The RTS Stock Exchange has decided to change the brand of its index, the main indicator of the Russian stock market. Starting from the first half of 2005, the RTS index will be distributed as S&P/RTS.

The RTS stock exchange and the international rating agency Standard & Poor's (S&P) signed a corresponding cooperation agreement.

The document involves the joint development of calculations, licensing and distribution of Russian stock indices throughout the world. All joint index products will be distributed under a single S&P/RTS brand. This will give them extra weight.

The criteria for calculating the indices will be the capitalization of companies and the number of shares in free float, as well as the quality of corporate governance, the RTS representative specified.

This work should be carried out by a special index committee, which will include representatives of RTS and S&P. The Federal Service for Financial Markets (FSFM) will be invited to participate in the work of the committee.

As part of the cooperation, it is planned to modernize the methods for calculating existing indices by applying standards recognized by the global financial community, as well as to develop new indices. According to the chairman of the board of directors of the NP RTS Stock Exchange, Jacques der Megredichyan, the methodology for calculating the new index will differ from the currently existing methodology for calculating the RTS index. Joint products will be calculated in accordance with the S&P methodology, taking into account the number of shares in free float, as well as liquidity factors.

“The index will become a benchmark for the value of Russian assets for the whole world. Cooperation... will make it possible to bring Russian local pricing for Russian assets to all investors in the world,” noted the head of the Federal Financial Markets Service Oleg Vyugin .

Thus, Vyugin hopes that RTS will become listed on world markets on a par with such mastodons as NASDAQ or Dow Jons.

From the point of view of practical use, stock indices have two main components: informational, which reflects the state of the market, and commercial, which serves as the underlying asset for trading. In disseminating information, RTS loses to its only Russian competitor, the MICEX . News from this exchange appears on the market earlier. But the RTS information is considered more reliable, so investors are guided mostly by it.

“The new index will continue to bear the information load that the RTS index carried today,” says Valery Petrov, board member of the Guild of Investment and Financial Analysts . However, in his opinion, Russian indices today lack a solid commercial component.

Experts hope that connecting the S&P to the RTS will make the RTS index more adequate. Now the stock exchange, as the Yukos story has shown, is subject to the influence of political conditions.

In mid-2004, the calculation of the RTS index was changed. This was preceded by numerous trading suspensions due to the collapse of Yukos shares , on which the index was heavily dependent. A drop in the company's capitalization could worsen the overall picture of the stock market in the country, and foreigners could begin to withdraw money from Russian assets. But the management of RTS changed the calculation methodology in such a way that the failures or rises of these particular stocks almost ceased to be reflected in the stock exchange’s performance.

It turns out that now investors, primarily foreign ones, cannot really assess the situation on the Russian market based on the stock exchange index.

“If S&P can change the calculation in such a way that the indices will more adequately reflect the state of the market, this will be a big plus,” emphasized Mikhail Armyakov, an analyst at the Russian Investors Investment Company.
Now Russian investors are forced to use all sorts of tricks to navigate the market situation. In recent years, stock traders have expressed many complaints about the RTS index and are looking for alternative options (the MICEX and MICEX-10 have now become polar indices, Moscow Times), said Barrel Investment Company analyst Andrei Zorin . According to him, most large companies calculate their own indices. “I hope that the involvement of Standard & Poor’s specialists in the development of a methodology for calculating indices will help remove many of the shortcomings and leave its main advantage - a great history (in September of this year we will celebrate the 10th anniversary of the RTS index),” concluded Zorin.

However, according to Valery Petrov, cooperation between RTS and S&P at the current stage does not imply that the new methodology for calculating the RTS index will increase the commercial attractiveness of the Russian market and individual companies.

“The fact that S&P joined this project is a good indicator for Russia. At the same time, S&P benefits more here, since they become the official source of information on one more country, one more trading platform,” says Petrov.

Thus, no one can yet say exactly what exactly the cooperation between RTS and the leading rating agency will give Russia.

RTS will recalculate Standard & Poor's indices