Warsaw Stock Exchange Uses Esma-Compliant Software To Beef Up Market Surveillance

Terry Flanagan

Warsaw Stock Exchange (WSE), the now-dominant exchange player in central and eastern Europe, is continuing on its modernization path and its aim of becoming a serious cut-price alternative to the more established western European venues appears to be paying off—as the WSE today unveiled its latest bit of exchange kit, a new market surveillance tool.

The Polish bourse now accounts for just over half of all equities volumes traded in central and eastern Europe—surpassing in recent years its fierce local rival, the CEE Stock Exchange Group, which comprises the stock exchanges of Vienna, Budapest, Ljubljana and Prague—but the WSE now sees itself as beginning to stand almost shoulder to shoulder with the elite national exchanges of western Europe.

Philippe Carré, global head of client connectivity, SunGard

Philippe Carré, global head of client connectivity, SunGard

“Poland is a big country and the Warsaw Stock Exchange is ambitious,” Philippe Carré, global head of client connectivity at SunGard’s capital markets business in London, a trading technology firm, told Markets Media.

“The Warsaw Stock Exchange’s mission in the last 10 years has been to grow its exchange to the point where it is not seen as eastern European any more, but firmly seen as a European exchange.”

In a bid to attract new overseas investors, the WSE signed a long-term co-operation agreement with transatlantic stock exchange operator NYSE Euronext in 2010 and has been in the process of overhauling its trading infrastructure ever since. It wants to encourage new categories of traders such as prop shops, algo traders and high-frequency traders to the emerging market venue in a bid to drive trading, especially in derivatives which the WSE sees as a growth driver.

A new Universal Trading Platform—which is being built by NYSE Technologies, the technology arm of NYSE Euronext—is expected to go live on the WSE in early November, which promises to introduce huge technological improvements at the Polish bourse.

And in today’s announcement, the WSE has plumped for SunGard’s Protegent compliance solution and Valdi electronic trading tools for real-time surveillance and monitoring of trading activity on the exchange. Protegent and Valdi will help enhance the WSE’s ability to supervise members connected to its trading platforms and help improve its capability to manage market-making activity as well as detect potential errant and suspicious trading patterns.

The new surveillance monitoring kit will also enable the Polish venue to comply with Europe’s market abuse rules, including the new automated trading guidelines that were recently introduced by the European Securities and Markets Authority (Esma), the pan-European regulator.

Other exchanges across Europe are also beefing up their monitoring equipment to comply with the Esma rules as trading becomes ever more complex due to the increasing ability of computers to process data at faster and faster speeds. Esma wants exchanges and brokers to take the lead in policing electronic markets and high-frequency trading.

SunGard’s Valdi will give the WSE’s surveillance teams a detailed, real-time view of market data and trading activity regardless of the connectivity tools used by WSE members.

“Surveillance tools are an absolute requirement as stock exchanges around the world seek to ensure fair and orderly markets,” said Adam Maciejewski, member of the management board of the WSE.

“The WSE selected SunGard’s Protegent because it is an efficient, proven and system-agnostic solution that complements our existing arsenal of market protection capabilities. Valdi will help the WSE improve our ability to monitor exchange trading activity and give our surveillance team enhanced access to real-time data, helping them identify trading patterns that might reveal market abuse.”

Carré at SunGard added: “SunGard is a long-time partner of the Warsaw Stock Exchange, and we will now be helping the WSE address a critical concern for stock exchanges worldwide: the accurate, timely monitoring of trading activities. The combination of Valdi’s real-time, pre- and post-trade functionality and flashback function with Protegent’s real-time market abuse rules engine and easy reporting capabilities is helping exchanges like the WSE monitor trading activity and prepare for new regulations.”

Carré believes that the technological push by the WSE is to provide more capacity, new products and new functionality to support, what the WSE hopes, will be growing volumes in the coming years.

“Not just in Warsaw, but volumes have been subdued everywhere in the world in the last few months,” said Carré. “But the WSE has been doing better than the average stock exchange in the last few years and has benefitted from a lot of growth, especially in terms of listings.

“The WSE is also looking to attract more listings, especially international ones from eastern European countries. Firms in the region are looking for an exchange that offers them an international window without being too big. A Bulgarian firm or Ukrainian firm might be a bit lost on a bigger exchange, for example. The WSE provides a good sized market and an opening to international trading practices. The whole range of measures that are taking place right now on the WSE are to prepare it for further growth, while the regulatory changes in Europe have also triggered some of the changes.

“But the WSE is managing to become a bit of a catalyst for further changes in eastern Europe because they very strongly compete against the CEE Stock Exchange Group, the Vienna-led stock exchange group.”

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