In this Q&A, Cees Vermaas, CEO of The International Stock Exchange (TISE), explores the impact of macro-economic conditions on latest listing trends and the execution of a strategy to deliver a business model for sustaining future growth.
Q: Cees, can you tell us a little about yourself and your role as CEO of The International Stock Exchange (TISE)?
CV: Yes, it would be my pleasure. Originally, I am from The Netherlands and I have an information technology background but now I have been working within international financial market infrastructure for more than 20 years. I have held senior executive positions within several international exchanges, including CEO of CME Europe Ltd, CEO of Euronext Amsterdam and Head of European Cash Markets for NYSE Euronext.
Since November 2020, I have been CEO of TISE with responsibility for all aspects of leadership and management of the Exchange. Focusing on strategy, business development and infrastructure, I am working with, and creating enhanced value for, all our stakeholders, including our staff, members, issuers and shareholders. Our aim is to do this by executing a strategy which delivers a more diversified and scalable business model to sustain future growth.
Q: And can you give us an overview of TISE?
CV: Built on a culture of responsiveness and innovation, TISE is one of Europe’s leading stock exchanges for listing bond issuances aimed at professional investors. Headquartered in Guernsey and with staff operating across Dublin, Guernsey, the Isle of Man, Jersey and London, our regulated market is uniquely positioned within the European time zone but outside both the UK and the EU.
As a major professional bond market, we are among the leading venues in Europe for listing high yield bonds and private equity debt securities, and we are experiencing solid growth in structured finance and securitisation transactions. We also have a pool of ‘domestic’ equities and a significant share of the market for listed UK Real Estate Investment Trusts (REITs), as well as a comprehensive sustainable market segment, TISE Sustainable.
Q: We are living in a very unstable period politically, economically and socially – how has this impacted business so far this year?
CV: The first half of 2022 comprised two very different quarters in terms of new listing volumes on TISE. Following a record 2021 and a record first quarter this year, new listings have since been subdued primarily due to a significant shift in macro-economic conditions. There has been the much-anticipated pullback from the historic bull market run as geopolitical instability, global supply chain issues, persistent inflation and rising interest rates have combined to provide unfavourable conditions within the debt capital markets.
“the refinement of our core bond market proposition has successfully mitigated against the worst of the downturn”
I would be lying if I said that we have been immune from the effects of the more unfavourable conditions, but the refinement of our core bond market proposition has successfully mitigated against the worst of the downturn and facilitated further growth in the size of our market. So far, we have gone through the fixed income market downturn much better than most of our competitors. Ultimately, there were 487 securities listed on TISE during the first half of the year, contributing to a 11.2% rise year on year in the total number of securities on TISE’s Official List, which reached 3,815 at 30 June 2022, representing a total market value of more than £600 billion.
Q: You mentioned that TISE is a major professional bond market so what have been some of the trends and developments in that sector?
CV: It was just over a year ago that we enhanced our international bond listing offering through the introduction of our Qualified Investor Bond Market (QIBM). Launched at the start of August 2021, there were more than 1,000 newly listed bonds on QIBM in its first year. Most recently, the QIBM proposition has been further enhanced through a detailed revision of its post-listing continuing obligations to ensure it reflects a proportionate regulatory and disclosure regime for all bond products and structures.
Listings on QIBM during the first half of 2022 have included investment grade corporate bonds, high yield bonds, private equity debt securities, securitisations, sovereign bonds, convertible bonds and profit participating notes. The volumes are marginally lower than the same period during what was a record 2021 and actually if you look closer they were on a par with last year when excluding the impact of high yield bonds.
“the QIBM proposition has been further enhanced through a detailed revision of its post-listing continuing obligations…”
TISE remains the leading European venue for listing high yield bonds and the slowdown is a function of high yield market being particularly impacted by the wider economic backdrop. Lenders have shown significant risk aversion and issuers have paused issuances as rates and yields made borrowing more expensive. There is a relatively healthy pipeline in institutional loans and high-yield bonds earmarked for M&A and LBO transactions which should precipitate listings in the future.
In terms of other trends, there was a 7.6% increase year on year in private equity related listings on QIBM during the first half of 2022. The private equity sector remains very strong with a significant amount of capital to be deployed and TISE remains the leading venue for the listing of securities related to this transactional activity.
There have also been more investment grade corporate bonds, sovereign bonds (including another bond from the States of Jersey) and securitisations listed on QIBM during the same period. Securitisation listings increased by 10% year on year and included prominent deals from major international banks backed by a range of asset classes including auto loans, credit card receivables, loans to SMEs, as well as residential and commercial mortgage-backed securities.
Q: Sustainability is a key item on everyone’s agenda now, so what has been happening at TISE in terms of related listings?
CV: TISE bond listings are including a growing number of sustainable bonds. In July 2021, we became a Partner Exchange of the United Nations’ Sustainable Stock Exchanges Initiative (UN SSE) and we launched our comprehensive sustainable market segment, TISE Sustainable.
TISE Sustainable is open to issuers and securities from across both our bond and equity markets who are independently assessed as complying with an internationally recognised framework or rating which demonstrates their environmental, social or sustainable credentials.
Since its launch, we have admitted sustainable issuers, green bonds, sustainable bonds, sustainability-linked bonds and humanitarian catastrophe bonds to TISE Sustainable. At the end of June 2022, there were more than £13 billion of listings on TISE supporting environmental, social and sustainable initiatives, which demonstrates the role we can play as a facilitator of global sustainable capital flows.
Q: You’ve talked about a strategy of diversification, and we can see that in terms of the bonds you are listing but what about the geographical origin of the business?
CV: There has been continued growth and internationalisation of Member firms who facilitate business on the Exchange. Building on the success in this regard during 2021, so far during this year there have been two new Member firms from Ireland and one from Jersey. This means that most of the leading listing agents for Euronext Dublin’s GEM market are now Members of TISE and in a position to directly facilitate listings on our market.
“There has been continued growth and internationalisation of Member firms who facilitate business on the Exchange.”
As well as strengthening TISE’s credibility and visibility amongst the advisory community, the geographic expansion in the Membership underpins the delivery of our strategy to diversify and scale up our bond listings in the UK, Europe and internationally. In H1 2022, the UK remained the largest single domicile of issuers with listed securities on TISE, but more than 25% of all issuers listing securities on TISE in the first half of the year were domiciled in the European Union, predominantly Luxembourg, Ireland, and The Netherlands, as well as France, Germany, Italy, and Sweden.
Q: Have there been any more developments regarding trading activity or other services?
CV: In February, we launched our new bespoke auction trading system, NOVA. The auction platform provides an automated price discovery and transaction model which delivers even greater value to our current equity issuers. NOVA also provides us with a flexible platform which can be adapted to support new products and services, including a prospective private markets offering.
Indeed, we have continued to explore opportunities to launch our own offering within the private markets. This has included partnering with a selected potential customer to explore beta testing of an initial product concept which we intend to bring to market by the end of the year. Utilising our NOVA trading system and expertise in the regulated market, we are well positioned to provide an efficient and scalable private market facility for private companies and private funds.
Q: Could you summarise your plans for the future?
CV: We remain focused on executing our strategy to add significant scale in our core markets and service a diversified range of products. I am pleased with the progress we have made in executing our strategy, despite the challenging macro-economic environment. We have an increasingly diversified and scalable business model which puts us in an excellent position to make the most of the opportunities which will emerge, not least when more buoyant market conditions return.
This Q&A was originally published in World Commerce Review, Autumn 2022