MICEX Trading System Adopts New Technologies Of Concluding And Executing REPO Transactions In Government Securities

Under the program of the development of the national debt market, the MICEX is implementing new financial instruments and optimizing the conditions of concluding operations in government securities. In particular, on 11 August, 2003, the MICEX launched new technologies of concluding and executing transactions in government securities, stipulated in the Bank of Russia's regulations #219-P "On the serving and the circulation of issues of Federal government securities on the MICEX" and #220-P "On the order of concluding and executing REPO transactions in government securities of the Russian Federation". The new technologies enables one to conclude inter-dealer REPO transactions as well as transactions of purchase and sale of government securities in the secondary market with time of performance during the day, 1 and 2 days.

The time of inter-dealer REPO transactions may vary from 1 to 180 days with possible prolongation up to 90 days. The first part of a transaction can be executed on the day of concluding the REPO transaction or on another day.

The technology of inter-dealer REPO enables parties to:

make compensatory payments in order to preserve the balance between the value of the coverage and the sum of money in a REPO;
discount the value of the coverage in order to regulate the credit risk;
offset reciprocal obligations in uniform transactions; LI>change within a REPO's time the conditions of the transaction (the REPO rate, the REPO time, the margins of the coverage discount change); LI>technically freeze the coverage until the date of performance of the second part of a REPO transaction.

In accordance with the plans of the Bank of Russia, on 13 August, the first exchange modified REPO (reverse REPO) auction will be held with settlements on 14 August (settlement code S1).

At present, REPO operations are among the most popular in the government securities market. From January to July 2003, the total volume of transactions of direct and reverse REPO against the Bank of Russia amounted to over 440 billion rubles.