The effect of Gamma rays on the fees of the BSE

• Gherguş, of the Association of Brokers: "Even the level of solar explosions could be used to statistically justify the increase of the fixed fees of the BSE"

The Association of Brokers yesterday reiterated its opinion that the change of the tariffs of the BSE will negatively affect the domestic stock market, through the voice of its vice-president Nicolae Gherguş, after the Council of the Stock Exchange summoned the shareholders to decide on a new pricing policy.

At the end of last year, the Association of Brokers criticized the management of the BSE after it sent brokers a questionnaire in which it was proposing the change of the pricing system to encourage the brokerage firm that intermediate large trades.

Nicolae Gherguş said yesterday: "I reiterate the opinion of the Association of Brokers concerning the aspects of the Extraordinary General Shareholder Meeting which follows, that the change of the fees of the BSE with the excuse they provided will affect the competitive environment between the market participants and will negatively affect the market access of retail investors in the long run, by increasing costs, market access and implicitly the future revenues of the BSE and the future liquidity of the market".

Adrian Lupşan, the vice-president of the BVB, said on Wednesday, that the modification of the pricing policy is intended to progressively get closer to the practices in the region.

According to Nicolae Gherguş, following prior promises of finding some ways to dialog, the Board of Directors of the Association of Brokers was invited to attend the meeting of the Board of Directors of the BSE, on the very day that the Notice to attend of the Extraordinary General Shareholder Meeting was voted.

Mr. Gherguş told us the following: "It was, as it has become clear by now, a formal dialog < of the deaf >, in which the opinions expressed carried no weight whatsoever. The decision seemed to have already been made, like I had already expected, even before the questionnaire had been sent to the brokers, and regardless of the response received. Our suggestions, that major modifications of the current status quo should be made under the umbrella of a multi-annual Strategic Development Plan of the BSE Group, adopted by the shareholders of the General Shareholders Meeting, or those concerning the specifics of the Romanian market, have been disregarded".

The vice-president of the Association of Brokers said that the justifications of the management of the BSE were mere excuses: "Most certainly, when you want to justify an economic decision using statistical data, that science will always provide you with a possibility to find an excuse. You could use the level of solar explosions or the size of the rapeseed harvest to justify the raising of the fixed fees. But like I said, the burden of the new fees suggested by the Central Depository and the ones the BSE wants to implement, will be shifted to the retail investors, because they can't be internalized by the brokerage firms".

Nicolae Gherguş also said: "But the current Board of the BSE, which is currently in a decision-making pause ever since its appointment, is currently in the situation where it needs to explain itself to shareholders which have backed this lack of ideas and are showing their competence in the fragile area of suppositions or arbitrary comparisons. It isn't said anywhere, or there is no talk about it whatsoever, that this focus on < major foreign institutional investors > will yield absolutely no results in the absence of a liquidity generated on the regular market by the retail investors, who are completely disregarded and whom the BSE seems to be willing to test its experiments on. Obviously, there is no mention that these costs will be borne precisely by the 3-4000 investors (still) active on the Romanian market, nor of the fact that the BSE is incapable of coming up as an alternative to the banking system".

The rant of the vice-president of the Association of Brokers continued: "In Romania, we are used to the idea that anyone who has had a beer on Wallnerstrasse or has talked to a deputy manager of the London Stock Exchange all of a sudden becomes competent when it comes to the financial markets, and that assumed genius is most visibly expressed by the desire to align to the major markets, or at least to the ones in the region, without mentioning in any way the manner in which those markets have come to be envied or the context in which they operate.

Under these circumstances, it is not impossible to convince one SIF president that, if he < aligns > with the stock exchanges in the region and he votes in favor of such decisions < backed by statistics > at the general shareholder meetings, he will become Romania's next Lloyd Blankfein".

• An appeal to the shareholders of the Bucharest Stock Exchange

Nicolae Gherguş considers that it will be interesting to see the position which the SIFs will take at the extraordinary General Shareholder Meeting of the BSE, "as they themselves represent a product specific to Romania, whether it is good or bad, but at any rate they have no equivalent on the foreign markets. "Personally, I would rather keep a touch of hope that they will conduct a thorough review of this situation", the vice-president of the Association of Brokers said.

He also warned the shareholders about the personnel expenses of the BSE, which have increased lately: "I don't know, on the other hand, given the context of the drop in trading and of the not exactly favorable predictions, whether these measures are expected to cover the costs of the new hirings at the BSE, but this aspect is not of the competence of the Association of Brokers, but rather the analysis which each shareholder will conduct, and sooner or later, the Board of Directors will have to answer for that as well".

• A message to the Board of the Bucharest Stock Exchange

Nicolae Gherguş says that he has an indirect message for the management of the BSE, but one which he is sending on his own behalf: "I would like to tell the Board of Directors of the BSE that the appeal to dialog outside the public area which they iterated during the meeting I mentioned, will only be honored provided that dialog is honest and constructive, and its results are allowed to change.

Or, the presence of an item on the agenda of the Board of Directors involves at the very least the intention of the Chairman to adopt that item, in which case such useless dialogues can only lead to a drop in the competitiveness and the effectiveness of the institutions involved".

The Bucharest Stock Exchange has summoned its shareholders, to decide on March 13th, on the new pricing policy, as well as the adoption of new articles of incorporation.

The Stock Exchange Council proposes the introduction of a fixed monthly fee for brokerages and a variable share of the trades made, like it had announced at the end of last year.