The MICEX Stock Market And The MICEX Are Finalizing The Development Of The “REPO With Bonds” Trading Mode

The boards of the MICEX and the MICEX Stock Exchange have adopted regulatory documents modifying the existing procedure of carrying out REPOs with bonds in the exchange market and determining the new pricing policy of the MICEX Group in this segment of the market. Trading in the “REPO with Bonds” mode are to be launched before the end of 2005, after the RF Federal Service for Financial Markets approves the “Rules of Trading in Securities on the MICEX Stock Exchange” and “The MICEX Rules of Rendering Clearing Services in the Securities Market”.

At present, the MICEX Stock Exchange and the MICEX are finalizing the development of the “REPO with Bonds” trading mode. Part of the project is a new pricing model which provides for considerably lower commission rates for REPOs with bonds.

The new trading mode gives market participants the following new possibilities and services:

• the use of discounts on bonds’ market prices when carrying out REPOs and determining the price parameters of their first parts;
• the use of compensatory fees as a standard exchange mechanism of control of market risks and the mechanism of reducing default risk;
• carrying out REPOs without control of coverage of their first parts and REPOs with deferred execution of obligations for their first parts (on the first or second work day after the day of the REPO);
• carrying out intra-day REPOs with execution of obligations for their first and second parts on the same day;
• carrying out REPOs for the period of up to 180 calendar days and outside the current coupon period;
• bilateral netting of mutual obligations of parties to address deals, including REPOs and transactions carried out in the negotiated deals mode.

The MICEX Group’s basic aggregate commission rate for a REPO with 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 MICEX Group’s basic aggregate commission rate for intra-day REPOs (the due date of execution of which falls on one settlement day) is a fixed value independent of the amount of the REPO: 45 rubles charged from each party to the REPO.

The MICEX Group’s new pricing model will reduce market participants’ costs: for one-day REPOs - 30 times, for one-week REPOs - 6 times and for two-week REPOs - 4 times.

The implementation of the new «REPOs with Bonds» trading mode and the new pricing model will help to increase the liquidity of the market of REPOs with bonds and the exchange market of corporate, regional and municipal bonds as a whole.

The proportion of REPOs with bonds in the volume of the market of REPOs grew considerably in 2003-2004 (from 20 to 40%). In the first six months of 2005, the average monthly volume of REPOs with bonds amounted to about 27 billion rubles. The average proportion of REPOs with bonds in the total trading turnover of the secondary market of bonds reaches 20%.