The positive performance recorded by the Malta Stock Exchange during 2007, both in terms of new listings and in turnover values, was reflected in the financial results for the year, which showed a pre-tax profit of just under Lm569,000 (e1.3 million), an increase of some Lm76,000 (e177,000), or 15 per cent, on the previous year.
The profit figures, however, are not strictly comparable with those of last year since, with the corporate restructuring of the Malta Stock Exchange coming into effect on 1 November 2007, the Exchange’s financial year for 2007 covered only the first 10 months of the year, that is, from 1 January to 31 October.
Insofar as Exchange operations were concerned, 2007 turned out to be quite a successful year. Apart from 30 issues of Government Stocks and Treasury Bills, which were admitted to the market for the first time during 2007, another seven new corporate bonds and two equity issues were admitted to the recognised lists during the 10 months under review.
The listing of Treasury Bills was significant in that not only were these securities traded on the Exchange for the first time this year, but their introduction to the market also brought about a major development in the Exchange’s security settlement system, as they became the first securities in our market to be traded, cleared and settled on the same day.
One of the equity issues that came to the market during 2007 also happened to be the first foreign registered company to be listed locally. Another similarly set up company was admitted to the recognised list at the very start of 2008. Excluding funds raised on the primary market through the issue of Treasury Bills, a total of Lm347 million (e808 million) was raised on this market during 2007. Widening the range of financial instruments available to investors, as well as deepening the liquidity of financial instruments available in the secondary market, will remain prime strategic goals for the Exchange in the coming year.
In the market, turnover reached a total of just over Lm196 million (e457 million) during 2007, an increase of around 22 per cent compared to the previous year’s performance. At the same time, total market capitalisation climbed to Lm3.3 billion (e7.7 billion), up from Lm2.9 billion (e6.8 billion) the previous year.
As mentioned earlier, a very important milestone for the Exchange took place in November when, subsequent to amendments in the Financial Markets Act which came into effect on 1 November 2007, the Malta Stock Exchange changed its corporate structure from that of a corporate entity under that Act to a public liability company under the Companies Act.
The proposal to change the corporate structure of the Exchange from a public entity under a specific law, to a group of companies under the Companies Act, has been in development for a number of years and this objective was finally achieved during 2007.
The new corporate structure is supported by an extensive internal restructuring that was implemented during the third quarter of the year. Both the new internal and corporate structures provide the proper legislative, regulatory, governance and operational structures to enable the Exchange to increase its operational efficiency, to seek new business opportunities and to attract future strategic partners with a view to continue to expand its operations both locally and overseas.
Another major event that left its mark on the operations of the Exchange during 2007 was the preparatory work needed to set up the proper operational basis for the euro-changeover process that took place on 1 January. The Malta Stock Exchange was directly involved, together with other institutions in the financial sector, in the Financial Services Sub-Committee under the National Euro Changeover Committee, NECC.
In order to ensure that the changeover exercise proceeded smoothly, the Exchange dedicated a significant amount of resources, both human and financial, to the preparatory work required such as a number of technology updates to its trading and securities registration systems, the training of staff and the implementation of the necessary amendments to client accounts to reflect the change in the currency of denomination.
In November, as part of the process of changing the national currency, the Exchange also became a direct member of the European Clearing and Settlement System known as Target 2, a centralised payment system with a single technical platform developed and operated by a “consortium” of central banks – Banca d’Italia, Banque de France and the Deutsche Bundesbank – on behalf of the Eurosystem.
Together with the US Federal Reserve Bank’s “Fedwire” system and the global foreign exchange settlement system “Continuous Linked Settlement” (CLS), Target 2 is amongst the largest payment systems in the world and offers a number of advantages to its users, settling payment transactions in a fast manner and in central bank money with no credit risk. This development further strengthens the post-trading infastructure of the Exchange by bringing it in line with the highest international standards.
One of the most important priority issues for the Exchange is to ensure compliance with its international obligations. During the course of 2007, the Exchange took the necessary steps to comply with its commitments vis-à-vis the voluntary European Code of Conduct on Clearing and Settlement to which it had subscribed in November 2006. The Exchange also dedicated considerable resources, both human and financial, to ensure compliance with the Transparency Directive and the Markets in Financial Instruments Directive (MiFID), which were both transposed into Maltese law during the past year.