A PLURIBUS UNUM

Spain 2020 | FINANCE | INTERVIEW

Political instability and geographical centralism are the two biggest challenges to the long-term prosperity of one of southern Europe's most important stock exchanges.

Joan Hortalà i Arau
BIOGRAPHY

A professor of economic theory at the University of Barcelona, Joan Hortalà i Arau studied economics and law at the University of Barcelona and holds a PhD from the London School of Economics. A member of the Royal Academy of Economic and Financial Sciences, he has been Dean of the Faculty of Economics and held different positions at the University of Barcelona and the Superior Council of Scientific Research. He has also been a Councilor of the City Council of Barcelona, a member of Parliament, and a councilor for industry and energy for the government of Catalonia.

Can you tell us about the Barcelona Stock Exchange and how it has evolved in recent years?
The Barcelona Stock Exchange is an old institution. Its transaction records date back to 1830, and its activity was carried out at Casa Lonja de Mar. Throughout the 19th century, Barcelona had the most important stock market in Spain. In Madrid, public debt and public effects were basically contracted, while the conventional private income exchange was in Barcelona because this was where the first public limited companies in Spain were established. The Barcelona Stock Exchange remained in a self-regulation regime until 1915, when the official stock exchange was introduced. In 1987, the stock market law was introduced, as a result of which markets were unified, exchange agents disappeared, and the stock market became a limited company. Thereafter, four exchanges were integrated into a holding company called the Spanish Markets Exchange (BME). In 2006, BME went public.

How do you evaluate the future of this market?
The economy is based on two pillars: the real economy, where raw materials are transformed into finished products, and the financial economy. In an economic system, it is the real economy that creates wealth, not the financial economy. The financial economy creates efficiency because it brings together savings and investments. Since those who save are different from those who invest, the system would lose effectiveness if there were no mechanism to bring them together. As a result, potential resources would not be fully utilized. The financial system links savings with investment.
How has the political crisis in Catalonia influenced the Barcelona Stock Exchange?
Everything influences the stock market. The political crisis may occasionally affect a Catalan company, but it does not influence the global market. In spite of this, there is a real psychological impact. For example, people who invested in the stock market may no longer want to invest in certain Catalan securities. There are other factors that can have a bigger impact, such as the US-China trade war, Brexit, crisis in the Middle East and Turkey, and fluctuations in oil prices.

We always talk about technological development, especially in Barcelona, which is a hub of technological development and innovation. What is the exchange doing in this regard?
Technology has monumentally transformed the stock market in every aspect, including hiring, liquidation, and the individual behavior of those who operate in the market. All stock exchanges have specific departments trying to innovate and implement the latest technologies. We often work with major IT and tech companies on a global level. We try to promote tech companies of different types since our intention is to assist innovative entrepreneurs form consolidated companies and support them going public on the stock market. Blockchain is another technology we are working on. We are taking into account all high-frequency latency systems, even if they do not currently have a direct influence.

The stock market is complex and fluctuates greatly. What has been the most difficult part of your career?
The most difficult part was integrating the Barcelona Stock Exchange into the BME holding after the reform of the stock market. On the one hand, this gave us greater business opportunities but on the other hand, it diminished our capacity and independence. At present, one of our main challenges is to clearly distinguish between functional centralism and geographical centralism. Since four exchanges were integrated into the BME, it makes sense to have only one accounting department. This concentration is acceptable and necessary but not all operations have to be based in Madrid. In our opinion, functional centralism is valid but the geographical one is not. This is a topic that currently concerns the peripheral exchanges and particularly the Barcelona Stock Exchange.