The new trading mode “REPOs in bonds” was launched on the MICEX Stock Exchange in order to better satisfy the needs of participants using these operations and improve the procedures of exchange REPOs. The implementation of this project makes REPOs in corporate, regional and municipal bonds a new specialized exchange product.
The “REPOs in bonds” trading mode gives market participants the following new possibilities and exchange services:
- the use of discounted market prices of bonds when carrying out REPOs and the determination of price parameters by their first parts;
- the use of compensatory payments as a standard exchange mechanism of control of market risks and a mechanism of reducing default risks;
- the possibility of carrying out REPOs without the control of the coverage of their first parts as well as the possibility of carrying out REPOs with delayed execution of obligations for their first parts (on the first or the second work day after the transaction);
- the possibility of carrying out intra-day REPOs with execution of obligations for the first and the second parts of the transaction on one settlement day;
- the possibility of carrying out REPOs for the period of up to 180 calendar days and outside the current coupon period.
The Exchange Rules, which took effect on 14 December 2005, also envisage additional services for participants in the MICEX stock market:
- the possibility of carrying out intra-day REPOs in stocks;
- the possibility of market participants’ early execution of their obligations for transactions carried out in the negotiated deals mode with settlement codes ?01-?30 and REPOs (beginning from the day of transaction);
- the bilateral netting of reciprocal obligations and claims for transactions between two parties with settlement codes B0-B30, REPOs and calculated compensatory payments.
The “REPOs in bonds” mode is available for all participants in trading on the MICEX Stock Exchange who use the new Trading System workplace (Version 3.20.) or have installed the updated versions of broker systems (working via the universal MICEX bridge).
Temporarily, all participants in trading on the MICEX Stock Exchange can carry out REPOs in bonds in the old (“REPO”) trading mode.
Along with the new trading mode “REPOs in bonds”, the MICEX put into effect, beginning from 14 December 2005, a new system of tariff rates, offering lower rates of exchange commission for REPOs in bonds carried out in this trading mode. The MICEX has changed the procedure of charging commission for transactions carried out in the negotiated deals mode with settlement codes ?0-?30 and transactions carried out in the “incomplete lots” trading mode. Beginning from 14 December 2005, the MICEX applies the unified temporal procedure of charging commission for all such transactions: the commission is charged on the day of the transaction.
The base of the compound commission of the MICEX Group for a REPO in bonds for each party is 0.00035% of the amount of the REPO, including VAT (or 0.126% of yearly interest) for each day during the period of the REPO.
The compound tariff rate of the MICEX Group for intra-day REPOs (the appropriate day of execution of which falls on one settlement day) in stocks and bonds is fixed and does not depend on the amount of the REPO. It is equal to 45 rubles from each party to the REPO.
The first transactions in the new trading mode “REPOs in bonds” were carried out by Gazprombank, Vneshtorgbank, Industrial and Construction Bank and Region Brokerage.
The new trading mode “REPOs in bonds” and the new system of tariff rates give participants in the MICEX Stock Market additional possibilities to increase liquidity in the REPO market and improve the potential and the attractiveness of the orderly securities market? from the standpoint of managing financial assets.
