Brexit brings with it obvious risks also for the Italian Stock Exchange which has been in the orbit of the London Stock Exchange for some time now. So much so that even the president of Consob, Giuseppe Vegas, has raised the issue in recent days in a letter to the president of the LSE Donald Brydon asking that every strategic initiative by London be defined in close cooperation with the authority that supervises the Italian markets. However, it is not only the problems associated with the unknown legislation that affect the future of our stock exchange, with London leaving the European Union. But they concern in a broader way the basic strategic choices that must guide the development of Borsa Italiana, which has so far failed to take off and earn its place in the sun. And that today, in addition to Brexit, it finds itself involved in a possible new merger between the London Stock Exchange and Deutsche Boerse. In this scenario, Brexit may be the last opportunity to fix what was not done well at the time of the merger with the London Stock Exchange. This was explained to FIRSTonline by Michele Calzolari, president of Assosim, who hopes that the government will make "an exceptional effort not to let it slip away".
Doctor Calzolari, what is happening now, with Brexit, to the Italian Stock Exchange?
The theme must be tackled with a broader look and primarily concerns the analysis of what the Italian Stock Exchange is today, which represents less and less the real economy. The banking component weighs too much and for too long. Attention, including in the media, is clearly directed to the sector's difficulties, but the financial system is paying too little attention to the real economy. And the problem is well known: we have not been able to attract the big names in Italian entrepreneurship to the market. In this context, Brexit can be a further problem or, conversely, even an opportunity.
In what sense?
We need to understand what happens with the merger between the Frankfurt Stock Exchange and London. No one today can say if there will actually be, the British want to continue but we'll see if the Germans decide to go ahead. It is certainly a matter between two private companies, but the fact that Consob has felt the need to point out that there are critical issues is significant.
What can Italy do?
The golden share was not included in the merger agreement between LSE and Borsa Italiana. So, except for the commissioner as suggested by Gianluca Garbi of Banca Sistema, we can't do much. Among other things, even if there had been the golden share, the room for maneuver would still have been reduced. Even the French Stock Exchange, which despite having the golden share, in agreement with the American lists, in the end did not use it: in these cases it is always difficult to demonstrate that damage has been caused. Among other things, I don't believe that neither the London Stock Exchange nor Deutsche Boerse want to damage Borsa Italiana. But the perspective is different. The point is to ask whether enough is being done to develop the Italian Stock Exchange, whether there is a merger with Frankfurt or not.
And is enough being done?
Some things like the Elite program have been done right. On others, however, more can be done, such as for the MTS, here what has been done is not enough. We need to leverage more on our fixed income expertise, where we are unbeatable, we were the first to launch it and Borsa Italiana has every chance to become a leader in this sector. Just as London, in the logic of specialization of skills, is the leader in equities and Frankfurt in derivatives. We are also at a favorable time for the development of fixed income instruments. With the Capital Market Union, which aims to develop an economy less oriented towards banks and more towards market instruments, including bonds and securitizations, there are great possibilities for development. We must also understand that the Stock Exchange, although a private company, is an entity that goes beyond this. And Italy should ask for participation in the governance of society.
How does Brexit fit into this scenario?
The more specific complications related to Brexit are regulatory. Now the rules that govern England on this front are homogeneous with those of Europe. It is clear that not in three months, but in one or two years, the British could choose to make different choices, with repercussions on market competition. Let's think about the rules on IPOs on the placement of bonds. This is a topic to consider. At the same time, Brexit accelerates all the reflections made so far of a strategic nature, which are further complicated by the prospect of the merger with Frankfurt: on what to do for the post-trading part, for the quotations, for the IT platform, where to place the server.
Do you agree with the commissioner hypothesis put forward by Gianluca Garbi?
Garbi is right in maintaining that the receivership is unfortunately the only way provided for by the law, since the golden share was not provided for in the contract. Obviously we hope that it will not go that far and that a shared solution can be found, which protects the Italian stakeholders perhaps by intervening on the governance of the holding company. In other words, I believe that Brexit could be the opportunity, the last opportunity, to fix what was not done well at the time of the merger with the London Stock Exchange, even in the event of a new merger.
In what sense?
Brexit perhaps represents the last train with which to recover part of the mistakes of the past by focusing on the fundamental questions: what can we focus on to play a role? why don't we have institutional investors? The volatility we have witnessed in recent times is not positive for the market but stabilization can only be given by long-term investors, such as pension funds, which unfortunately have a negligible weight here! Furthermore, Brexit opens up opportunities in terms of product distribution and outsourcing. Many companies based in London will find themselves without a European passport to distribute their financial products unless they open another local office in Europe.
Does Milan have a good chance of being attractive?
I think he definitely has the opportunity to play the game. The issue does not concern the big banks but the fund managers who will have to relocate. To let them go to Ireland is a sin. To attract them here, however, it is necessary to create an attractive fiscal and regulatory package. But their arrival in Milan would certainly bring dynamism to the market. It would be enough to bring back 50/100 Italian senior managers who emigrated to London. This too is an aspect linked to the theme of the return of the brain drain that should not be underestimated.
What should Milan focus on?
Back office services are unlikely to be relocated here because Italy costs too much. Rather I think of services with greater added value such as the part related to distribution. Imagine what impact it could have on universities, on the world of professionals and lawyers. We are facing a unique opportunity. The Government must make an exceptional effort not to let it slip away. Also because we are talking about qualified jobs for our young people.
