Risks of the economic situation in Poland

The GPW Group’s business is highly dependent on the performance of the Polish economy. Changes in the state of the Polish economy affect the business and investment activities of issuers whose securities are listed on the markets organised and operated by the Group, including their financial results, which in turn may affect the prices of these shares, the volume of transactions, as well as activities related to issuing new securities. Deterioration of market conditions in Poland also has a material impact on the activity of investors and consequently on the turnover on the Group’s markets.

 

GPW’s listing revenue depends directly on the level of listed asset prices and the frequency and volume of trading on the GPW markets depends on investor activity. Consequently, during periods of economic volatility and risk aversion, the Company’s revenues may decline; combined with a stable cost level, this could reduce GPW’s potential profit

 

Risk of the geopolitical and economic situation outside Poland

The Group’s business depends on conditions on the global financial markets. Economic trends in the global economy, especially in Europe and the USA, as well as the geopolitical situation in neighbouring countries impact investors’ perception of risks and their activity on financial and commodity markets. As global investors evaluate geographic regions from the perspective of potential investment, their perception of Poland and GPW may decline in spite of a relatively stronger macroeconomic situation compared to other countries of the region.

 

In view of a significant share of foreign investors in trading on the markets operated by the GPW Group, their low activity could affect the amount of charged trading fees, which are the main source of the Group’s revenue. Combined with a stable cost level, this could reduce the GPW Group’s potential profit.

 

Risk of market and political events beyond the GPW Group’s control

 

The volume of trading, the number of new listings and demand for the GPW Group’s products and services are affected by economic, political and market developments, both domestic and global, that are beyond the Group’s control, including in particular:

  • general trends in the global and domestic economy and on financial markets;
  • changes in monetary, fiscal and tax policies;
  • the level and volatility of interest rates;
  • inflation pressures;
  • changes in foreign exchange rates;
  • adoption of the euro as the currency of Poland (causing potential changes to monetary and fiscal policy or causing changes in the allocation of investor portfolios);
  • reclassification of Poland from Emerging Market to Developed Market in global benchmarks;
  • change of Poland’s credit rating;
  • institutional or individual investors’ behaviour;
  • volatility in the prices of securities and other financial instruments;
  • availability of short-term and long-term funding;
  • availability of alternative investment opportunities;
  • legislative and regulatory changes; and
  • unforeseen market closures or other disruptions in trading.

 

These events could have a significant impact on the activity of GPW Group clients, mainly issuers and investors. Their low activity could affect the Company’s trading and listing revenue, revenue from introduction of financial instruments, and consequently information services, and it could affect the GPW Group’s profit.

 

Risk of competition from other exchanges and alternative trading platforms

As a part of the global economy and a beneficiary of free flow of capital between European and global economies, the markets operated by the GPW Group are exposed to the risk of competition from other exchanges and alternative trading platforms.

In the European Union, competition in the trade and post-trade sectors is amplified by legal amendments designed to harmonise legislation of the EU member states and integrate their financial markets. In particular, the GPW Group may face competition of multilateral trading facilities (MTF) in the area of equity trade, as well as energy exchanges and derivatives exchanges in the area of commodity trade and commodity-based derivatives.

 

MTF activity on the Polish market could take away part of the trading volumes handled by the platforms operated by the Group and reduce the trading revenue, and consequently affect the Group’s profit.

 

Risk of price competition

The trading cost on large foreign exchanges and MTFs is lower than on GPW, mainly due to the relatively small size of the market in Poland. Consolidations in the global exchange sector and the development of MTFs may increase pressures to reduce fees charged for trade on the financial markets.

 

As a result, GPW clients could exert pressures on GPW to reduce listing and trading fees, affecting GPW’s revenue. These factors could strongly affect the Company’s financial position and results.