MICEX Launches Short Term Interest Rate Futures

Trading in the futures on the compounded MosIBOR overnight interest rate and the 3-month MosPrime Rate, calculated by the National Foreign Exchange Association (NFEA), begin in the MICEX Derivatives Market Section on May 30. For the first time futures on ruble-denominated interest rates of inter-bank credits will be traded on the Russian market. Futures of this type are among the most popular contracts on the international derivatives markets. According to the MICEX Vice-President Yevgeni Ellinski, the new instruments will provide means for hedging interest rate risk, which is even more important regarding the future Russian ruble full convertibility.

Specifications of the new futures, adopted by the MICEX Board, state that the underlying of the particular series of the compounded MosIBOR ON futures contract is a set of MosIBOR overnight interest rates from the first to the last day of trading in this futures series. The underlying of the second futures contract is the 3-month MosPrime Rate. The notional amount of both contracts is equal to 10 million rubles.

On the first trading day the three series of the 3-month MosPrime Rate futures, settled in August and November, 2006 and February, 2007, will be launched as well as the three series of the compounded MosIBOR ON futures settled in June, July and August, 2006.

The parameters of the risk management system for the new instruments are as follows:

• The market share limit: 10%; the limit takes effect when the open position in particular futures series reaches 1500.
• The order size limit (limit on the total size of active buy or sell orders for each series of the instruments): 1000 contracts.
• The daily price limit:
  • for the futures on the compounded MosIBOR ON:
    • June 2006: 12000 rubles/contract;
    • July 2006: 25000 rubles/contract;
    • August 2006: 35000 rubles/contract.
  • for the futures on the 3-month MosPrime Rate:
    • August 2006: 0.84 percentage points/contract;
    • November 2006: 0.90 percentage points/contract;
    • February 2007: 1.00 percentage points/contract.

  The exchange fee for the futures on the 3-month MosPrime Rate is 250 ruble, for the futures on the compounded MosIBOR ON – 30 rubles.

  Background information:

  MosPrime Rate is the National Foreign Exchange Association (NFEA) fixing of the reference rate based on the indicative offer rates of Russian ruble deposits as quoted by the leading participants of the Russian money market to first class financial institutions. The list of banks contributing reference rates is determined by the NFEA Board. Contributor Banks are selected on the basis of reputation, credit standing, scale of activity and experience in the Russian money market. MosPrime Rate is calculated for the tenors of 1, 2 and 3-month deposit rates provided by 8 Contributor Banks. The starting day of the contract period is “tomorrow” (TOM). MosPrime Rate is calculated as an arithmetic average of the rates provided by Contributor Banks after disregarding the highest and the lowest.

  MosIBOR is the NFEA fixing of the reference rate based on the indicative offer rates of Russian ruble deposits as quoted by the leading participants of the Russian money market. The indicative offer rates are provided by 16 Contributor Banks. MosIBOR is calculated for the following tenors: overnight, 1 week, 2 weeks, 1 month, 2 months, and 3 months. The starting day of the contract period is “today”. MosPrime Rate is calculated as an arithmetic average of the rates provided by Contributor Banks after disregarding the 4 highest and the 4 lowest.

  Additional information on MosPrime Rate and MosIBOR, including historical data, could be found at www.nva.ru.