Macroeconomic Conditions in 2016, Economic Policy of the Government, Conditions on the Stock Market

GPW’s results will be largely driven by the activity of investors on the capital markets and by the overall economic conditions.

According to the projections of the European Commission, Poland’s GDP will grow by 3.5% in 2016. The main driver of economic growth will be private consumption, bolstered by continued improvement on the local job markets as well as growing social benefits, such as the government programme Family 500+. The growth of investments will be supported among others by low interest rates, although the new tax on financial institutions could be a risk factor for lending.

According to the projections of the European Commission, all EU member states will report growth with the exception of Greece, whose GDP will fall (down by -0.7%). The EU’s GDP will grow by 1.9% in 2016, compared to 1.9% in 2015, and the eurozone’s GDP by 1.7%, compared to 1.6% in 2015. This implies continued economic growth, although the growth rate remains sluggish, both historically and as compared to other well-developed economies.

The main factors of uncertainty around the global financial markets, global economic activity and inflation in 2016 include the outlook of China’s economy, commodity prices such as oil, as well as the pace of tightening of the US monetary policy.

Competition of Multilateral Trading Platforms (MTF)

In October 2015, one of the European stock markets operating as an MTF started to offer trade in Polish stocks participating in WIG30. In the 4.5 months until the date of this report, trades on that market reached PLN 39 thousand (at trading sessions on 8 and 9 October 2015; source: Reuters). The figure is negligible compared to trade on GPW within that period; however, trade in GPW listed stocks on the MTF may increase in the future. Likewise, other European MTFs may also offer trade in Polish stocks.

The launch of trade in Polish stocks on MTFs could grow the overall value of trade in such stocks, including among others arbitrage and trade by investors active on MTFs with no access to GPW. However, it is not unlikely that MTFs could also attract part of the trade currently handled by GPW.

Change of Poland’s financing model of capital market supervision

A new financing model of capital market supervision is in place since 2016 in Poland, where the cost of PFSA’s supervision is paid not only by GPW and KDPW, as before, but by a broader group of entities (including issuers, investment firms, insurers, and investment funds). As a result, the GPW Group’s charge will decrease in 2016 by a half compared to 2015. In response, GPW decided to reduce the transaction fees (see above).

Financial and Commodity Market Regulation

• MiFID II - The planned amendments of European legislation under MiFID II will largely impact the structure and operation of European trading venues. MiFID II is expected to take effect as of January 2018 following transposition to national law and enactment of implementing regulations. The new legislation defines among others the requirements for the publication of data on pre/post-trade transparency and exemptions from the publication obligation. MiFID II modifies the detailed requirements for the provision of investment services, the organisational requirements for investment firms and trading systems, providers of market data services, and access rights of supervision authorities. It also introduces new norms of algo trading and direct market access. From the perspective of GPW, the entry into force of the new legislation requires regulatory, technological and operational harmonisation, involving capital expenditure.
• Renewable Energy Sources Act of 20 February 2015 implements, as of 2016, a new support scheme for the production of energy from renewable energy sources (RES), which is to be based on auctions. The existing system of green certificates of origin will expire on or before 31 December 2035 as the current support scheme is to be phased out starting in 2020. The Act also limits the group of entities eligible for support under green certificates and imposes restrictions on the issuance of certificates of origin for multi-fuel combustion plants. The potential impact of amendments to RES regulations on the business of TGE is discussed in section II.7. Risks and Threats.
• CO2 Trading Act effective as of September 2015 enables TGE to grow a new business segment by becoming the national platform authorised to organise CO2 primary market auctions (currently Poland sells them on the German exchange EEX);
• Energy Efficiency Act amended as of 31 December 2015 extends the existing support scheme for another year. The last tender for white certificates will open in 2016. Property rights in energy efficiency certificates will expire under the law as of 1 April 2017.

Integration of the Electricity Market (Internal Energy Market)

The objective of integration of the European market as a consistent harmonised internal market mechanism: the Internal Electricity Market (IEM), is to allow all market participants to participate in cross-border trade in electricity. The target solution to ensure market coupling (MC) is the Price Coupling of Regions (PCR) model developed by Western European exchanges on the Day-Ahead Market and Cross-border Intra-day (XBID) model on the Intra-Day Market.

In July 2015, TGE became a full member of the Multi Regional Coupling market and signed the Day-Ahead Market Operations Agreement, which supports the co-operation of 12 energy exchanges and 25 transmission system operators. In December 2015, TGE opened the Day-Ahead Market in electricity for the link between Poland and Lithuania: LitPol Link.

Gas Hub

With its projects and investments, the Polish transmission system could play a key role in the development of the Polish gas market and the integration of the gas markets in Central and Eastern Europe. With the completion of planned investment projects and the start of gas supplies via the LNG Terminal in Świnoujście, potential gas supplies from Belarus and Ukraine, and the interconnectors in Lasów, Cieszyn and Mallnow, the Polish market will enjoy most diversification of all V4 countries and could become a source of gas supplies for Central Europe, as well as the Baltic States and Ukraine whose gas market is estimated to reach 50 billion m3/year.

The launch of Poland’s gas hub and the completion of pending infrastructure investments will enhance market liquidity by integrating the markets of Central and Eastern Europe, generating potential pressure on wholesale prices.

Reappointment of TBSP as the Treasury Securities Reference Platform

In January 2016, TBSP was reappointed as the electronic market of the Treasury Securities Dealer System, a reference platform of secondary trade in Treasury debt for three years until 30 September 2019.