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Jukka Ruuska, President And CEO Of HEX Group: Competitive Advantage Through Regulation And Taxation

Date 22/10/2002

Highlights of Mr. Jukka Ruuska´s speech at the 90th Anniversary seminar of Helsinki Exchanges:

There has been a securities exchange in Finland for almost the entire 20th century. The Helsinki Stock Exchange established in 1912, however, was quite a different from the present Helsinki Exchanges of the HEX Group. The methods and procedures of operation remained unchanged for a long time until the 1980s saw the start of a strategic revolution that turned a local operator of common functions into a modern business corporation.

And where do we stand after the developments of the last couple of decades?

  • We have created a local market, which combines the benefits of locality and no borders.
  • At the same time, we offer our issuers access to a global market.
  • Our promise is "World's best Nokia", as our market share of Nokia's global share turnover shows. We are local in serving our customers.
  • We are genuinely interested in small and medium-sized Finnish companies.
A thriving financial sector in Finland is one of the premises to a thriving national economy. Especially the everyday heroes working for the capital markets, such as brokers, analysts and back office employees should be appreciated more. They, too, rightly deserve to be seen as makers of Finland's success. All in all, the value of securities markets is not properly understood in Finland.

HEX's position today is in many ways better than it has ever been during the last 90 years in spite of the higher risks and challenges involved. We are acting now and will be acting in the future in two very different markets, local and global. Both roles have their own special characteristics. In the global market, we are competing with the world's biggest marketplaces, which means that we have to play by the same rules as our competitors.

In the securities markets, regulation and taxation often are major competitive factors. For example, in regulation we need to maintain the good balance between credibility and flexibility.

Taxation determines where listed companies decide to have their domiciles. Another good question is whether the taxation of investment in securities is neutral in comparison to other investment options. As the studies of The Finnish Foundation for Share Promotion show, investors in Finland still are heavily taxed compared to other European countries. In corporate taxation, the imputation credit system has a definite competitive advantage and it should not be abandoned.

We operate a stock exchange with one of Europe's lowest production costs. One of our biggest challenges is to remain competive in this respect, as well. The on-going changes in the securities markets, for example the central counterparty, demand bigger transaction volumes. We have chosen to seek growth through cooperation. Our choice has been not to join alliances where the tempo of progress is set by the slowest actor.

We have launched a successful cooperation in the Baltics that has added to the number of listed companies traded in our trading system bringing trading volumes closer to a critical mass. We have acquired a small holding in the Copenhagen Stock Exchange to support our good cooperation with the Danes.

In the derivatives trading, we are in cooperation with the world's biggest derivatives exchange, Eurex, where the most liquid Finnish derivatives are traded. We also have a cross-membership agreement with Europe's biggest marketplace Euronext. The agreement makes it possible to have an easy access to each other's marketplaces, which will further enhance the liquidity of Finnish shares in Helsinki.

Together with the Nordic stock exchanges and the central securities depositories we are studying the possibilities of creating a common Nordic Central Counterparty -function. We are also a pioneer in the area of CSD-links. The most recent link was created with the Swedish CSD. A CSD-link makes it possible to trade and deposit the shares of, for example, TeliaSonera as if they were Finnish shares. Besides Stockholm, HEX also has links with Clearstream Banking in Germany, with Euroclear France in France and with Necigef in the Netherlands.