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According to the MICEX CEO, these results were reached thanks to the rapid development of all segments of the exchange market, first of all the currency market (growth – 2.3 times), the corporate securities market (growth – 1.4 times), the government securities market (growth – 1.2 times), and the derivatives market (growth – 3.7 times). The most important projects, implemented in 2004, included:
- the unification of the UTS and the SELT into a unified trading session, which completed the creation of a unified national currency market in Russia;
- the creation of the MICEX Stock Exchange, where trading began 11 January in all corporate securities which had previously been traded in the MICEX Section Stock Market;
- the launch of the money market. The MICEX began to service deposit transactions between the Bank of Russia’s and credit institutions.
A new scale of commission rates was introduced in the UTS, which resulted in the growth of daily volumes of operations of most participants and the growth of the proportion of large participants to 84%, which confirms the growing attractiveness of the exchange segment of the market for leading operators. The competitiveness of the exchange currency market is confirmed by the growth of the proportion of the MICEX currency market’s turnover in the total turnover of interbank cash conversion operations in the “dollar/ruble” instrument from 5% to 10%. Considering the growing role of the euro in the world financial system, the MICEX intends to develop the exchange market of the euro. The main changes will take place in the system of risk management and clearing activity.
In 2004, the exchange turnover of operations in corporate and regional securities on the MICEX grew 1.4 times. The total volume of transactions in non-government securities, including operations in stocks, bonds and repo transactions, reached 4.351 trillion rubles (151.2 billion dollars), whereas in 2003, this figure amounted to 3.024 trillion rubles (99 billion dollars). The proportion of this segment in the total exchange turnover amounted to 27.6%. The volume of secondary trading in stocks grew 1.3 times to 2.779 trillion rubles (97 billion dollars) over 2.145 trillion rubles (70 billion dollars) in 2003. In 2004, the MICEX Index grew by 7.3% from 514.71 points in the beginning of 2004 to 552.22 points at the end of the year.
The number of companies, whose securities circulate on the MICEX, continues to grow. At the end of 2004, 413 securities of 267 issuers were traded in the MICEX Stock Market Section (in 2003 – 381 securities of 235 issuers), of which 135 securities of 76 issuers were listed. 399 securities of 268 issuers circulate on the MICEX Stock Exchange, which began its work on 11 January 2005. Of these securities, admitted to trades on the MICEX SE, 172 securities of 89 issuers are listed. This number exceeds by 23% the number of securities listed in the MICEX Stock Market Section.
These figures demonstrate the growing role of the stock market segment in the MICEX activity. In 2004, the MICEX Stock Exchange was established, which obtained the stock exchange license from the RF Federal Service for Financial Markets and on 11 January, 2005, launched trading in corporate securities. As a result of the reorganization of the stock market component of the MICEX business, the functions pertaining to the organization of trading in corporate securities have been distributed between the MICEX and the MICEX SE in the following way: the MICEX SE organizes the process of trading, work with clients, listing and the development of exchange technologies; the MICEX provides clearing services and the technological support. Today, 512 organizations - professional participants in the securities market - trade on the MICEX SE. 401 organizations are admitted to trading, the number of their clients amounting to 107 thousand investors.
In 2004, the corporate bonds market demonstrated steady growth. Over 80 companies entered the exchange market with their securities. The total volume of issue grew 1.8 times and amounted to 140.4 billion rubles (4.92 billion dollars). Corporate bonds play an important role of linking the manufacturing sector of the economy with the securities market. The volume of transactions in corporate bonds amounted to 715.5 billion rubles (24.9 billion dollars), secondary trading accounting for 423.2 billion rubles (14.7 billion dollars). The proportion of this instrument in the exchange turnover reached 4.5%.
The turnover of subfederal (regional) and municipal bonds grew 2.7 times and 3.3 times correspondingly. The volume of transactions in these securities amounted to 493.3 billion rubles (17 billion dollars.) and 14.9 billion rubles (0.5 billion dollars) correspondingly.
The turnover of government securities grew 1.2 times. The total volume of transactions in government securities amounted to 1.335 trillion rubles (46.2 billion dollars) as compared with 1.114 trillion rubles (36.1 billion dollars) in 2003. This increase is largely explained by the growth of the number of REPO operations in government securities on the MICEX. The volume of modified REPO operations as well as direct and inter-dealer REPO operations amounted to 735 billion rubles (25.4 billion dollars). The volume of primary placement of GKO/OFZ at auctions grew 1.3 times: 142.1 billion rubles (4.9 billion dollars). The proportion of the government securities market in the total exchange turnover amounted to 8.5%. In 2004, the MICEX resumed trading in the bonds of the Bank of Russia, which began to issue securities after a three-year interruption. From September till December 2004, the volume of transactions in the bonds of the Bank of Russia amounted to 49.9 billion rubles (1.7 billion dollars). Market regulators, the MICEX and dealers focused on increasing the liquidity of the government securities market. The list of securities, admitted to circulation in the MICEX trading system in the government securities market, was extended to include, besides GKO/OFZ, the RF eurobonds, OGVZ of the 1999 issue, the bonds of the Bank of Russia and the bonds of Moscow. In November 2004, the MICEX began to publish the indexes and the profitability indicators of the government securities market. The MICEX set up the Government Securities Section (GSS) and formed the GSS Council, composed of representatives of the leading dealers of the government securities market. The GSS Council addresses the most important issues of the work of the market.
In 2004, the MICEX, jointly with the Bank of Russia, implemented a new project in the money market: the conducting of deposit operations of the Bank of Russia through the MICEX trading and settlement system. In December, the number of participants, who had concluded appropriate agreements, reached 112. The volume of deposit operations amounted to about 200 billion rubles (7 billion dollars).
Participants display their interest in the currency futures market, revived on the MICEX. The increased volatility of the US dollar results in the growth of turnovers in this segment of the market. In 2004, the total turnover in the Derivatives Market Section grew 3.7 times and amounted to 13.1 billion rubles (0.46 billion dollars). At the end of 2004, the volume of open positions reached 139 million dollars, having grown 17 times over the year. The MICEX aims at widening the range of circulating instruments (first of all by launching trading in option contracts) and improving the system of risk management, which will help to increase the volume of operations of existing participants and attract new banks and businesses to the market.
Increasing the MICEX transparency is among the priorities of the MICEX management. Recently, the MICEX has disclosed its capital structure. The MICEX stockholders are 14 leading commercial banks, the Bank of Russia and the Association of Russian Banks.
An important area of the MICEX work is cooperation with foreign exchanges and financial institutions. The MICEX takes an active part in the activities of the International Association of Exchanges of the CIS counties, which promotes the development of orderly capital markets in the countries of the Commonwealth. A big step in this area was the establishment, in December 2004, of the Association of Central Depositaries of Eurasia with the participation of the National Depositary Center (the MICEX settlement depositary). Besides, in 2004, the MICEX signed agreements of cooperation with the London Stock Exchange and Shanghai Stock Exchange. These agreements confirm that the MICEX is acknowledged as Russia’s leading exchange conforming to the world standards of listing and disclosure of information on securities and issuers. The implementation of these agreements will help to increase the transparency of the Russian Stock market for international investors.
In 2005, the MICEX Group’s strategic goals will include:
- the creation of Russia’s leading stock exchange on the basis of the MICEX Group. In January 2005, the MICEX Stock Exchange began its work. The MICEX SE is a specialized division within the MICEX Group, organizing trades in corporate securities.
- the strengthening of the MICEX leading position in the area of settlement and depositary service of the exchange and over-the-counter markets. The MICEX long-term strategy includes the establishment of a central settlement depositary.
- the preparation of the creation of a clearing organization within the MICEX Group, initially, in the sphere of the currency market.
- the development of the currency market “euro/ruble” and “euro/dollar”.
- the development of the market of derivative financial instruments (options, interest-bearing derivatives, derivative instruments on stock assets).
