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Session Summary. Market Regulation and Structure after the Crisis: What Lesions have been Learned?

February 4, 2010

Ronald Arculli, Chairman Hong Kong Exchanges and Clearing: Russia is just a part of getting more international companies listed in Hong Kong. The HKEx seeks to get the right people with the right culture to work on listings. The crisis has brought regulators around the world closer together. This should help avoid regulatory arbitrage.

Johan Elmquist, Fund Manager, Swedbank Robur: The Russian market has structural issues that make it less competitive than other markets. Liquidity is one such issue. This drives up the cost of capital for issuers. With $2 bln invested in Russia, Swedbank Robur needs to use DRs to maintain portfolio liquidity. The solution is not fewer DRs, but a more liquid local market. Eventually, the two Russian exchanges must merge.

Dame Clara Furse, ex-CEO London Stock Exchange: An exchange’s purpose is to lower the cost of capital for issuers. Liquidity in Russian stocks has to improve. Corporate governance is another important attribute. Elsewhere, regulators will not be scrutinizing exchanges post crisis, exchanges did their jobs. Instead, attention will focus on unregulated parts of the marketplace, like dark pools.

Fang Xinghai, Director General, Financial Services Office, Shanghai Metropolitan Government: China might have escaped the crisis to a large degree, but it has seen wide fluctuations during the last 10 years in equity and property. One thing that China does is control leverage. There is no leverage in stocks, and property has relatively high down payments of 30% for homes. The zero leverage in stocks means investor loses – the investor loses alone, so systemic risk is lower.

Michel Prada, Chairman International Valuations Standards Council: Unregulated securitization pushed risk into the wrong places with the wrong risk management environment. Speculation is not bad; it just has to happen on organized exchanges. At the end of the day, only 10-15% of trading happens on exchanges, so the problem lies in the off-exchange market.

Tony Tan Keng Yam, Deputy Chairman, Government of Singapore Investment Corporation: Consistent government policy is necessary to attract long-term money. The rule of law is the cornerstone for overseas investors. Regulations are needed so transactions can happen.

Alexey Timofeev, Chairman of the Board, NAUFOR: The development of markets has been satisfactory to date, but there have not been enough financial products, capitalization was concentrated in too few names, and too many retail investors have left Russian markets. Markets must become deeper.


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