On 24 March, the MICEX Exchange Council decided to set up an individual clearing organization – the Clearing House - within the MICEX Group. Following the recommendations of the Bank of Russia, the Clearing House will be set up as a closed-type joint-stock company. The Clearing House will be a credit institution, performing clearing activities. According to the MICEX CEO Alexander Potemkin, the development of clearing business within the MICEX Group will help to improve the risk management system, taking into account the growing volume of exchange trading.
Following world trends in the development of the exchange business, the MICEX has changed the Settlement House and the Depositary into individual organizations within the MICEX Group. The establishment of the MICEX Stock Exchange as an individual trading floor within the Group enabled to transform the organization of trading, clearing and information and technological support of trades into individual business processes and services, provided in the MICEX stock market. Thus, the MICEX has provided a basis for further technological and marketing development of these types of activities in the chain «trades – clearing – settlements – technological services».
The main areas of development of the MICEX Group’s clearing business include:
- creating the system of managing risks of default on transactions in securities and preparing the transition to centralized clearing;
- developing the institute of clearing brokers;
- developing clearing operations and technologies in the context of integration of clearing in the currency, derivatives and stock markets as well as in the government securities market.
The MICEX Group is developing the clearing business facing the challenges posed by the currency market. The advantage of the current MICEX system of managing risks in the currency market is the restriction of the volatility of exchange rates of currencies provided by the Bank of Russia, which, in conjunction with the MICEX terms of marging and the procedure of the Bank of Russia’s participation in trades, secures the appropriate level of reliability for market participants. However, the growing volumes of the exchange currency market (in 2004 - 350 bln USD, 2.4 times more than in 2003) and changes in the Bank of Russia’s policy (transition from the policy of regulating the volatility of the ruble/USD exchange rate to the policy of regulating the volatility of the basket of currencies) require changing the risk management system. This is impossible to implement while retaining the old organizational framework of the MICEX, which combines the trading floor and the clearing organization. In particular, the development of the system of margin fees and guarantee funds and the need to attract and place funds securing the completion of settlements for the results of clearing require the introduction of refinancing instruments, which are now used in the operations of credit institutions.
The Exchange Council has commissioned the MICEX Directorate to work out the Charter and the business-plan of the Clearing House and to estimate its required capital. Appropriate documents for the registration and licensing of the Clearing House will be submitted to the Bank of Russia.
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