.jpg)
In 2006, the total volume of trading in all markets of the MICEX Group amounted to 52.04 trillion rubles (1924.6 billion US dollars), twice as much as in 2005 (26.5 trillion rubles or 932.2 billion dollars). This figure is a historical maximum for the MICEX, established 15 years ago. Correspondingly, in 2006, the daily average turnover grew to 210.7 billion rubles (7.8 billion dollars). As a result, by the total turnover of trading, the MICEX remains the largest exchange in Russia, the CIS, Central and Eastern Europe. Besides, growth of the volume of exchange-based transactions, primarily in corporate securities, has enabled the MICEX Stock Exchange to join the list of top 20 leading stock exchanges worldwide.
According to the MICEX President Alexander Potemkin, the MICEX Group has reached a record-high level of exchange-based turnover thanks to the launch of new exchange products and services and the growing attractiveness of the stock market, which is becoming an effective mechanism of raising funds needed for the development and modernization of Russian companies. “Our main achievement over the last 15 years”, said the MICEX President “has been the creation of market mechanisms of determining the exchange rate of the Russian ruble and attracting investments to the Russian economy. During these years, we have built the infrastructure of the national capital market, based on advanced exchange and information technologies.”
The impressive results of 2006 were achieved thanks to the rapid development of all sectors of the exchange-based market: the corporate securities market (growth: 3.2 times), the foreign exchange market (growth: 1.5 times), the government securities market (growth: 1.6 times) and the derivatives market (growth: 4.8 times). Among the most important events which took place in the exchange-based market in 2006 are the following:
-
?
- the launch of trading in Gazprom shares on the MICEX Stock Exchange, Rosneft’s IPO, trading in mortgage securities; ?
- the development of collective investments, the doubling of the number of individual investors working on the MICEX Stock Exchange; ?
- raising the liquidity of the exchange-based currency market by improving the parameters of traded instruments and optimizing the tariff policy; ?
- organizing the service of the Bank of Russia’s lending operations (collateral crediting) and the launch of a new segment of the government securities market – government savings bonds; ?
- the launch of interest-bearing futures on the exchange-based derivatives market; ?
- the beginning of the work of The National Clearing Center within the MICEX Group, which organizes settlements and clearing for transactions in the MICEX orderly markets.
Last year was marked by the rapid growth of liquidity of the exchange-based corporate securities market. In 2006, the total volume of transactions in non-government securities (including operations in shares and bonds and repos) on the MICEX Stock Exchange grew 3.2 times and reached 20.38 trillion rubles (754.9 billion dollars) over 6.40 trillion rubles (225.6 billion dollars) in 2005. Correspondingly, the daily average volume of transactions in stock assets reached 82.5 billion rubles (3.1 billion dollars) a day. The share of the Stock Exchange in the total turnover of the MICEX Group amounted to 39.2% (in 2005: 24.2%).
In 2006, the volume of all transactions in shares on the MICEX Stock Exchange amounted to 14.86 trillion rubles (550.2 billion dollars), 3.7 times more than in the same period of 2005. This accounts for about 90% of the total turnover of transactions in shares on all of Russia’s leading stock exchanges. We managed to partially reverse the outflow of liquidity generated by trading in Russian assets: the share of trading in shares on the MICEX SE in the total (global) volume of trading in Russian shares (including GDRs and ADRs) grew from 59% to 71% (in January-November 2006). The top 10 most actively traded stocks included shares of the following issuers: Gazprom (32.0%), RAO UES (25.0%), LUKoil (14.6%), Norilsk Nickel (6.3%), Sberbank (6.1%), Rostelecom (4.8%), Surgutneftegaz (4.4%), Mobile Telesystems (1.5%), Tatneft (1.0%) and Uralsvyazinform (0.9%). The volume of equity repos amounted to 3.8 trillion rubles (141.3 billion dollars), a 5.1-fold growth over 2005. The capitalization of the market for shares traded on the MICEX SE reached 23.34 trillion rubles or 885 billion dollars (at the end of 2005: 7.44 trillion rubles or 258.6 billion dollars). This resulted from a favorable economic situation in the country, high oil prices and foreign investors’ growing interest in shares in Russian companies.
The most important event that took place on the stock market in 2006 was the liberalization of the market for Gazprom shares and the launch of trading in these securities on the MICEX Stock Exchange. The proportion of trades in these shares on the MICEX SE in the total exchange-based turnover of Gazprom shares on all of Russian exchanges grew from 10% on the first day of trading (23.01.2006) to 93% at the end of the year.
The improving situation on the Russian stock market is reflected in the MICEX Index, which grew by 68% (83% - in US dollars) to 1693.47 points (on 30.12.2005: 1011.00 points). In 2006, the MICEX improved its system of index management and increased in the number of securities comprising the MICEX Index by adding common shares in Gazprom, Mobile Telesystems, Uralsvyazinform, RBK Information System, Rosneft, Polus Gold and preference shares in Transneft.
The modification of exchange-based repos, the launch of trading in equity repos and the implementation of a new scale of rates for this segment of the stock market enabled to raise liquidity of the repos market. In 2006, the volume of trades in shares, made in the repos market, and transactions in corporate, regional and municipal bonds amounted to 6.46 trillion rubles (equity repos accounted for 3.8 trillion rubles; bond repos accounted for over 2.6 trillion rubles). This is an almost five-fold growth of the volume of this market over 2005.
The MICEX Stock Exchange plays an important role in initial public offerings. In the corporate bonds market, the MICEX SE has long been an acknowledged leader by the number and the total volume of placed securities. In 2006, the MICEX SE’s efforts to hold IPOs in the share market brought their first results. In 2006, seven companies used the services of the MICEX SE to make their IPOs, including Rosneft, Severstal, OGK-5 and others, which raised about 350 billion rubles (over 13.2 billion dollars).
Corporate bonds remain an important instrument of attracting funds to the manufacturing sector. In 2006, 225 companies offered their securities on the MICEX Stock Exchange. The total volume of issue amounted to 464 billion rubles (17.2 billion dollars), 1.8 times more than in 2005. The volume of transactions in corporate bonds amounted to 4.13 trillion rubles (153.1 billion dollars), of which 1.8 trillion rubles (66.7 billion dollars) was accounted for by secondary trading. The share of this instrument in the total turnover of the MICEX Group grew from 5.7% to 8%. The segments of regional and municipal bonds showed stable growth. In 2006, 20 bond issues of 19 Russian regions and municipalities were sold for 50.5 billion rubles (1.8 billion dollars). The total volume of exchange-based transactions in these securities amounted to 1341 billion rubles (49.7 billion dollars) and 45 billion rubles (1.7 billion dollars) correspondingly, which is 1.6 and 1.2 times more than in 2005.
Interest in shares of mutual funds is growing. The volume of exchange-based trading in these instruments grew 3.5 times over 2005 and amounted to 5.0 billion rubles (186 million dollars). Growth of liquidity generated by exchange-based trading in shares of mutual funds was promoted by the launch of the institution of specialists on the MICEX Stock Exchange. Specialists are participants in trading supporting the purchase and sale quotations of securities. In 2006, three participants in trading on the Exchange were granted the status of specialists. They support quotations of five securities.
Since the beginning of 2006, the number of securities traded on the MICEX Stock Exchange has grown by 44%, while the number of issuers whose securities are admitted to exchange-based trading has grown by 40%. In 2006, the first mortgage securities? were launched on the Exchange. At present, 967 securities of 587 issuers are traded on the MICEX SE. Of these, 221 securities of 131 issuers are listed. Good news for issuers was the adoption of the new version of the Rules of Listing, Admission to Placement and Trading of Securities on the MICEX SE. The new version of the Rules establishes the Sector for Innovation and Growth Companies (IGC Sector) and introduces a new listing level: Quotation List B. At present, List B includes common shares in Systema–Gals and Raspadskaya companies. Common shares in Rosneft, which in 2006 made the largest IPO in the Russian stock market, were moved to Quotation List B. In December 2006, the MICEX Stock Exchange accredited the first listing agents. These are six financial companies which act as guides for innovation and growth companies when the latter enter the exchange market.
On 01.01.2007, 586 organizations – participants in the securities market on the MICEX SE provided access to trading for 265 thousand investors (on 1.01.2006: 134 thousand), including over 24 thousand legal entities, over 230 thousand individual investors, 2 thousand non-residents and almost 8 thousand institutional investors.
In 2006, the volume of currency trading on the MICEX grew considerably. The total volume of exchange-based transactions in foreign currencies amounted to 25.89 trillion rubles (955.9 billion dollars), 1.5 times more than in 2005 (16.79 trillion rubles or 592.0 billion dollars). The share of currency operations in the total exchange turnover of the MICEX Group amounted to 49.7% (in 2005: 63.5%). The largest volume was accounted for by operations in USD/RUR instruments: 25.46 trillion rubles (940.0 billion dollars). Participants’ interest in the Euro-ruble segment is growing. In 2006, 432.8 billion rubles (16.1 billion dollars) worth of transactions were made in this segment, 3.4 times more than in 2005. The share of swaps in the structure of operations in the exchange-based currency market increased noticeably. The volume of swaps amounted to 9.7 trillion rubles (growth: 2.1 times over 2005). The volume of Euro-ruble swaps grew 20 times. To cut participants’ costs, while maintaining the reliability of exchange-based trading in foreign currency, the MICEX lowered its commission in the dollar/ruble segment (for all instruments) and in the Euro/ruble segment (for swaps). The number of members of the MICEX Currency Market Section reached 539 organizations.
In 2006, in the government securities market (GSM) and the money market, the total volume of transactions grew 1.6 times and amounted to 4.87 trillion rubles or 180.7 billion dollars, including transactions in GKO/OFZ and other bonds, repos and deposit operations of the Bank of Russia. The share of this segment in the total exchange turnover of the MICEX Group is 9.4%. The volume of repos in the government securities market (including direct and reverse repos against the Bank of Russia, modified repos and inter-dealer repos) grew to 3.63 trillion rubles or 134.9 billion dollars (growth: 1.9 times). The market for inter-dealer repos showed the most impressive growth. Its turnover reached 1.33 trillion rubles (growth: 4.2 times). The range of traded instruments was widened as a result of admitting 25 issues of regional and corporate bonds to trading. This increases banks’ refinancing possibilities by enabling them to transact direct repos against the Bank of Russia.
In 2006, the total turnover of deposit operations of the Bank of Russia involving the use of the MICEX trading system showed stable growth and exceeded 468 billion rubles (17.3 billion dollars), which is 2.4 times more than in 2005. The range of deposit operations of the Bank of Russia on the MICEX was widened by adding “demand” deposit transactions. We also organized the service of a new segment: lending operations of the Bank of Russia (collateral crediting).
One of important achievements of 2006 was the organization of service of a new segment of the government securities market: government savings bonds (GSB). In December, the first auction to place GSB was held on the MICEX, at which 415.1 million rubles worth of GSB (at face value) were sold.
Stable growth of participants’ interest in the currency futures market promoted the growth of liquidity of these instruments. The total volume of trading in the MICEX Derivatives (Standard Contracts) Market Section amounted to 894.3 billion rubles (33.1 billion dollars), 4.8 times more than in 2005. The average open interest in the RUR/USD contract in the MICEX derivatives market amounted to 1.52 billion dollars. In 2006, the MICEX launched futures on interest rates of the inter-bank money market (MosIBOR and MosPrimeRate). The volume of transactions in these instruments amounted to 3.6 billion rubles. To promote the development of the derivatives market, the MICEX widened the range of traded instruments by launching trading in futures and options on the MICEX Index and other stock assets and improving the risk management system.
Besides organizing trading, the MICEX Group provides to professional participants in trading a whole range of settlement services. In 2006, not-for-profit partnership The National Depository Center (NDC), which is part of the MICEX Group, remained Russia’s leading settlement depository. The value of securities in depositors’ depot accounts with the NDC grew by 86% from 1.77 trillion rubles to 3.3 trillion rubles (124.9 billion dollars), shares accounting for 1.14 trillion rubles (35% of the consolidated assets portfolio). This came as a result of diversification of the NDC’s services, growth of liquidity in the MICEX Group and reduction of costs of keeping securities. During the year, the number of the NDC’s inventory operations exceeded 1.9 million: on average, 159 thousand operations a month, up 71% on 2005. In 2006, the NDC performed all the necessary preparatory work to obtain the central depository license: the NDC’s own capital increased by 39.2% to 870.41 million rubles, the NDC obtained ?+ rating from Thomas Murray, special attention was paid to the improvement of corporate governance, the IT base, interaction with market participants, the risk management system and the quality of services.
In August 2006, credit institution The National Clearing Center obtained the Bank of Russia’s license to perform banking operations. The National Clearing Center was founded by the MICEX and the NDC. The event was important for the structural development of the MICEX Group. The National Clearing Center will provide clearing in exchange-based and OTC markets. This includes determining obligations of participants in clearing, offsetting these obligations and organizing the execution of obligations for transactions in compliance with the RF laws.
In 2006, an important area of our work was the promotion of cooperation with foreign exchanges and financial institutions. The MICEX takes an active part in the work of the International Association of Exchanges of the CIS countries, which coordinates the development of orderly capital markets in the Commonwealth countries. Besides, in 2006, the MICEX signed memoranda of cooperation with the London Stock Exchange (LSE) and Deutsche Börse, which confirmed the MICEX’s status of Russia’s leading exchange satisfying the international standards of listing and disclosure of information on securities and issuers. The implementation of these agreements will help to improve the reliability of the exchange system of risk management and the transparency of the Russian stock market for international investors.
The MICEX Group holds the central place in the infrastructure of the Russian capital market integrating the trading and the settlement systems on a unified technological platform. The Group is comprised of the MICEX, the MICEX Stock Exchange, the National Mercantile Exchange, the MICEX Settlement House, the National Depositary Center, the National Clearing Center, regional exchanges, etc. These organizations provide trading, settlement, clearing and depositary services to about 1000 market participants — leading Russian banks, broker companies and other financial institutions located in 50 Russian cities, including Moscow, Novosibirsk, St.Petersburg, Rostov-on-Don, Yekaterinburg, Vladivostok, Nizhni Novgorod, Samara and other cities.
By the total value of trading (in 2006: 1925 billion US dollars) the MICEX is the largest exchange in Russia, the CIS and Eastern Europe. At present, the MICEX, under the aegis of the International Association of Exchanges of the CIS Countries (IAE CIS), is creating appropriate conditions for the formation of an integrated orderly stock market based on the technological facilities of national exchanges of the Commonwealth.
After implementing the up-to-date electronic trading and depositary systems the MICEX became a universal financial exchange which serves as a basis for a nationwide system of trading in all of the main segments of the financial market: the stocks and corporate bonds market, the foreign exchange market, the government bonds and money market, the market of derivative instruments. The average daily turnover at MICEX is 8 billion US dollars.
The MICEX Stock Exchange, Russia’s leading stock floor, is a part of the MICEX Group. It provides trades in stocks and bonds of 600 issuers, including such “blue chips” as Gazprom, RAO UES, Lukoil, Norilsk Ni?kel, Sberbank, Rostelecom, Surgutneftegaz, MTS, Tatneft, and others – with a combined market capitalization of 900 billion US dollars. In 2006, the total value of transactions on the MICEX SE reached 755 billion dollars, including 550 billion dollars for stocks. This makes up over 90% of the total value of transactions on Russia’s leading floors, and over 70% deals with Russian shares worldwide. The MICEX Index, Russia’s main stock market indicator, grew by 68% (83% - in US dollars) in 2006.
Trading is held electronically on the basis of an up-to-date trading and depositary system, to which regional floors and remote terminals are connected. Settlements for transactions in cash are effected via the MICEX Settlement House, while settlements for securities are effected via the National Depositary Center.
