The BVB Board did not inform the shareholders, at the balance sheet meeting, about the impasse of the Central Counterparty; What does Radu Hanga say?

The Board of Directors of the Bucharest Stock Exchange (BVB) did not inform the shareholders, at the balance sheet meeting, about the impasse in which the Central Counterparty project was, although, until that moment, it had been notified about the intention of Euronext Clearing (formerly CC&G) to exit the contract with CCP.RO Bucharest, as it appears from subsequent reports and the information that appeared in the public space.

Radu Hanga, the president of BVB, says that at the time when the shareholders' meeting of our capital market operator took place, the management of CCP.RO had informed the board of the stock exchange about the start of negotiations with Euronext Clearing to find a solution in order to continue the project. At the moment when "the authorization until the end of 2024 of CCP.RO Bucharest became subject to risks", BVB immediately informed the market, i.e. on April 29, according to the president of the stock exchange.

• In the BVB Budget documents for this year, shareholders are informed that the operationalization of the CCP is expected in 2024

The shareholders' meeting of the Bucharest Stock Exchange took place on April 24, among the items on the agenda were the approval of the company's financial statements for the year 2023, the discharge of the administrators and the Budget and Business Plan for the year 2024.

In the Report of the Administrators for last year it is mentioned that: "The authorization and operationalization of CCP.RO are expected during the year 2024".

In the Budget and Business Plan for this year it is specified: "The year 2024 is also a vital year from the perspective of the new products that BVB intends to launch, namely the derivatives market with indices, shares and energy as the supporting asset. The launch of these products, estimated to take place in the second half of the year, will involve a substantial effort to promote and also educate partners and investors".

The Investment Plan for 2024 provides for investments in various assets and buybacks of own shares, in accordance with BVB projects for this year, the management of the capital market operator estimating the value of the investments at 11.6 million lei, as well as a net profit of 12.6 million lei.

Among the significant events that may affect the budget for 2024, the BVB management mentions the conflict in Ukraine, but which, according to the BVC, will probably not significantly affect the company's activity.

• Shortly after the shareholders' meeting in which the shareholders approved the budget, the management of the stock exchange announces that the Central Counterparty project is at an impasse

On April 29, just a few days after the BVC received the green light from the shareholders, the BVB management informed the market, through a current report, about the existence of risks regarding the operationalization of the CCP until the end of the year, induced of the need for negotiations regarding the technology services of CCP.RO.

It was also mentioned that the stock exchange also evaluates the need for a partial depreciation of the investment in CCP.RO. In other words, Euronext Clearing (formerly CC&G), the entity that provided consultancy to the Central Counterparties project in our country and dealt with the development and delivery of the software for the settlement system, no longer undertook to provide the software.

• Radu Hanga: "Euronext Clearing notified CCP.RO of its intention to terminate the contract on April 16; later, from the information that was brought to our attention, CCP.RO held negotiations with Euronext to find a solution to continue the project"

The BURSA newspaper asked the BVB president for an explanation about the reason why the board did not inform the shareholders, at the balance sheet meeting, about the impasse in which the Central Counterparty project was.

Rada Hanga sent us: "The Bucharest Stock Exchange, as a listed company and market operator, reiterates its commitment to transparent communication with partners, authorities, investors, shareholders and mass media, regarding the evolution of the CCP project. RO, as well as other efforts to develop the local capital market.

Thus, with regard to the holding of the Ordinary General Meeting of Shareholders on April 24, 2024, the supporting documents related to the items on the agenda of the AGOA convened for 24/25.04.2024 were made available to BVB shareholders, according to the provisions of Law no. 24/2017 in conjunction with the provisions of ASF Regulation no. 5/2018, at least 30 days before the date of the meeting, i.e. on March 21, 2024. At that time, Euronext Clearing (formerly CC&G) - the provider of consultancy regarding the establishment of the Central Counterparty in Romania, as well as of specific technological assistance for compensation and risk management - had not notified CCP.RO of the intention to terminate the contract signed in 2020, for a duration of seven years. This notification was made on April 16, 2024.

After April 16, 2024, from the information that was brought to our attention, CCP.RO initiated and carried out bilateral negotiations with Euronext Clearing to find a solution to continue the project, respectively the provision of the technological solution. At the moment when the authorization until the end of 2024 of CCP.RO Bucharest SA, as a central counterparty, became subject to potential risks induced by the need for negotiations regarding technology services for the technical administration of the clearing system operationally managed by to CCP.RO, the Bucharest Stock Exchange immediately informed the shareholders and the entire market on this aspect, respectively on April 29, 2024.

The Bucharest Stock Exchange reaffirms its commitment to supporting the Central Counterparties project, a major step for the development of the capital market".

It is not clear from the BVB president's answer why the capital market operator did not inform shareholders, at the April meeting, about Euronext's intentions. What we can deduce is that, based on the information provided by the management of CCP.RO, the board of the stock exchange expected the negotiations to end quickly, with a favorable solution for CCP.RO and within the originally established terms. But that does not exclude informing the shareholders, at the balance sheet meeting, about the intention of Euronext and the ongoing negotiations.

• BVB shareholders are invited to approve the company's participation with another three million euros in the capital increase of CCP.RO

The Council of the Bucharest Stock Exchange convened the shareholders, for September 3, in order to approve the BVB's participation with a maximum of three million euros in the capital increase of CCP.RO Bucharest.

According to the supporting documents for the items on the agenda, the Central Counterparties project requires an additional contribution of around five million euros to become operational. From the latest version of the CCP.RO Business Plan, it appears that the entity will be operational next year, in July 2025 and the first futures contracts will be launched.

Recently, the management of CCP.RO requested the Financial Supervisory Authority to extend the deadline by which they must submit the complete file of the Central Counterparty, which is currently September 8. The request involves the modification of an ASF regulation, which proposed a 90-day extension, so that the new deadline will probably be December 8, 2024.

The Bucharest Stock Exchange owns 53% of CCP.RO Bucharest, an entity whose shareholders also include OPCOM, PPC Energy (formerly Enel), Electrica, Banca Transilvania, former SIFs and brokerage houses. The Central Counterparty is the entity intended to facilitate the launch of derivatives in our country and specific capital market operations, such as short selling, which cannot now be carried out.