Noting such positive trends as the growth of the turnovers of futures contracts, MICEX CEO Alexander Zakharov stressed that so far, a full-fledged derivatives market industry has not been created in Russia. In 2002, the total turnover of the whole Russian derivatives market, including derivative instruments for currencies, securities and stock indexes, reached 3,5 billion US dollars, which does not exceed 0,001% of the turnover of the world derivatives market for financial assets only.
The absence of the full-fledged national derivatives market is the reason why the state budget is based on prices for main commodity groups, which are formed primarily on international markets. Only now we are beginning to understand the role of the derivatives market in market economy, and yet its state can show the effectiveness of a country's market reforms. One of the main macroeconomic functions of the derivatives market, thinks the MICEX CEO, must be the formation of market prices, first of all, for such strategic domestic commodities as oil, oil products, grain, sugar, metals, and timber. Of no less importance is the possibility of hedging market risks, which, if realized, can boost economic growth and considerably improve the investment climate.
In April, 2002, in the MICEX Derivatives Market (Standard Contracts) Section were put into circulation 5 settlement futures for such stock assets as MICEX10 index, the common shares of RAO UES, LUKoil, Surgutneftegaz, and Gazprom. Average daily turnovers of these instruments in December, 2002, reached 220-230 thousand contracts, an almost 16-fold increase against the first month of trades. The total daily turnover of all types of futures grew more than 6 times from 18,7 million rubles in December, 2001, to 116,3 million rubles in December, 2002.
In order to optimize the parameters of currency futures, on 13 February, 2002, in addition to futures for the US dollar and the euro with 1, 2 and 3-month periods of performance, futures contracts were put into circulation with 4, 5 and 6-month periods of performance. For the latter the exchange commission rate was reduced. Besides, it was intended to reduce the deposit rate of maintenance margin for contracts with the shortest periods of performance. As a result, despite the high degree of predictability and low volatility of the exchange rate of the ruble, turnovers of currency futures grew more than 2 times from 7 990 contracts in February to 18 084 contracts in December, 2002. As a result, the average daily turnover increased 1,5 times against the end of 2001 and reached 28 million rubles. The total volume of transactions, concluded with currency futures, reached 4,7 billion rubles (147 714 contracts), while the number of open positions as of the end of the year was 31,5 million rubles (977 contracts).
In 2002, one of the MICEX's important areas of work was the improvement of the derivatives market technologies. The MICEX transferred the functions of clearing for derivative instruments for issue securities and stock indexes to the specialized settlement organization - The MICEX Settlement Chamber -, implemented the technologies of dynamic management of funds in the course of the trading session and electronic document turnover, and extended the trading session till 19:00, Moscow time.
Another aspect of the MICEX's work was the development of Internet-based trading technologies. Seven members of the Section had the hardware/software interface (gateway) installed at their workplaces in order to work with the MICEX trading system. The total number of types of broker systems "broker-client", using this gateway, reached four. The number of transactions, concluded through the Internet, reached 5 770 or over 20% of the total number of transactions on the market. In 2002, the composition of the participants of the MICEX derivatives market widened. Nine organizations were affiliated as members of the Derivatives Market Section. The total number of members of the Section reached 196 organizations, including 112 banks and 84 non-lending institutions. In order to increase the liquidity of the MICEX Derivatives Market, the MICEX established the institute of market makers.
The MICEX began to popularize futures among private investors. The "Manage the Future!" contest, held in November-December, 2002, by Brokercreditservice Company with the help of the MICEX, promoted the growth of the client base of the MICEX derivatives market. The goal of the contest was to show investors the potential of the derivatives market as a mechanism of hedging risks, connected with investing in shares, and conducting speculative operations. Twenty-seven contest participants conducted operations with futures for stock assets in the MICEX Derivatives Market (Standard Contracts) Section and with shares in the MICEX Stock Market Section. The results of the contest are published on the web site of Brokercreditservice Company: http://www.bcs.ru.
In 2002, the MICEX continued to widen the range of instruments circulating in the MICEX Derivatives Market (Standard Contracts) Section. Six new instruments for stock assets were prepared for putting into circulation, among them settlement futures contracts for common shares of OAO Mosenergo, OAO NK YUKOS, OAO Tatneft, OAO Sberbank of Russia, OAO Rostelecom, and preference shares of RAO UES.
Accommodating the requests of participants, the MICEX intends to put into circulation derivative instruments for issue securities with performance by delivery of shares. Specifications of 10 delivery futures (for common shares of RAO UES, NK LUKoil, OAO Surgutneftegaz, OAO Mosenergo, OAO YUKOS, OAO Tatneft, OAO Sberbank of Russia, OAO Rostelecom, OAO Norilsk Nikel, and preference shares of RAO UES) have been submitted for the approval of state regulators. In 2002, a number of projects were aimed at the development of new segments of the MICEX derivatives market and launching derivative instruments for financial and commodity assets. Among them are gold futures, futures for the rate of MosIBOR-overnight inter-bank credit, and delivery futures for white sugar.
In 2002, state procurement interventions on the grain market were for the first time held in electronic form, using remote access means within the unified exchange system based on the MICEX infrastructure.
The use of electronic trades and remote access within the unified exchange system helped to improve the technology of holding auctions and to conduct state procurement interventions simultaneously in seven grain-producing regions of the Russian Federation. Producers could participate in intervention trades from any of 7 trading floors, located in the nearest region, which considerably reduced their costs.
The technologies of conducting state procurement interventions in 2002 and the newly-created infrastructure can serve as a basis for the future permanent organized grain market, including its derivative segment.
Thus, in 2002, the MICEX started to create conditions for the emergence of a full-fledged derivatives market, including its commodity segment.
According to the MICEX CEO, it was possible thanks to the government's increased attention to the exchange derivatives market. The RF Economic Development Ministry has established the interdepartmental expert council for organized markets, its main aim being the formulation of coordinated state policy and the establishing of clear division of authority in the area of the development and state regulation of organized markets, the creation of the mechanisms of the use of exchange markets for state needs and the improvement of their legislative base. The state is getting involved in the creation of commodity markets, first of all, the markets of oil products and agricultural goods. Exchange mechanisms are beginning to be used in implementing government projects on these markets, such as regular state procurements for the purpose of regulating the grain market and auctions to sell quotas for other agricultural goods.
The development of new positive trends in this area, thinks the MICEX CEO Alexander Zakharov, requires the joint efforts of the government, financial institutions, exchanges, and producers aimed at formulating and adopting the state policy of the development of the derivatives market. The implementation of this policy will boost the modernization of the manufacturing sector and help to secure sustainable economic growth.
