Bourse set to meet FTSE conditions

Greek bourse operator Hellenic Exchanges is confident that the changes it has made will satisfy stock market index compiler FTSE, enabling it to retain its mature market status, its vice chairman said yesterday. FTSE placed Greece on a watch list for possible demotion in 2006. If implemented, the move could prompt an exodus of index funds that track mature equities markets. «With all the adjustments we have made, the obstacles cited by FTSE have been removed,» Hellenic Exchanges Vice Chairman Socrates Lazaridis told Reuters in an interview. «We have taken all necessary action to resolve issues cited in previous evaluations, except one.» Foreign portfolios own more than 50 percent of the Greek stock market’s available free float. Greek equities have a market capitalization of about 155 billion euros ($244 billion). Lazaridis said the remaining issue, expected to be resolved in a year’s time, related to omnibus accounts. The bourse requires data on the final investor-owner of shares, while FTSE’s clients desire information that stops at the level of broker. «We are not at risk of a downgrade. We must effectively communicate the changes to the institutional investors’ community, and the same applies for Greek custodians, so that investors are able to make a proper assessment,» Lazaridis said. Greece, which gained mature market status in 2001 after joining the eurozone, was placed on watch for failing to get a passing grade in six criteria, the minimum needed for a warning. Lazaridis said improving volumes in the derivatives market had removed one of the weak spots last year and more recently another four were resolved. Off-exchange transactions have been enabled with the passage of MiFID, the European Union’s Markets in Financial Instruments Directive; delivery of stock free of payment has been allowed; stock lending has been liberalized; and a flat-tick rule on short sales has been scrapped, along with the flagging of these trades. MiFID was introduced in November 2007 to dismantle barriers to competition in share trading. Following FTSE’s recent talks with Greek stock market authorities, the index compiler will proceed with roadshows in London to communicate the new state of affairs at Hellenic Exchanges with brokers and funds. Scrapping tax Lazaridis said the Greek market’s trading velocity, which measures value traded to overall capitalization, trails the average ratio in other developed European markets mainly because of a 15 basis point tax on share sales. This discourages day traders and is also seen as hindering algorithmic trading – computer-generated electronic trading – a possible growth engine held back by high trading costs. The Greek market’s velocity ratio is around 60 percent, according to Morgan Stanley, which also sees potential for a trading boost if the tax is removed. The ratio is 180 percent at Borsa Italiana and 177 percent at Deutsche Boerse. «The tax is an important concern. The government has said the sales tax will be abolished by the end of the year. The issue is if it will be replaced with something else and what impact this would have,» Lazaridis said. (Reuters)