Ludwik Sobolewski, in the post-truth age

Nearing the end of his term, Ludwik Sobolewski, the CEO of the Bucharest Stock Exchange (BSE), is bragging about things that he didn't do, perhaps in an attempt to persuade he deserves to stay at the helm of the BSE, especially for the attractive salary of 17,000 Euros/month, plus performance bonuses.

Market sources are saying that during this period, a new term of the CEO is being negotiated, and that he is being pressured to accept a smaller compensation.

In full electoral campaign, Ludwik Sobolewski once again proves his abilities as a politician.

He said yesterday, in an interview granted to a financial newspaper, that the operator of the Bucharest stock exchange has convinced the MSCI agency that it meets the criteria for the management of risks during the settlement process, and respectively that Romania is no longer considered a market without a functional «delivery versus payment» (DVP) principle. Sobolewski also said that his goal is the introduction of the "omnibus" accounts (collective accounts).

That is what Sobolewski has to show for himself after four years of mandate.

Let's take them one at a time.

What does the MSCI say?

In the June 2017 report, MSCI notes that in Romania are available omnibus structures, but under special circumstances, and indeed, it has removed from the report the note concerning the absence of a real DVP (Delivery vs Payment) system, which was present in the assessments of 2014, 2015 and 2016. That is the only change, in the MSCI report concerning Romania, of the last four years. Other than that, the MSCI is saying that the information concerning the companies are not always easily available in English, not all regulations can be found in English, detailed market data isn't available in English and competition between brokers is very low, which leads to very high trading costs.

Ludwik Sobolewski isn't saying anything about these shortcomings.

This year, the MSCI did no "upgrade" concerning Romania, as has happened in 2016 and 2015.

In 2016, the MSCI noted that starting with October 2014, brokers/custodians started using SWIFT for their communications, and in 2015, said also since October 2014, there is a separation between the custodian and trading accounts. However, those projects have been at the level of the Central Depository, therefore not under the direct coordination of Ludwik Sobolewski.

The CEO of the BSE has not praised the reports of the MSCI of the past few years, but he did find it appropriate to pick up on a technicality in this year's report, precisely before his term expires.

The fact that the MSCI has removed from the report the note concerning the absence of a real DVP system has been a formality, after the Financial Oversight Authority and the National Bank of Romania have confirmed, following the evaluation of 2015, that the Central Depository fully meets the recommendation of the European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR) concerning the delivery versus payment principle.

Under these circumstances, the Central Depository issued a press release, in January 2017, in which it stated: "The Central Depository brings back to the attention of all market participants that the settlement of security trades concluded on the Bucharest Stock Exchange and recorded within the system of the Central Depository are done using the «delivery versus payment» (DvP), according to which the delivery of financial instruments gets done if and only if the appropriate amounts are paid".

In other words the reality is the same, only its description by Ludwik Sobolewski is different, to actually make it look like he has put in the work.

It's about the same with the omnibus accounts.

The omnibus accounts (collective) have been gradually introduced in the Central Depository starting with 2011, being available for all types of financial instruments since December 2012, MSCI wrote in 2013.

Sobolewski says that he wants to introduce them, attempting to leave the impression that they are not available at all. But nominee accounts exist on the Romanian stock market, but some sources are saying that what needs to be resolved is the delimitation, technically and within the law, of the difference between "holder" and "owner".

Laurenţiu Căpcănaru, member on the Board of Directors of the Association of Brokers, says that he does not agree with the statements of Ludwik Sobolewski. According to him, nominee accounts existed on the BSE since before Sobolewski came in, and the structure of the settlement system hasn't changed in any way during his term as CEO.

Last autumn, the BSE boasted about the achievement of being placed on the monitoring list, but in a different agency - FTSE Russell. It did however warn that we need to meet the liquidity requirement, which is where the BSE falls short. Given that the chances are low of FTSE improving our rating this year, Sobolewski found a way to come out on top. In the absence of concrete results, his ability of getting many of the shareholders to buy what he's selling is still remarkable.