Modernise, internationalise and institutionalise is the mantra of Malta Stock Exchange – precisely what its executive chairman Joseph Portelli is determined to achieve.

There is an air of excitement and innovation about the Malta Stock Exchange (MSE), as it works to shake off the image of a dull, boring exchange, focused solely on servicing its local market.

Thanks to initiatives in several areas, the MSE is breaking new ground and is even seen at the cutting edge, not least because of its plans to set up two new exchanges for security tokens by the end of the year. Security tokens involve creating digital shares and bonds in companies to sell to investors. In the case of equity tokens, they offer the same rights and protections that ordinary shares provide – including dividend, voting and ownership rights.

“As blockchain evolves we believe that security tokens could be the future of capital markets and this could be a source of income which can dwarf our current income,” Joseph Portelli, executive chairman of the MSE, said.

He is thrilled the exchange is making a name for itself as an international trailblazer in this space and adds the new MSX project, which hopes to partner with digital asset giants Binance and OKEx to create security token exchanges “will hopefully futureproof the MSE and is an amazing opportunity for us to differentiate ourselves from other exchanges.”

Sharing his strategic vision, he says the road map for modernising, institutionalising and internationalising emerges from the National Capital Market Strategic Plan – a 23-point plan implemented soon after he took over as chairman of the exchange.

“I think being chair of the MSE is one of the most enjoyable projects I have ever had because I was given an opportunity to, in essence, build upon something which didn’t exist,” he said.

He warned the MSE faced a bumpy future if it did not look beyond its shores and generate new revenue.

“The fact of the matter is, Malta is a small economy,” he said. “We already have good penetration, with many of the larger local companies having already listed. Plus, just because a company is listed with us today, it doesn’t mean that it won’t merge, be bought out, or delist tomorrow, so we need a constant flow of new business.

“My concern is we can’t get much leaner. I doubt we can cut operating expenses for a fourth straight year – we need revenue growth to sustain us for the future. Full stop.”

His comments follow three consecutive years of operating expenses reductions. “No executive can cut expenses indefinitely and have the company do well,” he said.

Portelli was born in New York City to Gozitan parents and spent the first 39 years of his life in the US, working with top financial services firms like Bank of America, Nomura Securities and Goldman Sachs. He graduated from Baruch College, The City University of New York.

He always kept strong links with Malta, visiting periodically, and is enamoured with the country. He met his wife, Michelle, who also happened to be from Gozo, in New York, and both were eager to settle here.

He managed his own investment management company during their first four years in Malta.

“Then I started teaching and working for hedge funds and sat on boards,” he said. “Then I got an opportunity to sit on the board of the MSE.” He was first appointed a director of the MSE in 2013 and became chairman in May 2015.

“Never in a million years did I think that I would ever head a national stock exchange, and I’m absolutely honoured to have had the opportunity to do so. This is pretty much a once-in-a-lifetime opportunity and I don’t want to mess it up, nor do I want to squander an opportunity to modernise and transform our capital markets.”

Several initiatives have been undertaken to grow and create new revenue streams, apart from MSX. In 2017, the Malta Stock Exchange Institute launched – an educational venture that gives Portelli great pride.

It’s primarily part of the exchange’s initiatives in corporate social responsibility to improve financial literacy. Just under a thousand students attended more than 70 courses last year, up 66 per cent from its first year.

With Prospects MTF launched in 2016 to enable SMEs to gain access to the capital market, Malta Stock Exchange expects close to 30 companies will have listed by year end. “We are giving small companies an opportunity to raise capital efficiently and cost-effectively, and we’re thrilled with how well that’s gone,” Portelli said.

Thanks to the October 2017 launch of the MSE’s market for institutional investors, the Institutional Financial Securities Market (IFSM), the MSE attracted all 12 wholesale debt securities previously listed on the now defunct European Wholesale Securities Market (EWSM).

The MSE, which was previously a minority partner with the Irish Stock Exchange (ISE) in the loss-making EWSM, had offered to acquire full ownership of EWSM. The Irish turned it down. Then, following the acquisition by Euronext of the ISE, the new owner shut down EWSM.

“Although we had good relations with our Irish colleagues, we were dissatisfied that the MSE had only a 20 per cent stake, in a joint venture, where a foreign player was seeking local business, which otherwise could have come to us,” Portelli said. “So, after our takeover bid was turned down, we politely gave notice that we were exiting the joint venture and creating a competing market. Needless to say, we were thrilled when we ended up getting the business for free.”

He is quick to pay tribute to the MSE board of directors and has a strong relationship with the shareholder the Finance Ministry. “I’m very fortunate to be working with a Finance Minister and board that are very supportive,” he said. “In the board room we are very collegial and there is a lot of mutual respect.”

“This is a very busy board having approved countless projects and initiatives, and is not afraid to make changes, innovate and offer opinions. It doesn’t mean we agree all the time, but I would say about 98 per cent of the time, we share the same vision. In short, we make a great team and I couldn’t have asked for a finer board.”

Portelli is also grateful he works with exceptional staff at the exchange. He tries to encourage a family environment and team mentality where he can.

“We have pizza, pastizzi and ice cream days a couple of times a month; we have staff outings and strategy lunches a few times a year, all in the hope of getting the staff and managers closer together with dialogue and a bit of fun” he said.

“With 53 employees, the MSE is small enough, whereby I know all of our people first-hand, and I try to engage with all of them when I can, and try not to lose sight of our staff being our number one capital resource,” he said. “Admittedly, we have high standards and I expect a lot from our managers – they are a fine group.”

The Malta Stock Exchange premises in Valletta have been refurbished and modernised. More space has been created and the top floor of the premises has been devoted to a new incubator – the FinTech Accelerator Programme, encouraging start-ups and existing foreign operators to find temporary premises within the exchange.

“The amount of pleasure and satisfaction I get when foreigners come into the MSE, and they are just so impressed with how cutting edge it looks, is immense,” Portelli said.

Several initiatives have been taken to internationalise the exchange. There have been trips to leading financial centres, led by Finance Minister Edward Scicluna, including to New York, Shanghai, London and Tel Aviv. The MSE has taken stands at international conferences, notably at the Barcelona ABS Conference focusing on asset-backed securities and another on Italian and European non-performing loans in Milan.

It teamed up with trade body FinanceMalta to hire an international public relations firm and took a six-month campaign of commercials on Bloomberg TV and its website.

Portelli has also extended trading hours and updated the listing rules to allow exchange-traded funds (ETFs). Thanks to new legislation in the pipeline, Malta also hopes to be one of only three dozen jurisdictions worldwide to allow the listing of real estate investment trusts (REITs).

With all these achievements, the MSE is growing in confidence.

“It is our hope that in a few years’ time, particularly in the security token space, the MSE will be known as a trailblazer and a respected international player,” said Portelli. “We’re spreading our wings.”