The MICEX Shareholders Discuss The Exchange's Performance In 2002, Elect Alexander Potyomkin New CEO

Today's general meeting of the MICEX shareholders has discussed the results of the exchange's work in 2002. In 2002, the total exchange turnover of the MICEX grew by 18% and reached 3,7 trillion rubles (117,3 billion dollars). The number of participants in the MICEX financial markets grew by 5%, exceeding 1500. Shareholders noted that the main result of 2002 was the fact that the MICEX considerably strengthened its positions in the Russian financial market. Its share in the total turnover of the Russian stock market exceeded 80%.

The MISEX shareholders decided to increase the exchange's authorized capital stock from 115,415 million rubles to 346,245 million rubles. They also elected the new Exchange Council, with Konstantin Korishchenko its Chairman, and the new Auditing Commission. The MISEX shareholders elected Alexander Potyomkin the new MICEX CEO.

The MICEX shareholders discussed the exchange's economic and financial performance in 2002, adopted the balance sheet, the profit and loss statement and other financial reports. In 2002, the MICEX's net profit reached 281 million rubles, a 24% growth against 2001. The MICEX shareholders decided to invest most of the profit in the fund for the development of exchange business.

At their meeting, the MICEX shareholders noted that favorable trends in the Russian economy and the MICEX's efforts to boost the development of different segments of the organized market had a positive effect on the MICEX's performance. The MICEX was one of Europe's few exchanges that increased their turnovers in 2002. In Western Europe twelve out of fifteen exchanges registered decline in the volume of trades in securities.

Trading volumes on the MICEX (billion rubles)

In 2002, the non-government securities sector demonstrated rapid growth. The total turnover of the market of stocks and corporate bonds grew by 77% to 1,4 trillion rubles. The MICEX's share in the turnover of the stock market grew by 3% and reached 87%. This figure was reached thanks to innovations and working with individual investors. The MICEX successfully implemented the technologies of Internet-based trading and Internet-based settlements (using Sberkards), offered new analytical services (the system of support of SPOT trading operations), organized contests for individual investors, began to trade in shares of mutual funds and pursued other activities.

In 2002, the corporate bonds market continued to develop rapidly. About 60 issuers distributed new issues worth of 47 billion rubles, almost a twofold growth over 2001. The volume of secondary trades in the market of corporate bonds doubled. The MICEX's share in the total turnover of corporate bonds in the organized market, including primary placement and secondary circulation, reached 96%.

Besides, in 2002, the MICEX widened the range of stock instruments. It launched REPO transactions involving non-government securities, created the market of eurobonds with settlements in currency, organized the distribution of mortgage bonds (First Mortgage Company, Moscow Mortgage Agency) and prepared the project of organizing trades in Gazprom shares.

The extensive use of new technologies in the segment of government securities helped the MICEX to increase the volume of trades in government securities by 27% - to 255,8 billion rubles. The nominal volume of the market of traded government bonds grew by 36% (to 217 billion rubles). Among the MICEX's innovations are the extension of the time of trades and settlements, the issue of OFZ with debt depreciation (OFZ-AD), the resumption of transactions of direct REPO against the Bank of Russia, the implementation of a special system of electronic document turnover and the reduction of the exchange commission. The MICEX prepared projects to create the market of government savings bonds (GSO) and organize the system of deposit auctions of the Bank of Russia on the basis of exchange trade.

An important result of the MICEX's work in 2002 was its retaining the status of exchange rate forming center and its position in the organized currency market. The modified UTS demonstrated an almost twofold growth of trading volumes. The daily average trading volume, which in 2002 reached 89 million dollars, grew almost two times (to 170 million dollars) in the first quarter of 2003. In 2002, the MICEX System of Electronic Lot Trading accounted for over 60% of the turnover of the whole MICEX currency market. The MICEX extended the time of the trading session (by 2,5 hours), launched the system of electronic document turnover and provided banks the possibility of concluding "currency swap deals" in large lots on "overnight" terms.

In 2002, the total volume of trades on the MICEX derivatives market grew 2,6 times against 2001 and reached 13,3 billion rubles. In 2002, trades were launched in derivative instruments for stock assets. In particular, futures for the stocks of leading Russian issuers were put into circulation. At the same time, the turnover of the standard contracts market and its participants' activity are still low due to such external factors as the absence of full-fledged regulative environment, disagreements between regulators and the absence of legal defense for participants. In this connection, the MICEX prepared a number of proposals for the government, dealing with the strategy of the development of the market and improving its legislative base.

Besides, in 2002, the MICEX, jointly with the Ministry of Agriculture and the Ministry of Energy, began to create organized commodity markets of grain, sugar and oil products.

According to A.Potyomkin, the MICEX strategic tasks require the formulation of a long-term concept of the exchange's development, emphasizing the development of both trading and depository and clearing complex and the implementation of the latest information technologies. Our approach to the MICEX future development should correspond to the world practice and, on the other hand, take into consideration the existing environment, in which the MICEX and the Russian financial market as a whole are developing. The MICEX should make considerable effort to formulate, jointly with government agencies and other market participants, a long-term strategy of the development of the Russian financial market and its segments and improve the legislative base of existing market.

In early 2003, the MICEX Exchange Council formed a working group to prepare the MICEX code of corporate conduct, an important part of the exchange's long-term strategy of development dealing with the improvement of the system of management and managerial approaches.

The MICEX long-term development strategy may also include such components as:

• the formation of important market indicators (currency exchange rate, interest rates, stock average and, in future, price indicators of Russian strategic commodities);
• making the stock market an effective mechanism of attracting investments and redistributing capital between sectors of the economy and regions of the country;
• infrastructure support of the state's money-and-credit and currency policy;
• the promotion of the integration of the Russian and the international financial markets.

Brief information: Alexander I. Potyomkin was born in 1956. Graduated from M.Lomonosov Moscow State University (the Faculty of Economics). In 1982-1991 worked at Vnesheconombank of the USSR and Gosbank of the USSR. As the head of the department for currency auctions of Vnesheconombank of the USSR and, later, director of the Currency Exchange of Gosbank of the USSR (later - the MICEX) A.Potyomkin took an active part in the formation of the currency market in Russia.
From December, 1991, till November, 1998, A.Potyomkin worked at Central Bank of the Russian Federation. From 1996 till 1998 he held the position of Deputy Chairman and was a member of the Board of Directors of the Bank of Russia. In 1993-1999 A.Potyomkin held the position of Chairman of the MICEX Exchange Council.
From 1999 till 2000 he worked as advisor to the Board of Vnesheconombank. Since 2000 he has been First Deputy Chairman of the Board of MFK Bank. After the consolidation of the business of ROSBANK and MFK Bank, A.Potyomkin was appointed, in July 2002, Deputy Chairman of the Board of ROSBANK. In this capacity he dealt with the issues of corporate financing, interaction with financial institutions and trust management.
A.Potyomkin is married and has three children.