In 2014, Moscow Exchange launched a major initiative to segregate clearing and trading participants. As a part of this process, a new “general clearing firm” category was created with higher capital requirements. This is in line with best practice in developed markets, highly capitalised market participants accept the clearing and settlement risks of smaller players. This the overall risk of centralised settlement systems. Companies with ‘general clearing firm’ status are eligible to provide clearing services to other categories of FX Market customers, both Russian and foreign legal entities. Market participants operating via general clearing firms will be able to reduce costs of trading on the FX market.
Moscow Exchange continued to develop its FX offering in 2014. On 1 December, it started trading in GBP and HKD in TOM and TOD instruments, and overnight swaps without full pre-funding, with settlement in RUB. Trading in the currency pair BYR/RUB was facilitated as the requirement of the full pre-funding was removed, new were instruments offered — namely with TOM settlement and overnight swaps — and trading hours were extended.
The Exchange will continue to develop its Direct Market Access (DMA) and Sponsored Market Access (SMA) technologies. The SMA service, which provides clients with full access to the Exchange’s software and hardware suite, will be updated to meet global standards to appeal to new international institutional investors.
The Exchange will work to attract retail customers by carrying out awareness campaigns regarding the benefits of on-exchange currency conversion transactions against cash operations.
In addition, a new clearing arrangement – payment-versus-payment (PVP) – will be offered to settle OTC trades via the NCC Clearing Bank.
The Exchange will continue to develop the integrated FX Market as part of the EurAsEC in order to activate trading in national currencies. In particular, the product offering and number of non-resident member firms from the EurAsEC will be expanded, which will stimulate trading in both major currency pairs and national currencies.
In 2014, Moscow Exchange’s Money Market continued to expand the types of securities admitted for repo. The Exchange also introduced settlement in USD and EUR for interdealer repo in Eurobonds, foreign stocks and depositary receipts (DRs). From June to December, the volume of interdealer repo transactions in those securities was RUB 7 trln, or 21% of the total volume of the total interdealer repo volume.
Major changes were made to the regime for repo with the central counterparty (CCP), the fastest growing Money Market instrument. Trading hours were extended, early settlement was introduced and the first Eurobonds were introduced for repo with the CCP.
Including seven-day repo and the introduction of foreign currency.
The new initiative will allow such collateral to be combined into a universal liquidity management instrument, as well as more successful asset substitution in trades.
In 2015, the Exchange plans to launch basket repo with the Bank of Russia and collateral management by NSD. This new product will facilitate trading and settlement opportunities for Russian participants, reduce their costs, reduce risks and improve collateral management in repo.
The Exchange also plans to continue to expand the CCP-cleared repo. The Exchange will also continue preparation for the planned 2016 launch of clearing participation certificates repo. Clearing participation certificates are securities backed by different types of collateral. The new initiative will allow into a universal liquidity management instrument.
In 2014, a number of new products were introduced on the Moscow Exchange Derivatives Market. September saw the launch of deliverable futures contracts on shares of Russia’s largest retailer Magnit and on shares of Moscow Exchange, as well as the launch of futures contracts on Russian sovereign Eurobonds with 2030 maturity. With the highly liquid sovereign Eurobond market offering ample potential, brokers were thus given additional opportunities to manage their portfolios.
The Exchange also began offering futures on Russian market volatility. The contract’s underlying asset is the Russian market volatility index (RVI), the method of calculation of which has been updated to meet current international standards. The RVI enables investors to predict market expectations and respond quickly to events, including of a macroeconomic nature. The new product helps hedge securities portfolios and positions in the RTS Index and MICEX Index futures, as well as create arbitrage strategies.
In October the Exchange began accepting as collateral for derivatives trades — along and securities. The addition of allows domestic and international brokers to apply varying approaches to collateral management and to minimise the funding costs associated with their own and clients’ operations.
In addition, it plans to expand its FX futures offering and to improve existing instruments for private and institutional customers. In early 2015, the Exchange launched futures contracts on the CNY/RUB, USD/CAD and USD/TRY pairs, which substantially broadened the range of strategies available to the most active brokers.
The Exchange will push ahead with the development of options as part of its current programme to attract new clients and enhance liquidity. Weekly options and flex options will allow traders to choose the date and price at which contracts will be exercised.
The Exchange will also launch the Asset Managers Ranking project, whereby it will publish descriptions of asset managers’ strategies and track record managing accounts.
In 2015, the Exchange will focus on developing interest-rate contracts, including those allowing investors to hedge against interest-rate risks associated with Russian federal government bonds (OFZs) with variable coupon rates.
In 2014, in cooperation with the regulator, Moscow Exchange pushed ahead with simplifying the debt issuance process and expanding opportunities for issuers to raise debt capital on the domestic market. In particular, companies can now register bond programmes, which allows placement of bonds within the programme limits with no further registration, thus reducing issuers’ timelines and administrative expenses.
In June, the Exchange introduced an intraday clearing session to allow settlement in the middle of the trading day in order to accelerate delivery to end-customers. As such, there are now two clearing sessions on the Equity & Bond Market.
In late 2014, the Exchange expanded its information service offering by launching the MOEX Board indicative quotation system. The system operates like a notice board, allowing traders and investors to enter and view quotes for more than 1 020 stocks that are not traded on the Russian regulated market.
The initiative to divide securities into those eligible as collateral and those admitted to trading without full prefunding will also be a focus in 2015.
Settlement of trades in OFZs on T+1 will allow market participants to reduce the cost of funding operations on the sovereign debt market, increase trading volumes due to the absence of full prefunding requirements and concentrate liquidity within a single order book.
The introduction of opening and closing auctions is also planned for the OFZ market.
In addition, the Exchange plans to launch trading in bonds denominated in CNY, HKD, GBP and CHF with settlement in the respective currencies.
A key project in 2015 will be the launch of individual investment accounts (IIA), which will allow private investors to receive tax credits. The Exchange achieved much in this area in 2014 together with market participants, including the establishment of a marketing pool aimed at informing prospective investors about opportunities provided by accounts and the launch of a website to promote IIAs. As at the end of April 2015, had Moscow Exchange registered more than 17.000 accounts opened by individuals at 23 investment companies and 13 banks.
Following its launch in 2013, the Precious Metals Market operated at full force for the first year in 2014. The market facilitates trading in gold and silver. Trading takes place on the same platform as the FX Market and utilises the same risk management system. RUB, USD, EUR, CNY, gold and silver are accepted as collateral. The NCC Clearing Bank acts as both the central counterparty and clearing house.
In 2014, the Precious Metals Market welcomed 25 new members, including the largest Russian market participants. Seven market-maker agreements were signed with market participants. Four non-bank organisations began offering direct market access (DMA) to their clients. At the start of 2015 there were 48 market participants on the Precious Metals Market, consisting of 39 banks and nine investment companies.
In addition, the Exchange will work to develop precious metals fixings based on market prices. The fixings will serve as price benchmarks in settlement for precious metals derivatives.
The Exchange plans to broaden its precious metals offering in 2015 with the launch of trading in platinum and palladium. The new metals will encourage growth of trading volumes and the number of participants on the market.
In addition, the Exchange will work to develop precious metals fixings based on the market prices. The fixings will serve as price benchmarks in settlement for precious metals derivatives.
Commodities are traded on the National Mercantile Exchange, part of Moscow Exchange Group. In 2014, the Exchange began implementation of its Grain Market project, a major initiative focused on on-exchange grain trading with centralised clearing at NCC Clearing Bank, commodity accounts management by a commodity delivery operator and, as the next step, delivery of grain from the seller to the buyer.
In 2015, the Exchange will launch trading in deliverable derivative financial instruments on grain (forward and swap contracts).