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MICEX (Moscow Interbank Currency Exchange)
The MICEX is the largest universal exchange in Russia, the CIS and Eastern Europe
The MICEX Group is an integrated exchange, which organizes
electronic trading, clearing and settlements and provides depository
and information services. Since 1992, the MICEX has been the head
company of an exchange holding. The Group also includes the MICEX Stock
Exchange, the National Mercantile Exchange, the MICEX Settlement House,
the National Depository Center, the National Clearing Center, regional
exchanges and regional settlement centers as well as some other
organizations. They serve over 1700 participants in the exchange-based
market — leading Russian banks and brokerages, located in Moscow and
other large financial and industrial centers of Russia.
The Group's history began in the early 1990s, when, in the
course of market reforms, a number of Russia's leading banks and the
Bank of Russia established the Moscow Interbank Currency Exchange
(MICEX), which began to organize trading in foreign currencies. Since
the very first days of the existence of the exchange-based currency
market, the exchange rate of the US dollar fixed on the MICEX has been
one of the main indicators of the success of economic reforms in
Russia.
At present, the MICEX Group operates several key segments of
the financial market: the foreign exchange market (since 1992), the
government bonds market (since 1993), the derivative instruments market
(since 1996), the share market (since 1997), the market for corporate
and regional bonds (since 1999) and the money market (since 2004).
After implementing an up-to-date electronic trading and depository
system the MICEX became a universal financial exchange which serves as
a basis for a nationwide system of trading and settlements in the
orderly financial market of Russia. This laid the foundation of the
MICEX Group, the main goal of which is promoting the creation of market
mechanisms of fixing the exchange rate of the Russian ruble,
contributing to the improvement of the capitalization of Russian
companies-issuers and attracting investments in the country's economy.
Over the years, the MICEX Group has built the infrastructure of the
national financial market, based on the most advanced technologies.
The MICEX ranks among the leading exchanges of the world. By
the total volume of trading (in 2006: 52.04 trillion rubles or 1925
billion US dollars, the daily average volume of transactions: 211
billion rubles or 7.8 billion US dollars) the MICEX is the largest
exchange in Russia, the CIS and Eastern Europe. Growth of the volume of
exchange-based transactions in corporate securities enabled the MICEX
Stock Exchange to join the list of top 20 leading stock exchanges of
the world. The MICEX Stock Exchange is the place where liquidity for
Russian assets concentrates. It is the main stock exchange for
international investments in stocks and bonds of leading Russian
companies.
Foreign exchange
Trading in foreign exchange is held in
the MICEX System of Electronic Trading (SELT). Eight inter-bank
currency exchanges participate in a unified trading session. Since
1992, the RF Central Bank has set the official exchange rate of the
Russian ruble taking into account the results of trading in foreign
exchange on the MICEX. Daily trading is held in the US dollar, the
Euro, the Ukrainian hrivna, the Kazakhstan tenge, the Byelorussian
ruble as well as in currency swaps. In 2006, the total volume of
exchange-based transactions in foreign currencies amounted to
25.9 trillion rubles or 956 billion US dollars (about half of the MICEX
Group's total exchange-based turnover). At present, the MICEX foreign
exchange market has an effective system of risk management, which
guarantees the timely performance of obligations by all traders. One of
the elements of this system is the "payment vs. payment" rule,
according to which the MICEX effects settlements with a trader only
after the trader has performed his obligations. The most traded
currencies are the US dollar and the Euro. Members of the MICEX
Currency Market Section are 540 credit institutions. As a member of the
National Foreign Exchange Association (NFEA), the MICEX participates in
the implementation of the Standards of Work in the Internal Currency
and Money Markets.
Stocks
The MICEX Stock Exchange, Russia's leading stock
exchange, is one of the organizations comprising the MICEX Group. The
MICEX Stock Exchange organizes daily trading in the securities of about
600 Russian issuers, including such blue chips as Gazprom, RAO UES,
LUKoil, Norilsk Nickel, Sberbank, Rostelecom, Surgutneftegaz, Mobile
Telesystems, Tatneft, Uralsvyazinform and other companies, the total
capitalization of which is almost 900 billion dollars. About 590
organizations — professional participants in the securities market
trade on the MICEX SE. Their clients are over 270 thousand investors.
In 2006, the total value of transactions on the MICEX SE reached
20.4 trillion rubles (755 billion dollars), trades in stock accounting
for 14.9 trillion rubles (550 billion dollars). This makes up over 90%
of the total exchange-based turnover on the Russian market. Trading is
held electronically on the basis of an up-to-date trading and
depository system, to which regional floors and remote terminals are
connected. Settlements for transactions in cash are effected via the
MICEX Settlement House, while settlements for securities are effected
via the National Depository Center.
In 2006, the MICEX Index, Russia's main stock market
indicator, grew by 68% (by 83% in US dollars). The stable growth of the
market promotes the rapid expansion of the base of individual investors
on the Russian stock market. Last year, the number of individual
investors working on the MICEX SE doubled and exceeded 240 thousand
people. The Exchange holds trading in shares of over 100 mutual funds,
thus encouraging the development of institutions of collective
investing. To stimulate the growth of liquidity in the exchange-based
trading in shares of mutual funds, the MICEX Stock Exchange introduced
the institute of "specialists". These are participants in trading which
support purchase and sale quotations of certain securities.
The
MICEX Stock Exchange plays an important role in organizing initial
public offerings. In the corporate bonds market, the MICEX SE has long
been an acknowledged leader by the number and the total value of placed
securities. In recent years, efforts to promote IPOs in the share
market have begun to bring results. In 2006, seven companies used the
services of the MICEX SE to make their IPO, including Rosneft,
Severstal, OGK-5 and some others, which raised about 350 billion rubles
(over 13.2 billion dollars).
In 2006, the MICEX Stock Exchange started the Sector for
Innovation and Growth Companies (IGC Sector). The goal was to attract
investments in the fast-growing innovation sector of the economy
represented by small and medium-sized companies, create appropriate
conditions for these companies' IPOs and facilitate the development of
venture financing in Russia. To improve the transparency of innovation
and growth companies, the Exchange appointed listing agents –
organizations helping high-tech companies to join the Exchange.
Corporate, regional and municipal bonds
Russian companies
continue to use corporate bonds to attract considerable amounts of
investments. The MICEX Stock Exchange is Russia's leading floor
organizing trading in corporate bonds of over 300 Russian companies and
banks. In 2006, 223 companies sold 456 billion rubles (17.2 billion
dollars) worth of bonds on the MICEX. The total value of secondary
trading amounted to 4.1 trillion rubles (153 billion dollars). The
dynamics of bond quotation is reflected by the MICEX Corporate Bonds
Index, calculated since 2003.
The MICEX has considerable experience in organizing the
primary placement of and the secondary trading in bonds issued by
entities in the Russian Federation. At present, bonds of over
60 Russian regions and municipalities trade on the MICEX.
Government securities and the money market
The MICEX is a
national system of trading in government securities (GS), covering
Russia's eight main regional financial centers. Market participants
have direct access to a wide range of instruments of the GS market,
which includes, besides GKO and OFZ, other government bonds and bonds
of the Bank of Russia (OBR). Market participants can carry out the wide
range of operations in bonds: from primary placement and secondary
trading to REPO transactions (direct and reverse REPOs against the Bank
of Russia and inter-dealer REPOs). At present, over 280 authorized
dealers trade in the GS market. In 2006, the total value of
transactions in the GS market and the money market amounted to
4.87 trillion rubles (181 billion dollars), including transactions in
GKO/OFZ, REPOs and deposit operations of the Bank of Russia. The MICEX
government securities market gives the Bank of Russia broad
opportunities to implement its money and credit policy, while offering
market participants effective instruments helping to invest temporarily
free funds and manage liquidity. The MICEX publishes indexes and
indicators of the GS market yield and the curve of government bonds'
zero-coupon yield.
The Bank of Russia uses the MICEX trading system to carry out
deposit and credit operations involving credit organizations located in
different regions of Russia. In 2006, the volume of deposit operations
amounted to about 470 billion rubles (17 billion dollars), while the
number of banks participating in this market exceeded 140. In 2006, the
range of deposit operations of the Bank of Russia on the MICEX included
"demand" deposit transactions. Besides, the Exchange organized the
service of a new segment – credit operations of the Bank of Russia
(collateral crediting). One of important results of 2006 was the
organization of the service of a new segment of the GS market –
government savings bonds, intended for institutional investors.
The derivatives and commodity market
The MICEX is one of the
main organizers of trading in the Russian derivatives market. It holds
dominant positions in the market for currency futures. The MICEX's
share in this segment of the derivatives market exceeds 97%. The
Exchange organizes trading in US dollar futures and Euro futures as
well as futures on the exchange rate of the Euro against the US dollar.
In 2006, the total value of transactions in the MICEX Derivatives
Market Section amounted to about 900 billion rubles (33 billion
dollars), while the open interest reached 2 billion dollars. In 2006,
the MICEX launched futures on interest rates of the inter-bank money
market (MosIBOR and MosPrimeRate). To ensure the performance of
obligations for transactions, the Exchange has implemented a reliable
system of risk management. To cover risks, the Exchange has formed, at
its own expense, a reserve fund of 250 million rubles and a guarantee
fund of 250 million rubles to ensure clearing in the stock derivatives
market. To further develop the derivatives market, the MICEX tries to
widen the range of traded instruments by launching trading in futures
and options on the MICEX Index. Besides, the MICEX intends to widen the
range of derivatives on stock assets, interest rate assets and currency
assets and to improve the system of risk management by implementing the
technology of portfolio margin based on SPAN (Standard Portfolio
Analysis of Risk) methodology, developed by CME and used by many
leading exchanges and clearing organizations across the world.
Being an infrastructure element of the commodity market, the
National Mercantile Exchange (NAMEX) participates in organizing and
holding trading in the framework of state purchase and commodity
interventions in the grain market. The NAMEX's strategic plans include
the launch of derivative instruments on farm products, oil, natural gas
and other assets.
Settlements and clearing
Ensuring maximum possible guarantees
of execution of transactions is one of the Exchange's guiding
principles. Settlements for transactions are effected on the "delivery
vs. payment" principle via specialized organizations such as non-bank
credit organization The MICEX Settlement House (MICEX SH) and
non-profit partnership The National Depository Center (NDC).
By the size of assets, the MICEX Settlement House is among
30 largest Russian credit organizations. It secures reliable
settlements in all exchange-based markets. The volume of traders'
payments, which are made daily through the correspondent account of the
MICEX SH with the Bank of Russia, is about 200 billion rubles a day,
while the turnover of funds involved in settlements for clients'
transactions on the MICEX amounts to 300 billion rubles. About 400
Russian banks, accounting for about 30% of the Russian banking system,
have opened their accounts with the MICEX SH. Clients' balances in
accounts with the MICEX SH amount to over one third of the amount of
funds of all credit organizations of Moscow region kept in accounts
with the Bank of Russia.
In 2006, the NDC confirmed its status of the leading Russian
settlement depository. In 2006, the value of securities registered in
depositors' depo accounts with the NDC grew by 86% to 3.3 trillion
rubles (125 billion dollars), shares accounting for 1.14 trillion
rubles (35% of the consolidated portfolio of assets). In 2006, the NDC
performed all the required preparatory work to obtain the license of
the central depository: it increased its equity capital to 941 million
rubles and obtained the А+ rating from Thomas Murray international
rating agency.
Until recently, the MICEX has provided its own clearing
services to participants in exchange-based trading. The MICEX Group has
also begun to implement the central counterparty model for all
transactions, which agrees with world standards and enables to ensure
the transparency of obligations for transactions. For this purpose, the
National Clearing Center (NCC) has been established as a member of the
MICEX Group. The NCC has already obtained the Bank of Russia's license
to carry out banking operations. Soon it will be Russia's first
organization specializing in clearing in exchange-based and OTC
markets. This includes calculating obligations of participants in
clearing, offsetting these obligations and organizing the execution of
obligations for transactions in compliance with the RF laws.
Technologies
The MICEX Group's electronic trading and
depository system satisfies the world's best standards of reliability,
efficiency, protection and the continuity of business. The soft- and
hardware complex includes the trading, settlement and depository
systems, operating in the real-time mode. The telecommunication network
of the complex is supported by leading providers and covers the whole
territory of Russia. The core of the MICEX's global trading network is
two computing centers (the main one and the reserve one). The platform
of the MICEX Group's trading and depository complex is based on
Hewlett-Packard UNIX servers (over 80 servers). According to the
results of the audit performed by Gartner Group, the availability ratio
of the complex is 99.99. The MICEX trading complex enables to register
up to 800 000 orders and 500 000 deals a day. As the liquidity of the
exchange-based market grows, the capacity of the trading complex is
increased. Fiber-optic lines, satellite and other communication
channels connect the Exchange with over 1500 remote workplaces in
banks, broker companies and other financial institutions located in
more than 100 Russian cities. Over 300 brokerages are connected to the
MICEX trading complex, enabling to serve investors via remote terminals
with the use of Internet technologies. More than half of exchange-based
transactions in securities are carried out via such broker systems.
When the MICEX was connected to the Moscow unit of GL NET Company,
which is the world-largest global private network with access to
leading exchanges, over 4 thousand large foreign institutional
investors, including 500 largest international financial institutions,
were enabled to trade on the MICEX Stock Exchange.
Regional infrastructure
The inter-regional exchange
infrastructure, comprised of the MICEX and regional currency exchanges,
emerged in the middle of the 1990s on the basis of a single platform.
The MICEX continues to cooperate with regional currency and stock
exchanges and regional settlement centers of the orderly securities
market. These regional exchanges include the MICEX-Far East
(Vladivostok), the Nizhny Novgorod Stock and Currency Exchange (Nizhny
Novgorod), the MICEX-South (Rostov-on-Don), the Samara Currency
Interbank Exchange (Samara), the St. Petersburg Currency Exchange (St.
Petersburg), the Siberian Interbank Currency Exchange (Novosibirsk),
the Urals Regional Currency Exchange (Yekaterinburg). The settlement
centers are located in the same cities. Acting as regional
representatives of the MICEX Group, regional exchanges and settlement
centers interact with regional participants in financial markets,
ensure the implementation of new technologies, systems of timely
settlements with participants in exchange-based trading and provide a
wide range of information and advice services. In 2006, turnover in all
main segments of the exchange-based market of regional exchanges grew
to 11.9 trillion rubles, 1.5 times more than in 2005.
International cooperation
Considering the current
globalization processes and Russia's expected ascension of the World
Trade Organization, the MICEX Group makes efforts to integrate into the
infrastructure of the world capital market. The number of the MICEX's
foreign market participants is steadily growing. The share of foreign
investors' operations in the turnover of stock trading on the MICEX SE
has exceeded 20%. The MICEX interacts with such floors as the New York
Stock Exchange (NYSE), NASDAQ, the Chicago Mercantile Exchange (CME),
the London Stock Exchange (LSE), the Deutsche Borse (DB), the Wiener
Borse AG (WBAG), the OMX Group, the Shanghai Stock Exchange (SSE) and
other exchanges. The MICEX has singed memoranda of cooperation with a
number of these exchanges. In 2002, the MICEX joined the World
Federation of Exchanges as a correspondent member. The World Federation
of Exchanges is comprised of over 100 exchanges of the world, which
account for 97% of the capitalization of the world stock market. In
2007, the MICEX was made the Federation's affiliated member. Jointly
with the International Association of Exchanges of the CIS Countries
the MICEX Group is developing appropriate conditions for the formation
of an integrated stock market of the CIS on the technological basis of
national exchanges of the Commonwealth.
Information
The MICEX regards transparency as an important
guiding principle. Traders and investors can watch the course of
trading sessions on the MICEX web site, use up-to-date technologies of
remote mobile access or use the services of leading Russian and
international news agencies. At present, users receive exchange
quotations in the real-time mode through dozens of thousands of
terminals in Russia and abroad. The MICEX is actively involved in the
work of the Association of the Distributors of Financial and economic
information, aimed at improving the market of information services and
products. The MICEX publishes monthly journal "Exchange Review" and
releases information and analytical bulletins. The MICEX has opened
Russia's first museum of the history of the exchange business with
documents illustrating the history of Russian exchanges and their work
today.