The exchange introduces a new trading system in hopes of increasing turnover

Russian exchanges continue to compete for clients - following the launch of the RTS Standard platform, which allowed the RTS exchange to increase the turnover of shares from 1 to 20%, the MICEX stock exchange intends to offer participants a new trading system. The new trading technology complies with international standards, which, according to the MICEX, will make it possible to attract foreign participants. However, the Bank of Russia indicates that the MICEX must first carefully develop a risk management system in order to reduce the risks of increased non-payments.

The MICEX Stock Exchange plans to launch a new trading mode with partial collateral and full T+n settlements at the end of January 2010 (settlements are made not on the day the transaction is concluded, but on the third day). The corresponding decision was made following a joint meeting of the stock market committee and the working group on T+n trading technology. As the meeting participants told Kommersant, in this mode it will be possible to make transactions with liquid shares and bonds. In addition, the new system will have a central party to the transaction, which will ensure that the participants fulfill their obligations. Thus, the central counterparty will assume the risk if trading participants fail to fulfill their obligations (for example, if on the third day the participant does not fully deposit funds for the transaction). The central party will form a guarantee fund from contributions. Each trading participant will have a limit on the volume of transactions with the central counterparty; some participants may not be allowed into this system at all. The collateral that participants will have to deposit at the time of concluding the transaction will depend on the volatility of the securities and range from 25 to 45%. During the meeting, representatives of the exchange stated that the main goal of the project for the exchange is to expand the trading opportunities of market participants. Yesterday the MICEX was unable to comment on these plans.

Currently, on the MICEX, transactions with securities are carried out with 100% deposit and settlements are executed on the same day. The main competitor of the MICEX, the RTS exchange, launched the RTS Standard stock market in April, which combines exchange technologies of international exchanges: there is no 100% pre-deposit, and full settlements are carried out on the fourth day (T+4), the party to each transaction is the central counterparty.

The introduction of a new platform on the RTS allowed the exchange to instantly increase trading volumes, pulling part of the exchange turnover from the MICEX. Before the launch of the new platform, the RTS accounted for 1% of stock exchange trading, now it is 15%, and on some days the RTS share reaches 20%.

The new methodology, which the MICEX plans to introduce, is used on the main international exchanges, including the London one. “The new system will make trading more comfortable and will attract new foreign players who are not used to trading by depositing the entire transaction amount at once,” believes Andrei Uspensky, general director of Fleming Family and Partners Asset Management. “In turn, the growth of the client base will bring additional income to the MICEX,” notes Valeria Avksentyeva, Deputy General Director for Operations of the Otkritie Database.

The Federal Service for Financial Markets (FSFM), which is trying to implement a strategy to concentrate trading in Russian securities on the domestic market, supports the MICEX plans. “Trading on both platforms should be unified and attractive for market players - both Russian and Western,” says Vladimir Milovidov, head of the Federal Financial Markets Service.

However, the implementation of the project may be delayed due to agreement with the main shareholder of the MICEX - the Bank of Russia. “The project is very, very important and necessary,” notes a high-ranking official of the Central Bank. “The decision to implement it was made by the MICEX Board of Directors back in 2005.” However, according to Kommersant’s interlocutor at the Central Bank, the current version of the project does not contain a description of risk management. The FFMS also believes that in order to reduce the likelihood of conflicts between participants, it is necessary to carefully develop a risk management system. “With the introduction of partial collateral and T+n settlements, questions of the reliability of participants arise acutely and the risks of non-payments increase,” summarizes Vladimir Milovidov, “therefore, you need to think about how the central party to the transaction will take on the risks.”

Nailya Kommersant-Asker-zade, Tatyana Kommersant-Aleshkina

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