If officials regulators lift the restrictions for equity traders on the Athens Stock Exchange, the nation risks a deposit flight.Yannis Behrakis/Reuters
Is a market really a market if buyers can't buy and sellers can't sell freely?
Greek officials setting the ground rules for a reopening of the Athens Stock Exchange after almost four weeks of forced shutdown are faced with that question as they make a grim choice: Exempt investors from capital controls and risk more money heading for the exit, or safeguard scarce liquidity and get further isolated from global markets.
"A stock exchange with restrictions in place is not a real stock exchange," Spyridon Kyritsis, president of the Association of Members of the Athens Exchanges, or Smexa, a body representing brokerages in Greece, told reporters on Tuesday.
Like so much of Greece's pain as it clings to precious membership of the euro, the dilemma cuts to the heart of the country's status as a functioning capitalist economy plugged into the world.
Cash settlement of transactions on securities will continue to be suspended, the Hellenic Capital Market Commission said Wednesday in a statement . Spokespeople at the Finance Ministry and central bank declined to comment.
"The market can't stay closed for longer, but imposing any strict limitations on trading would not really make it a genuine market," said Antonis Georgakakis, a fund manager at Merit Securities in Athens. "It's very difficult now because even a free market will have its issues."
Foreign investors hold 59 per cent of stocks traded in Athens, which already lost 85 per cent since peaking in 2007. The combined value is now $41-billion (U.S.), roughly the same size as a single Italian bank, UniCredit SpA.
Investors would have less money available to trade if the market reopens with restrictions on the free movement of capital from bank accounts, members of Smexa's board told reporters at a press conference on Tuesday. There may be no buyers for stocks, said one member, Nikolaos Chryssochoidis. If, on the other hand, regulators lift the restrictions for equity traders, the nation risks a deposit flight.
"Brokers will want to be cautious in how much clients utilize them to execute in Greece, particularly for selling," said Duncan Higgins, managing director and head of electronic sales at Investment Technology Group Inc. in London.
Smexa members say that fears about an uncontrolled deposit flight are unfounded. Data from Hellenic Exchanges Group show that monthly capital outflows from the bourse in March, the worst month of the year so far, were just shy of €170-million. Last week, the European Central Bank raised the maximum potential Emergency Liquidity Assistance for Greek banks by €900-million.
A U.S.-listed exchange-traded fund tracking Greek stocks gives an indication of where traders expect the shares will go when trading resumes. Since collapsing a record 19 per cent on June 29, when the exchange was shut, the Global X FTSE Greece 20 ETF has rebounded 5.8 per cent. Whatever happens, Greek stocks won't slump more than 30 per cent a day, the threshold for an automatic halt.
"There's no reason for optimism at the opening of the exchange," said Antonis Tsompopoulos, a senior trader at NBG Securities SA in Athens. "I wouldn't say it will be chaotic, but I am 100 per cent sure liquidity will be constrained during the first sessions."