IVANA GAZIC, CEO OF THE ZAGREB STOCK EXCHANGE: "Had we remained a local player, we wouldn't have had enough resources"

The Zagreb Stock Exchange (Croatia) has chosen the path of expansion abroad under its management for more than a decade, given that, being only a national market, it did not have enough resources.

Ivana Gazic, chairman of the board of directors of the Zagreb Stock Exchange, says: "When I joined the stock exchange 11 years ago, it was just a national market that relied heavily on turnover or commissions. We realized that if we remained just a local player, we would not have enough resources to maintain a high quality of trading. That's what things were like before our country joined the European Union. Joining the EU, however, brought many changes in legislation, for example we could no longer rely on our software provider, and we had to pay for all the necessary changes in the trading system separately, so we started to look a little across the border, to see what could be done.

Eventually, in 2015, we have succeeded in acquiring the Ljubljana (Slovenia) stock exchange, to start a dream that we had had for a long time, namely - to have some interconnected exchanges in this part of the world".

Mrs. Gazic went on to say: "We are fully connected to the Ljubljana Stock Exchange, but we still have separate markets, boards of directors and policies. Croatia and Slovenia are very close in terms of distance, but the differences between the markets are significant. The national inclinations of investors are different, so it took a long time for Croatian investors to start noticing or thinking about investing in Slovenian companies and vice versa - Slovenian investors in Croatia. There are a lot of efforts in this regard, and the very developed pension fund industry, which decided to invest in Slovenia, has helped us".

But she pointed out that there is no vertical integration - neither Croatia, nor Slovenia have a depository, all the related activities are state-owned. "So far, we have been unsuccessful in convincing the government to sell us the depository", said Ivana Gazic.

• "The 2008 financial crisis has lowered our trading fees"

Ivana Gazic recalls that one of the pillars of its market strategy has been to widen the range of income sources, given that the financial crisis of 2008, which lasted seven years, led to a decrease in transaction fees. He said: "Then we started selling market data. We signed a partnership with the Vienna Stock Exchange, which helped us a lot. Then we launched new services. Our idea was that the markets need to expand their ranges of activity or sources of income in order to be able to finance the very expensive aspects, according to the regulatory requirements".

The Zagreb market official also says that the stock exchange does not plan to launch derivative instruments because it would be very expensive, and that is why it will continue to provide the classic products.

• "We wanted to make financing accessible to startups and SMEs"

"Since the government doesn't do privatizations and there aren't that many issuers on the market, we have lately resorted to the strategy of creating platforms that can provide financing to the companies at any stage of their development", says Ivana Gazic. "We have wanted to make access to funding accessible even to start-ups and SMEs. Four years agi we launched a partnership with an Estonian fund, and up until now we have funded 11 companies. We are seeing an increased interest in funding, this year. Companies that have obtained this kind of funding are now becoming increasingly sophisticated, bigger, international.

We wanted to create a place for small businesses to grow and at some point become issuers on the regulated market. Our platform is called Progress and is aimed at SMEs in the EU".

The Croatian stock exchange official reminded that the EU has a program that seeks to improve the listing of SMEs, but in her country it is not very successful due to "a system where investors focus on large issuers".

However, in her opinion, the initiative deserves attention, because, in the experience of Croatia, the companies that helped the country out of the crisis, even the one caused by the Covid pandemic, were SMEs.

• 2020, the most profitable year of the last decade, for the Croatian stock exchange

The year 2020 has been the most profitable in the last decade for the Croatian stock market, says Ivana Gazic. "In the next period we plan to pursue regional consolidation. We bought 5.3% of the Macedonian Stock Exchange, and our main goal is to help each other, because we saw that by managing more exchanges we can systematize the processes better, save money with technology, etc. We believe that this way we can contribute to the development of the local market".

• "The treatment on the cryptocurrency market isn't fair to us"

The rising dominance of cryptocurrencies in the markets is a challenge, according to the Croatian stock exchange official. "In a way, it affects our business because this field attracts young investors, especially since there are no regulations associated with virtual currencies. If you want to buy stocks, you need to sign papers, comply with regulations, but on the other side - of virtual currencies - you are buying an asset with a simple click. This type of treatment isn't honest".

Mrs. Gazic says that the stock market is carefully watching the developments in the virtual currencies sector, and if regulations will go towards the area where they cover crypto as well, then the exchanges will definitely have an answer, where those aspects are concerned.