Wall Street Journal Europe
Jason Corcoran in Moscow
April 15, 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange, according to the chief executive of RTS Group.
The dollar-denominated RTS and the ruble-denominated Micex were both suspended more than 30 times since September. As a result, investors turned to trading Russian global depositary receipts in London.
Prior to the financial meltdown, Russian exchanges had 70% of the value of equities traded against London's 30%.
Following Russia's war with Georgia, a banking crisis, investor scandals and the accompanying erratic trading patterns that led to the temporary closures of the exchanges, the value of equities traded was divided almost evenly between Russian and London bourses. Overall daily volumes traded in Moscow also slumped to $2 billion from the $7 billion reached early in 2008.
RTS Chief Executive Roman Goryunov said March trading volumes indicated Moscow had won back territory ceded to London.
"Last month we saw the tendency had changed in Moscow's favor with 70% to 30%," he said.
A spokesman for Micex Group said its figures matched Mr. Goryunov's.
Mr. Goryunov said neither of the local exchanges had been suspended since the regulator introduced rules on March 1 that formalized when trading can be halted and allowed greater shifts in prices before a market is suspended. Along with higher oil prices and a stronger ruble, the new rules helped trading volumes to bounce back to pre-crisis highs.
"All of the problems last year caused the international investors to cease trading in Moscow in favor of London," Mr. Goryunov said. "The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left."
Previously, trading in a stock was suspended until the next day if its price fell more than 10% and trading in the market as a whole was suspended if the benchmark index fell by the same amount.
Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of Russia's Bank of Development and Foreign Economic Activity and state-controlled investment bank VTB Capital is also believed to have buoyed local trading.
VTB, which manages Russia's sovereign-wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2 billion, up 41% from $6.5 billion in February.
The brokers that handled the greatest volume in March were Russia's Troika Dialog, followed by Germany's Deutsche Bank AG and local bank Renaissance Capital.
The RTS index was one of the world's best performers in March after falling more than 70% from September last year through to February. It climbed 27% to 690 points as of March 31 from 545 points at the end of the previous month. It closed at 807.61 on Tuesday.
Separately, RTS outlined plans to compete with its established rivals in Europe by launching an anonymous dark-pool system.
This would be the first attempt by a Russian market to launch a dark pool, following several similar moves by European firms. Dark pools allow traders to buy and sell equities anonymously, which can cut trading costs. The group will launch RTS Standard, a new equity market that enables members to trade the most liquid RTS stocks through an anonymous order book, "in the upcoming future," according to a statement Tuesday.
RTS Standard will be open until 11.50 p.m. Moscow time to allow customers to trade alongside the main U.S. and European markets.
Brokers ITG, Liquidnet and Nyfix offer dark pools for European stocks, while NYSE Euronext launched SmartPool, the first exchange-backed European dark pool, on February 2. U.S. dark pool Pipeline is set to launch its European system this month and the London Stock Exchange Group PLC plans to go live with its Baikal dark pool before the end of June.
Showing posts with label Micex. Show all posts
Showing posts with label Micex. Show all posts
Monday, 20 April 2009
Monday, 13 April 2009
Russian exchanges claw back trading after turbulent six months
Financial News
Jason Corcoran in Moscow
13 April 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange after scores of suspensions and closures since last September sparked an investor exodus.
Investors turned to trading Russian global depositary receipts in London after the Micex and RTS exchanges were both suspended more than 30 times since September last year. Erratic trading patterns triggered shutdowns brought on by Russia’s war with Georgia, a banking crisis and investor scandals at miners Mechel and Uralkali.
Prior to the financial meltdown, Russian exchanges had 70% of equity trading volumes against London’s 30%. Following the blowout, the ratio stood at about 50% to 50%. Overall daily volumes traded in Moscow also slumped to $2bn (€1.5bn) from $7bn reached early in 2008.
Roman Goryunov, chief executive of the dollar-denominated RTS exchange, said March trading volumes indicated Moscow had won back territory ceded to London.
Goryunov said neither of the local exchanges had been suspended since the regulator introduced new rules on March 1 formalising trading halts and widening the corridors for market suspensions. Along with higher oil prices and a stronger rouble, the new rules had helped trading volumes to bounce back to pre-crisis highs.
In an interview with Financial News, Goryunov said: “Last month we saw the tendency had changed in Moscow’s favour with 70% to 30%.
“All of the problems last year caused the international investors to cease trading in Moscow in favour of London. The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left.”
Previously, trading was suspended until the next day if a share price fell more than 10%. Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of state development bank Vneshekonombank and state-controlled investment bank VTB Capital is believed to have buoyed local trading.
VTB, which manages Russia’s sovereign wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2bn, up 41% from $6.5bn in February.
The top seller of the month was state lender Sberbank with a monthly turnover of $31.3m. Energy company Gazprom had a turnover of $17.2m, followed by miner Norilsk Nickel with $15.7m. These three blue-chips accounted for 43% of total turnover.
The broker-dealers that handled the greatest trading volume in March were Russia’s Troika Dialog followed by Germany’s Deutsche Bank and local bank Renaissance Capital.
The RTS index was one of the world’s best performers in March after falling by over 70% from September last year through to February. It went up by 26.6% to 690 points as of March 31, against 545 points at the end of the previous month.
Jason Corcoran in Moscow
13 April 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange after scores of suspensions and closures since last September sparked an investor exodus.
Investors turned to trading Russian global depositary receipts in London after the Micex and RTS exchanges were both suspended more than 30 times since September last year. Erratic trading patterns triggered shutdowns brought on by Russia’s war with Georgia, a banking crisis and investor scandals at miners Mechel and Uralkali.
Prior to the financial meltdown, Russian exchanges had 70% of equity trading volumes against London’s 30%. Following the blowout, the ratio stood at about 50% to 50%. Overall daily volumes traded in Moscow also slumped to $2bn (€1.5bn) from $7bn reached early in 2008.
Roman Goryunov, chief executive of the dollar-denominated RTS exchange, said March trading volumes indicated Moscow had won back territory ceded to London.
Goryunov said neither of the local exchanges had been suspended since the regulator introduced new rules on March 1 formalising trading halts and widening the corridors for market suspensions. Along with higher oil prices and a stronger rouble, the new rules had helped trading volumes to bounce back to pre-crisis highs.
In an interview with Financial News, Goryunov said: “Last month we saw the tendency had changed in Moscow’s favour with 70% to 30%.
“All of the problems last year caused the international investors to cease trading in Moscow in favour of London. The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left.”
Previously, trading was suspended until the next day if a share price fell more than 10%. Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of state development bank Vneshekonombank and state-controlled investment bank VTB Capital is believed to have buoyed local trading.
VTB, which manages Russia’s sovereign wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2bn, up 41% from $6.5bn in February.
The top seller of the month was state lender Sberbank with a monthly turnover of $31.3m. Energy company Gazprom had a turnover of $17.2m, followed by miner Norilsk Nickel with $15.7m. These three blue-chips accounted for 43% of total turnover.
The broker-dealers that handled the greatest trading volume in March were Russia’s Troika Dialog followed by Germany’s Deutsche Bank and local bank Renaissance Capital.
The RTS index was one of the world’s best performers in March after falling by over 70% from September last year through to February. It went up by 26.6% to 690 points as of March 31, against 545 points at the end of the previous month.
Monday, 10 November 2008
Russian exchanges strive to modernise
Financial News
Jason Corcoran in Moscow
10 November 2008
A merger of Micex and RTS is more likely following the exodus of €108bn in foreign capital since August
Rybnikov: suspensions must stop
Moves to merge Moscow’s two stock exchanges, modernise market architecture and improve long-term liquidity have been given impetus following Russia’s worst trading collapse since the sovereign default in 1998.
The frequent closures of Moscow’s two main trading platforms have led many investors to switch to trading Russian Global Depositary Receipts and Russian American Depositary Receipts in London and New York.
Some 23 suspensions of trading on the rouble-denominated Micex since early September have contributed to a two-thirds slide in the volume of trading and an exodus of investors.
Micex chief executive Alexei Rybnikov hopes the suspensions will become a rarity once the financial regulator, the Federal Service for Financial Markets, introduces rule changes.
He said: “I hope this situation will not continue. We have told the regulator and the Government that closures should be rare and can only be invoked for systemic reasons and not when the exchanges are only falling.”
Micex and Moscow’s biggest investment firms have asked the regulator to return to the old trading rules and allow bigger fluctuations so that a suspension becomes an extraordinary measure.
Rybnikov said the trade volume in London had doubled on the days when operations had ceased on the Micex and RTS exchanges. The trading closures, designed to curb the magnitude of fluctuations, ranged from one hour to more than a day.
BNP Paribas has estimated that $140bn (€109bn) in capital has left Russia since the beginning of August amid war with Georgia, a decline in oil prices and the rout in the country’s stock market.
Problems with the domestic repo market exacerbated the equity sell-off in early October when banks and brokers failed to meet their obligations on time. If a repo deal is not completed on schedule, the lender may dump the stocks in the market.
Repo deals made up about two thirds of the trading volume at Micex while margin trades and short selling were estimated at up to 25%. During the crisis, the regulator at various times stopped trading in repo, margin trades and short selling.
Rybnikov said a number of institutions had been fined for defaulting on bilateral repo obligations while the banning of Utrade.Ru, a subsidiary of Uniastrum Bank, should serve as a warning to others.
Difficulties in settling its repo payments, worth about 7bn roubles (€202m), forced investment bank KIT Finance to sell up to state diamond miner Alrosa and rail monopoly Russian Railways for 100 roubles. Problems at Moscow’s leading brokerage Renaissance Capital led to its sale of a 50% stake to oligarch Mikhail Prokhorov at a knockdown price of $500m.
The debate over the reshaping of Russian financial architecture has brought the issue of a merger of Micex and RTS to the fore.
Rybnikov said: “It makes sense to unify the exchanges. Only certain issues can be resolved through consolidations. The discussion started a year ago and barely anyone is against it, but we need to know what the state thinks and whether it wants to be a regulator, an owner or an activist investor.”
Russia’s Central Bank is the main shareholder in Micex, the central company in the group with a 29.8% share. Leading brokers, who are shareholders and members of both exchanges, have been campaigning steadily for a union for several years.
Vladimir Milovidov, chairman of the FFMS, admitted to delegates at last month’s UBS investor forum in Moscow that new approaches to regulation need to be found.
He said: “It is very important to combat insider trading. Laws have been submitted to the State Duma and we are hopeful they will come before parliament in the new year. We also hope to have a draft law for bond holders and to protect their rights.”
Milovidov said negotiations to expand Russia’s circle of investors to encompass Chinese funds were advanced. “We could have double listings in Shanghai and Moscow and that would provide a stabilising role.”
Deepening Russia’s investor base, pension reform and accelerating mutual fund growth are high on the agenda.
“The Russian market probably fell more than other developing markets,” explained Rybnikov. “The reason for that is the general shortage of long-term domestic investors in Russia. About a million and a half people buy and sell securities from time to time. This is roughly one per cent of the population… It is next to nothing.”
Rybnikov applauded moves to allow funds accumulated in the pension system to be invested in stocks other than governmental securities and Government-guaranteed securities.
He said: “One more significant step is the decision to allow the central bank to become a trading member on the stock exchange which would ultimately, I hope, allow the central bank to accept a wider range of collateral to provide liquidity to not only the banking system but also to the financial system, including investment companies and brokers that are not licensed banking institutions. We have seen that, as a result of the crisis, decisions which have been delayed for years have started to be taken.”
However, Rybnikov warned that differences in two competing governmental blueprints for Moscow as an international financial centre would have to be resolved first.
He said: “The Ministry for Finance and the Federal Service for Financial Markets have their own plans. There are key differences to be resolved in ideas for architecture, taxation and the investor base.”
http://www.efinancialnews.com/tradingandtechnology/index/content/3352424751
Jason Corcoran in Moscow
10 November 2008
A merger of Micex and RTS is more likely following the exodus of €108bn in foreign capital since August
Rybnikov: suspensions must stop
Moves to merge Moscow’s two stock exchanges, modernise market architecture and improve long-term liquidity have been given impetus following Russia’s worst trading collapse since the sovereign default in 1998.
The frequent closures of Moscow’s two main trading platforms have led many investors to switch to trading Russian Global Depositary Receipts and Russian American Depositary Receipts in London and New York.
Some 23 suspensions of trading on the rouble-denominated Micex since early September have contributed to a two-thirds slide in the volume of trading and an exodus of investors.
Micex chief executive Alexei Rybnikov hopes the suspensions will become a rarity once the financial regulator, the Federal Service for Financial Markets, introduces rule changes.
He said: “I hope this situation will not continue. We have told the regulator and the Government that closures should be rare and can only be invoked for systemic reasons and not when the exchanges are only falling.”
Micex and Moscow’s biggest investment firms have asked the regulator to return to the old trading rules and allow bigger fluctuations so that a suspension becomes an extraordinary measure.
Rybnikov said the trade volume in London had doubled on the days when operations had ceased on the Micex and RTS exchanges. The trading closures, designed to curb the magnitude of fluctuations, ranged from one hour to more than a day.
BNP Paribas has estimated that $140bn (€109bn) in capital has left Russia since the beginning of August amid war with Georgia, a decline in oil prices and the rout in the country’s stock market.
Problems with the domestic repo market exacerbated the equity sell-off in early October when banks and brokers failed to meet their obligations on time. If a repo deal is not completed on schedule, the lender may dump the stocks in the market.
Repo deals made up about two thirds of the trading volume at Micex while margin trades and short selling were estimated at up to 25%. During the crisis, the regulator at various times stopped trading in repo, margin trades and short selling.
Rybnikov said a number of institutions had been fined for defaulting on bilateral repo obligations while the banning of Utrade.Ru, a subsidiary of Uniastrum Bank, should serve as a warning to others.
Difficulties in settling its repo payments, worth about 7bn roubles (€202m), forced investment bank KIT Finance to sell up to state diamond miner Alrosa and rail monopoly Russian Railways for 100 roubles. Problems at Moscow’s leading brokerage Renaissance Capital led to its sale of a 50% stake to oligarch Mikhail Prokhorov at a knockdown price of $500m.
The debate over the reshaping of Russian financial architecture has brought the issue of a merger of Micex and RTS to the fore.
Rybnikov said: “It makes sense to unify the exchanges. Only certain issues can be resolved through consolidations. The discussion started a year ago and barely anyone is against it, but we need to know what the state thinks and whether it wants to be a regulator, an owner or an activist investor.”
Russia’s Central Bank is the main shareholder in Micex, the central company in the group with a 29.8% share. Leading brokers, who are shareholders and members of both exchanges, have been campaigning steadily for a union for several years.
Vladimir Milovidov, chairman of the FFMS, admitted to delegates at last month’s UBS investor forum in Moscow that new approaches to regulation need to be found.
He said: “It is very important to combat insider trading. Laws have been submitted to the State Duma and we are hopeful they will come before parliament in the new year. We also hope to have a draft law for bond holders and to protect their rights.”
Milovidov said negotiations to expand Russia’s circle of investors to encompass Chinese funds were advanced. “We could have double listings in Shanghai and Moscow and that would provide a stabilising role.”
Deepening Russia’s investor base, pension reform and accelerating mutual fund growth are high on the agenda.
“The Russian market probably fell more than other developing markets,” explained Rybnikov. “The reason for that is the general shortage of long-term domestic investors in Russia. About a million and a half people buy and sell securities from time to time. This is roughly one per cent of the population… It is next to nothing.”
Rybnikov applauded moves to allow funds accumulated in the pension system to be invested in stocks other than governmental securities and Government-guaranteed securities.
He said: “One more significant step is the decision to allow the central bank to become a trading member on the stock exchange which would ultimately, I hope, allow the central bank to accept a wider range of collateral to provide liquidity to not only the banking system but also to the financial system, including investment companies and brokers that are not licensed banking institutions. We have seen that, as a result of the crisis, decisions which have been delayed for years have started to be taken.”
However, Rybnikov warned that differences in two competing governmental blueprints for Moscow as an international financial centre would have to be resolved first.
He said: “The Ministry for Finance and the Federal Service for Financial Markets have their own plans. There are key differences to be resolved in ideas for architecture, taxation and the investor base.”
http://www.efinancialnews.com/tradingandtechnology/index/content/3352424751
Tuesday, 22 April 2008
Regulator tells exchanges to create single platform
Wall Street Journal
Jason Corcoran in Moscow
21 April 2008
Rybnikov: market users have a say on how infrastructure is set up
Merger could increase turnover sevenfold
Russia’s two largest stock exchanges are a step closer to being merged into a single trading platform following renewed efforts by the market’s main regulator to help develop Moscow as a global financial centre.
The Federal Service for Financial Markets will next month submit plans to the Government to merge the rouble-denominated Moscow Interbank Currency Exchange, Micex, and the dollar-denominated Russian Trading System Stock Exchange by 2010. The regulator believes the combined turnover of the exchanges could grow sevenfold by 2020 to 210 trillion roubles (€5.7 trillion) annually following the merger.
The regulator will propose that Micex and RTS become units of a holding company, whose shares would later be offered to the public. In an interview with Financial News, Alexei Rybnikov, the chief executive of Micex, confirmed the merger talks and said he was confident of success in spite of numerous obstacles.
He said: “We have many stakeholders involved in the affairs of the securities market infrastructure. The state is a regulator and also a shareholder both directly and indirectly in the infrastructure. In addition to the existing shareholders of the Russian exchanges, market users also have a say and their own view on how infrastructure is to be set up. The question is whether a model exists that can accommodate all these different interests and various stakeholders. I do think such a model exists.”
Analysis by Thomas Murray, a risk ratings and advisory specialist, of the vested interests of each platform’s shareholders, users, brokers, foreign and domestic investors and management in such a merger, found that while there may be diverging viewpoints on specific issues, all parties could see synergies from having a single trading platform.
Micex was set up in 1992 by Russia’s central bank, which still owns 28% of the exchange. Other shareholders include state-owned and commercial banks, which also have stakes in RTS. The significant shareholders in RTS are Troika Dialog, KIT Finance, Deutsche Securities and UniCredit Aton, each owning approximately 10% of the exchange.
Rybnikov said: “I think a model that will please all the different interests can be found and, when it is outlined, can be supported by the different stakeholders. But every stakeholder has to define what it wants from the infrastructure.”
A former head of investment banking at JP Morgan Chase in Moscow, Rybnikov has been head of the largest Russian stock exchange since its launch in November 2003. From 2002 to 2004 he was also director of the National Depository Centre, Micex’s settlement depository.
It is the creation of a central depository that lies at the heart of any merger between the two exchanges. NDC and RTS’s Depository Clearing Company have been battling for years for the title of pre-eminent central clearing company. The Government plans to set up a central depository, but the politics of choosing one depository to form the base of the single company have been a stumbling block.
Vladimir Milovidov, head of Russia’s market regulator the FSFM, told the newspaper Kommersant that the formation of a central depository was inevitable because having two institutions caused inefficiency and illiquidity and was more expensive for investors.
The FSFM has outlined a draft strategy for the development of the domestic capital markets over the next four years. Among the proposals are drastic changes to the tax rules, including cutting capital gains tax and a reduction of the tax on income from investments in securities, which the regulator hopes will encourage more companies to list their shares in Russia rather than going overseas.
The regulator has introduced several administrative controls to encourage corporates to list locally with only partial success – Russian companies that launch initial public offerings typically list both in Russia and London.
Liquidity has increased significantly, however, with average daily volumes of all Russian stocks reaching almost $6.2bn (€3.9bn), including $1.2bn of daily over-the-counter trading, according to Troika Dialog research. Roughly 45% of this trading takes place on Russian exchanges, 19% is OTC volumes in Russia and 36% is traded internationally. The inclusion of OTC liquidity adds considerably to the number of stocks that are liquid enough to merit investor interest, said Troika (see bar chart).
Rybnikov believes a deepening pool of liquidity will tempt more Russian issuers to list at home. He said: “For a global company, a foreign listing helps to create acquisition currency for potential transactions, there are also reputation and visibility-related issues that count. On top of that, the global investment banks that underwrite Russian IPOs also have most of their clients outside Russia. But as the domestic investor base grows and the competitiveness of Russian brokers grows, we will see more Russia-only listings.”
Rybnikov and other marketmakers are confident Russia can become a hub for the capital markets of the Commonwealth of Independent States and central Europe after necessary reforms.
The Russian parliament is considering legislation to allow foreign securities to list on domestic exchanges for the first time. It wants to better compete against Poland’s Warsaw Stock Exchange, which is establishing itself as a regional player having won listings from Ukraine and other former Soviet states.
Rybnikov said: “We have a lot to offer issuers from the CIS countries, not only in terms of the Russian investor base and the depth of the domestic market, but also due to the size of the foreign investor base that uses our platform.”
Such is the level of Russian corporate interest in the capital markets that Germany’s Deutsche Börse set up the first office of any foreign exchange in Moscow last year. However, the exchange group shot itself in the foot when a member of its executive board wrote to a Russia foreign policy adviser discussing a potential development with Micex to launch an equity trading and listing platform in Frankfurt.
Discussions were at an early stage and the letter to a policymaker is understood to have dismayed the Russians.
Rybnikov said: “The idea of creating a platform outside Russia in EU jurisdiction, where Russian stocks can be traded and settled more efficiently then elsewhere, is interesting. But it creates risks for our existing business. Because our goal is to get as much liquidity on Micex as possible we risk creating competition for ourselves. Hence, that idea is to be looked at with caution and will have to be studied in detail before it gets a go-ahead.”
Jason Corcoran in Moscow
21 April 2008
Rybnikov: market users have a say on how infrastructure is set up
Merger could increase turnover sevenfold
Russia’s two largest stock exchanges are a step closer to being merged into a single trading platform following renewed efforts by the market’s main regulator to help develop Moscow as a global financial centre.
The Federal Service for Financial Markets will next month submit plans to the Government to merge the rouble-denominated Moscow Interbank Currency Exchange, Micex, and the dollar-denominated Russian Trading System Stock Exchange by 2010. The regulator believes the combined turnover of the exchanges could grow sevenfold by 2020 to 210 trillion roubles (€5.7 trillion) annually following the merger.
The regulator will propose that Micex and RTS become units of a holding company, whose shares would later be offered to the public. In an interview with Financial News, Alexei Rybnikov, the chief executive of Micex, confirmed the merger talks and said he was confident of success in spite of numerous obstacles.
He said: “We have many stakeholders involved in the affairs of the securities market infrastructure. The state is a regulator and also a shareholder both directly and indirectly in the infrastructure. In addition to the existing shareholders of the Russian exchanges, market users also have a say and their own view on how infrastructure is to be set up. The question is whether a model exists that can accommodate all these different interests and various stakeholders. I do think such a model exists.”
Analysis by Thomas Murray, a risk ratings and advisory specialist, of the vested interests of each platform’s shareholders, users, brokers, foreign and domestic investors and management in such a merger, found that while there may be diverging viewpoints on specific issues, all parties could see synergies from having a single trading platform.
Micex was set up in 1992 by Russia’s central bank, which still owns 28% of the exchange. Other shareholders include state-owned and commercial banks, which also have stakes in RTS. The significant shareholders in RTS are Troika Dialog, KIT Finance, Deutsche Securities and UniCredit Aton, each owning approximately 10% of the exchange.
Rybnikov said: “I think a model that will please all the different interests can be found and, when it is outlined, can be supported by the different stakeholders. But every stakeholder has to define what it wants from the infrastructure.”
A former head of investment banking at JP Morgan Chase in Moscow, Rybnikov has been head of the largest Russian stock exchange since its launch in November 2003. From 2002 to 2004 he was also director of the National Depository Centre, Micex’s settlement depository.
It is the creation of a central depository that lies at the heart of any merger between the two exchanges. NDC and RTS’s Depository Clearing Company have been battling for years for the title of pre-eminent central clearing company. The Government plans to set up a central depository, but the politics of choosing one depository to form the base of the single company have been a stumbling block.
Vladimir Milovidov, head of Russia’s market regulator the FSFM, told the newspaper Kommersant that the formation of a central depository was inevitable because having two institutions caused inefficiency and illiquidity and was more expensive for investors.
The FSFM has outlined a draft strategy for the development of the domestic capital markets over the next four years. Among the proposals are drastic changes to the tax rules, including cutting capital gains tax and a reduction of the tax on income from investments in securities, which the regulator hopes will encourage more companies to list their shares in Russia rather than going overseas.
The regulator has introduced several administrative controls to encourage corporates to list locally with only partial success – Russian companies that launch initial public offerings typically list both in Russia and London.
Liquidity has increased significantly, however, with average daily volumes of all Russian stocks reaching almost $6.2bn (€3.9bn), including $1.2bn of daily over-the-counter trading, according to Troika Dialog research. Roughly 45% of this trading takes place on Russian exchanges, 19% is OTC volumes in Russia and 36% is traded internationally. The inclusion of OTC liquidity adds considerably to the number of stocks that are liquid enough to merit investor interest, said Troika (see bar chart).
Rybnikov believes a deepening pool of liquidity will tempt more Russian issuers to list at home. He said: “For a global company, a foreign listing helps to create acquisition currency for potential transactions, there are also reputation and visibility-related issues that count. On top of that, the global investment banks that underwrite Russian IPOs also have most of their clients outside Russia. But as the domestic investor base grows and the competitiveness of Russian brokers grows, we will see more Russia-only listings.”
Rybnikov and other marketmakers are confident Russia can become a hub for the capital markets of the Commonwealth of Independent States and central Europe after necessary reforms.
The Russian parliament is considering legislation to allow foreign securities to list on domestic exchanges for the first time. It wants to better compete against Poland’s Warsaw Stock Exchange, which is establishing itself as a regional player having won listings from Ukraine and other former Soviet states.
Rybnikov said: “We have a lot to offer issuers from the CIS countries, not only in terms of the Russian investor base and the depth of the domestic market, but also due to the size of the foreign investor base that uses our platform.”
Such is the level of Russian corporate interest in the capital markets that Germany’s Deutsche Börse set up the first office of any foreign exchange in Moscow last year. However, the exchange group shot itself in the foot when a member of its executive board wrote to a Russia foreign policy adviser discussing a potential development with Micex to launch an equity trading and listing platform in Frankfurt.
Discussions were at an early stage and the letter to a policymaker is understood to have dismayed the Russians.
Rybnikov said: “The idea of creating a platform outside Russia in EU jurisdiction, where Russian stocks can be traded and settled more efficiently then elsewhere, is interesting. But it creates risks for our existing business. Because our goal is to get as much liquidity on Micex as possible we risk creating competition for ourselves. Hence, that idea is to be looked at with caution and will have to be studied in detail before it gets a go-ahead.”
Tuesday, 27 November 2007
Russian exchanges in battle for liquidity
Financial News
Jason Corcoran in Moscow
26 Nov 2007
Alliances and technology investment should attract IPOs
Russia’s stock exchanges are battling against international competitors and mounting pressure to consolidate as they launch initiatives to attract domestic liquidity.
The London Stock Exchange remains the preferred destination for Russian companies looking to tap the capital markets, handling more than 70% of foreign listings by Russian companies. But rivals, including Frankfurt exchange operator Deutsche Börse, which opened a Moscow office this year, are attempting to challenge the LSE stranglehold.
Roman Kirindassov, who heads the German exchange’s campaign to lure Russian issuers, said: “For Russian companies, we offer a real alternative for tapping western capital with the most cost-effective and time-saving listing procedure.
“Russian banks and brokers can obtain direct membership to our electronic trading platform Xetra and Eurex, the world’s largest derivative exchange.”
Cat Oil, an Austrian provider of services to oil and natural gas producers, last year became the first company with Russian operations to sell shares on Deutsche Börse. It was joined in February this year by two Russian groups, Zaab Energy and IBS Group.
Nordic and Baltic stock exchange group OMX, which is subject to complicated takeover negotiations involving US exchange Nasdaq and Borse Dubai, has expressed an interest in buying a stake in a Russian bourse.
In April, OMX entered into a partnership with the St Petersburg Exchange – whose profits halved in 2005 after losing its monopoly to trade Gazprom stock – and RX, a group of UK venture capitalists, to create a new international trading platform.
The International Exchange St Petersburg will offer small and mid-sized Russian growth companies access to international capital without listing on a foreign exchange.
Although London has emerged as the home for Russian IPOs, domestic exchange Micex believes it is making inroads. Micex claims to account for more than 70% of transactions in Russian securities by volume, compared to 50% two years ago.
Alexander Potemkin, president of Micex, said: “We can say with certainty that foreign investors are prepared to bear the risks of the Russian infrastructure. Non-residents played an important role in the development of the Russian internal stock market as they gradually changed over from trading in global depositary receipts and American depositary receipts to trading in local stocks.”
Companies and their bankers cite the lack of a high-quality long-term domestic investor base as their reason for listing aboard.
Local exchanges, however, argue that conditions are improving with the growth of a domestic asset management industry and pension reform.
State-owned Sberbank bucked the trend in the summer with its $19bn (€12.9bn) share offering, which was placed entirely on Russian bourses.
To compete with London’s Alternative Investment Market, both the rouble-denominated Micex and its dollar-denominated rival, RTS, have launched secondary markets.
In June, Micex launched its innovation and growth companies sector, which has been described as Russia’s answer to Nasdaq, catering for telecommunications, software, biotech and hi-tech companies.
Micex, which focuses on individual investors and small to medium-sized brokerages that work directly with foreign investors, expects 10 new issuers to enter the opened sector.
RTS launched futures and options contracts in a number of Russian blue chips including Mobile TeleSystems, gold producer Polyus Gold, natural gas producer Novatek and oil pipeline monopoly Transneft.
Although companies usually list their shares on both exchanges, trade volumes on Micex surpasses those on RTS. However, RTS has a sizeable over-the-counter market for small-cap stocks and remains Russia’s only derivatives exchange.
Both domestic exchanges are looking to Asia and the Commonwealth of Independent States for growth. RTS acquired an equity stake in the Ukrainian stock market, Inneks, while Micex has signed a co-operation agreement with the Hong Kong stock exchange, which could pave the way for dual listings.
Potemkin said the deal with Hong Kong would bring more Asian investors to the Russian stock market.
He said: “This year, the share of foreign investors’ transactions in the volume of stocks trading on the Micex has exceeded 25%. The interest of Asian investors keeps growing.”
Despite the innovative efforts of the exchanges, however, the Russian regulator continues to call for the two main bourses to merge. The Federal Service for Financial Markets cites improved clearing, better market efficiency and the need to create a central depository as main benefits of a union.
Vadim Yegorov, head of public affairs at Micex, confirmed a merger could be on the cards in the next year or two. He said: “We are discussing it now but a lot depends on the regulatory bodies, pooling our infrastructure and shareholders’ interests.”
The Russian central bank owns 28% of Micex’s parent company, while RTS is privately owned by local brokerage houses including UFG, Troika, Aton, Renaissance and Alfa.
Roman Goryunov, chairman of RTS, said the exchange had not ruled out a merger but he believed the global trend towards consolidation did not necessarily apply to Russia.
He said: “RTS and Micex have their own segments of the market, their own clients and instruments. That is why current competition helps to develop the technology and market instruments and the development of the Russian financial market.”
Elena Krasnitskaya, a market analyst at Troika Dialog, believes policymakers are determined to expand the domestic markets for Russian companies, citing as one example a law permitting domestic custodians to issue Russian depositary receipts on foreign securities.
The regulator also published a bill in August that will eventually provide a legal framework for trading in foreign securities.
Krasnitskaya said: “The latest move, if successful, would boost the position of domestic exchanges in their competition with foreign peers for the stocks of CIS countries.
“It is becoming important to attract these listings as in the past 18 months alone, six Kazakh and Ukrainian companies have conducted offerings on the London Stock Exchange’s Alternative Investment Market.”
Calls for greater integration of the 18 CIS stock exchanges and three depositories grew louder at August’s general meeting of the International Association of Exchanges of the CIS countries.
Micex’s Potemkin said the most pressing task is to integrate the markets by allowing mutual admission of issuers, participants and investors.
He said: “One important measure aimed at securing this integration must be the creation of an IT committee and the compatibility of trading, broker, information and analytical systems, as well as the different telecommunication products of the CIS countries.”
In June, Russian Finance Minister Alexei Kudrin admitted his government was targeting the leading companies of the CIS in an attempt to persuade them to launch IPOs in Moscow. Russia already boasts by far the biggest and most liquid stock market in the region.
However, it is increasingly having to compete with the Warsaw stock market, which has attracted several Ukrainian IPOs and is equally well developed.
Warsaw has signed an agreement with one Lithuanian and two Ukrainian brokerage firms to encourage foreign listings. The Polish bourse could yet emerge as the main threat to the Russian exchanges’ hopes of becoming the leading trading centres in the region.
www.efinancialnews.com
Jason Corcoran in Moscow
26 Nov 2007
Alliances and technology investment should attract IPOs
Russia’s stock exchanges are battling against international competitors and mounting pressure to consolidate as they launch initiatives to attract domestic liquidity.
The London Stock Exchange remains the preferred destination for Russian companies looking to tap the capital markets, handling more than 70% of foreign listings by Russian companies. But rivals, including Frankfurt exchange operator Deutsche Börse, which opened a Moscow office this year, are attempting to challenge the LSE stranglehold.
Roman Kirindassov, who heads the German exchange’s campaign to lure Russian issuers, said: “For Russian companies, we offer a real alternative for tapping western capital with the most cost-effective and time-saving listing procedure.
“Russian banks and brokers can obtain direct membership to our electronic trading platform Xetra and Eurex, the world’s largest derivative exchange.”
Cat Oil, an Austrian provider of services to oil and natural gas producers, last year became the first company with Russian operations to sell shares on Deutsche Börse. It was joined in February this year by two Russian groups, Zaab Energy and IBS Group.
Nordic and Baltic stock exchange group OMX, which is subject to complicated takeover negotiations involving US exchange Nasdaq and Borse Dubai, has expressed an interest in buying a stake in a Russian bourse.
In April, OMX entered into a partnership with the St Petersburg Exchange – whose profits halved in 2005 after losing its monopoly to trade Gazprom stock – and RX, a group of UK venture capitalists, to create a new international trading platform.
The International Exchange St Petersburg will offer small and mid-sized Russian growth companies access to international capital without listing on a foreign exchange.
Although London has emerged as the home for Russian IPOs, domestic exchange Micex believes it is making inroads. Micex claims to account for more than 70% of transactions in Russian securities by volume, compared to 50% two years ago.
Alexander Potemkin, president of Micex, said: “We can say with certainty that foreign investors are prepared to bear the risks of the Russian infrastructure. Non-residents played an important role in the development of the Russian internal stock market as they gradually changed over from trading in global depositary receipts and American depositary receipts to trading in local stocks.”
Companies and their bankers cite the lack of a high-quality long-term domestic investor base as their reason for listing aboard.
Local exchanges, however, argue that conditions are improving with the growth of a domestic asset management industry and pension reform.
State-owned Sberbank bucked the trend in the summer with its $19bn (€12.9bn) share offering, which was placed entirely on Russian bourses.
To compete with London’s Alternative Investment Market, both the rouble-denominated Micex and its dollar-denominated rival, RTS, have launched secondary markets.
In June, Micex launched its innovation and growth companies sector, which has been described as Russia’s answer to Nasdaq, catering for telecommunications, software, biotech and hi-tech companies.
Micex, which focuses on individual investors and small to medium-sized brokerages that work directly with foreign investors, expects 10 new issuers to enter the opened sector.
RTS launched futures and options contracts in a number of Russian blue chips including Mobile TeleSystems, gold producer Polyus Gold, natural gas producer Novatek and oil pipeline monopoly Transneft.
Although companies usually list their shares on both exchanges, trade volumes on Micex surpasses those on RTS. However, RTS has a sizeable over-the-counter market for small-cap stocks and remains Russia’s only derivatives exchange.
Both domestic exchanges are looking to Asia and the Commonwealth of Independent States for growth. RTS acquired an equity stake in the Ukrainian stock market, Inneks, while Micex has signed a co-operation agreement with the Hong Kong stock exchange, which could pave the way for dual listings.
Potemkin said the deal with Hong Kong would bring more Asian investors to the Russian stock market.
He said: “This year, the share of foreign investors’ transactions in the volume of stocks trading on the Micex has exceeded 25%. The interest of Asian investors keeps growing.”
Despite the innovative efforts of the exchanges, however, the Russian regulator continues to call for the two main bourses to merge. The Federal Service for Financial Markets cites improved clearing, better market efficiency and the need to create a central depository as main benefits of a union.
Vadim Yegorov, head of public affairs at Micex, confirmed a merger could be on the cards in the next year or two. He said: “We are discussing it now but a lot depends on the regulatory bodies, pooling our infrastructure and shareholders’ interests.”
The Russian central bank owns 28% of Micex’s parent company, while RTS is privately owned by local brokerage houses including UFG, Troika, Aton, Renaissance and Alfa.
Roman Goryunov, chairman of RTS, said the exchange had not ruled out a merger but he believed the global trend towards consolidation did not necessarily apply to Russia.
He said: “RTS and Micex have their own segments of the market, their own clients and instruments. That is why current competition helps to develop the technology and market instruments and the development of the Russian financial market.”
Elena Krasnitskaya, a market analyst at Troika Dialog, believes policymakers are determined to expand the domestic markets for Russian companies, citing as one example a law permitting domestic custodians to issue Russian depositary receipts on foreign securities.
The regulator also published a bill in August that will eventually provide a legal framework for trading in foreign securities.
Krasnitskaya said: “The latest move, if successful, would boost the position of domestic exchanges in their competition with foreign peers for the stocks of CIS countries.
“It is becoming important to attract these listings as in the past 18 months alone, six Kazakh and Ukrainian companies have conducted offerings on the London Stock Exchange’s Alternative Investment Market.”
Calls for greater integration of the 18 CIS stock exchanges and three depositories grew louder at August’s general meeting of the International Association of Exchanges of the CIS countries.
Micex’s Potemkin said the most pressing task is to integrate the markets by allowing mutual admission of issuers, participants and investors.
He said: “One important measure aimed at securing this integration must be the creation of an IT committee and the compatibility of trading, broker, information and analytical systems, as well as the different telecommunication products of the CIS countries.”
In June, Russian Finance Minister Alexei Kudrin admitted his government was targeting the leading companies of the CIS in an attempt to persuade them to launch IPOs in Moscow. Russia already boasts by far the biggest and most liquid stock market in the region.
However, it is increasingly having to compete with the Warsaw stock market, which has attracted several Ukrainian IPOs and is equally well developed.
Warsaw has signed an agreement with one Lithuanian and two Ukrainian brokerage firms to encourage foreign listings. The Polish bourse could yet emerge as the main threat to the Russian exchanges’ hopes of becoming the leading trading centres in the region.
www.efinancialnews.com
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