipal, corporate and cooperative bonds, for futures and options, for investment products (such as ETFs, which have been available on the WSE since the second half of 2010), and for traded commodities.

The fact that the number of issuers of financial instruments is growing at an exceptionally fast rate almost unparalleled anywhere in the world, as well as the joining of trading platforms by new direct market players, presents the Exchange with new challenges relating to the clarity of the market. Among the tools which serve this aim are exchange indexes and classifications, some of which – NewConnect Life Science, NewConnect Lead, the WIG Div index of dividend companies, the modified RESPECT index – were launched or prepared for launch in 2010.

The company’s financial position is good – this applies both to the WSE itself and the whole of the group, bearing in mind that the various entities comprising it are at different stages of building stable market positions.

In the coming years the WSE will continue to pursue its regional development strategy. It also retains its original character as an organization which operates in fields long established as the traditional domain of stock exchanges, while also going beyond the types of activity that are typical of a secondary trading operator. The Warsaw exchange specializes in achieving synergy between fundamental market creation (regulation, promotion, education, establishment of new forms of trading and markets) and the function of a secondary trading platform. The history of the Warsaw Stock Exchange is therefore a story of diverse start-up projects transforming successfully into early-stage undertakings, and later gradually becoming mature. The WSE therefore comprises a set of multiple businesses launched at different stages of the exchange’s development, and being an engine for the development of the capital market. This means that the character of the WSE can be accurately summed up in two words: proactivity and professionalism, which as features of the organization are a cause for optimism about its future, both as an innovative and dynamic market, and as an enterprise generating profits for its shareholders.

Ludwik Sobolewski

WSE President