By Angelos Anastasiou
Conflicting views between the Cyprus Stock Exchange (CSE) and the Cyprus Securities and Exchange Commission (CySEC) seemed to bring a government bill, which would allow the finance ministry to second CSE staff to the CySEC on an as-needed basis, to an impasse on Monday.
Thus far, CSE employees had been seconded to the CySEC through a bilateral agreement between the two agencies, which required the consensus of the two administrations.
But a government-inspired proposal to legislate the finance minister’s right to authorise such secondments was met with strong resistance by the CSE heads.
The bill, which was brought for discussion at the House Finance committee on Monday, fails to take into account certain parameters, like spikes in activity at the Stock Exchange relative to the last two years, and obligations stemming from European directives, CSE officials claimed.
Addressing the committee, CSE board chairman Marios Pilavakis said that the bill discriminates against the Stock Exchange, by leaving the board unable to address the threat of understaffing.
Pilavakis proposed that a clause requiring the consent of the CSE’s management before any employees are transferred be inserted in the bill.
According to the CSE chairman, the stock exchange’s daily volume doubled in 2014, relative to 2013, to an average €307,489, whereas in the first months of 2015 it spiked to €705,415.
“Therefore, the CSE has an important role to play, and the loss of staff would impact its operation,” Pilavakis said.
“Considering European directives on national exchanges, it would be extremely dangerous if needs were to come up which could not be instantly met.”
He added that, following four years of losses, the CSE was on a path to breaking even in the first quarter of 2015, noting that the CSE has secured a legal opinion arguing that when two agencies are involved, one cannot decide without the other’s consent.
The CSE’s executive director Nontas Metaxas explained that in 2013, when two banks were shut down, the CSE was left with excess staff, and agreed to secondments to CySEC.
“But there is a rule on central exchange staff, which the CSE is forced to oblige with – and failure to comply means we get shut down,” Metaxas warned.
“Any change could have very bad consequences.”
Metaxas described the bill as “cannibalism of a going concern”, adding that in its current form, it will have disastrous effects.
He proposed greater involvement of the CSE board in decision-making, adding that, were problems to crop up along the way, someone should be held accountable.
“If CySEC, which is responsible for the operation of the stock exchange, cannibalises the CSE, it will be responsible,” he said.
CySEC chairwoman Demetra Kalogirou conceded that the CSE should be allowed a say in decision-making, but argued that the final call should rest with the finance ministry.
A ministry representative told the committee that the bill aims to address CySEC staff shortages exacerbated by the fact that its duties have increased, while CSE volumes are declining.
Based on this bill, CSE staff interested in being seconded will apply and the finance ministry will make the decisions.
Committee chairman Nicolas Papadopoulos asked stakeholders to work out their disagreements because committee members cannot act as mediators, and proposed that the CSE’s management be given a veto to secondments.
“In its current form, the bill affords the finance minister the right to move staff from the CSE to the CySEC as needed, obviously taking into account the views of the CSE’s management,” he said, adding that this system has worked thus far.
“This is exactly why we fail to understand how two agencies that have worked together so well so far, now disagree with a government bill aiming at better co-operation between them.”