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MICEX Group Derivatives Market

MICEX Group Derivatives Market. Directing the Derivative Market Boom – Trends and New Projects. Zhanna Smirnova MICEX Vice President. World exchange derivatives market: trends. World exchange derivatives market: products. World exchange derivatives market: regions.

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MICEX Group Derivatives Market

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  1. MICEX Group Derivatives Market Directing the Derivative Market Boom –Trends and New Projects Zhanna Smirnova MICEX Vice President

  2. World exchange derivatives market: trends

  3. World exchange derivatives market: products

  4. World exchange derivatives market: regions

  5. Derivatives trading starts in Russia October 1992 1990s: Start as it was… 2000s: And what’s now • Exchanges • 1992 – Moscow Commodity Exchange No activity since 1998 • 1993 – Russian Exchange No activity since 1998 • 1994 – Moscow Central Stock Exchange No activity since 1998 • 1994 – The Exchange “Saint-Petersburg” Till FORTS foundation 2001 • 1996 – MICEX Suspended 1998; Restarted 2000 • 2000 – SPCEX Trading now • 2001 – FORTS (based on SPBEX market) Trading now • Products (by underlying) Stock indices STIR GKO CM Stocks, indices FX 1994 1996 2001 2002 2006 1998 Russian derivatives market: history and facts

  6. Russian derivatives market: dynamics of growth

  7. Russian derivatives market: underlying dynamics 15-times growth of the MICEX cash markets

  8. Russian derivatives market: traded instruments

  9. Russian derivatives market: structure

  10. Russian derivatives market: barriers on the way up • Regulative • Absence of special acts: derivative instrument market law, clearing and netting law, etc.; • Regulation vacuum of OTC cash-settled transactions; • Tax problems for individual investors; • Collateral & bankruptcy law • Infrastructure • Low clearing houses capitalization • Educational • Generally low educational level; • Lack of special educational programs, seminars, etc. √ solved √ solved

  11. Russian derivatives market: potential of growth

  12. Russian derivatives market: potential of growth

  13. Russian derivatives market: potential of growth

  14. MICEX Exchange Clearing organization MICEX SH Settlement organization MICEX derivatives market: infrastructure SICEX URCEX SCIEX NCSEX Remote access via Internet for MICEX derivatives market participants and their clients

  15. MICEX Derivatives Market General Clearing Members Individual Clearing Members Trading (non-clearing) Members CLients Clients Banks Non-banks Clients MICEX derivatives market: membership

  16. MICEX derivatives market: membership

  17. MICEX derivatives market: market leaders

  18. FX futures: $ USD/RUB € EUR/RUB €/$ EUR/USD MICEX Group Derivatives market % $ X STIR futures: Overnight MosIBOR o/n 3-M 3 month MosPrime Rate Forthcoming: MICEX MICEX Index futures MICEX derivatives market: instruments

  19. MICEX USD/RUB futures: trading statistics

  20. MICEX USD/RUB futures: liquidity

  21. USD/RUB futures: domestic & international market

  22. MICEX STIR futures: trading statistics

  23. MICEX FX & STIR futures: nearest plans New types of orders Increasing liquidity Combination trading Widening trading opportunities Automatic quoting Market-making programs Synthetic products Futures-type settlement options Long interest rate products

  24. MICEX SE derivatives market Exchange MICEX SE Clearing house MICEX Settlement house MICEX SH Technical Center MICEX MICEX equity derivatives: firm basis Liquid underlying cash markets of MICEX Group High-end trading, clearing and settlement IT solutions Strong and effective financial safeguards system Clear market rules and simple transaction procedures

  25. MICEX SE derivatives market: coming instruments … Single stock options Bond- related futures options Proposed instruments list MICEX Index futures options Bond- related futures MICEX Index futures

  26. MICEX Index «Blue chips» MICEX10 index Sectoral MICEX O&G Capitalization MICEX PWR MICEX Large Caps MICEX TLC MICEX Middle Caps … MICEX Small Caps MICEX indices family

  27. Capitalization Liquidity Weighted price of 10 last trades On average 5.5 ticks per second 5% min free-float 15% max issuers’ weight 3 month watchlist 30 80% 10 95% shares sectors trading value capitalization 6 month calculation base MICEX Index: diversification and liquidity Calculation Structure Compliance With regulations RF Index Investment funds EU UCITS requirements USA Broad-based security index

  28. MICEX Index: economic sectors MICEX Index structure reflects exchange equity market distribution

  29. MICEX Index RTS RTX … DJ Titans Russia… MSCI Russia FTSE Russia IOB Index DAXglobal Russia MICEX Index: Russian EQ market benchmark Russian equity market in 2006: how many indices the market needs?

  30. MICEX Index: key indicator of Russian EQ market Russian equity market in 2007: strengthening positions of MICEX SE

  31. MICEX Index: basis for index investment funds Russian collective investments in 2007: investors choose MICEX Index

  32. Formed 21 Under formation 2 Registration 5 Total number 28 MICEX Index: basis for index investment funds Net asset value growth MICEX Index funds

  33. MICEX Index futures: analogies from abroad

  34. MICEX Index: analogies from abroad Russian currency is a stable one – there is no need to use another

  35. MICEX Index futures: contract specification

  36. Overall reliability and stability of MICEX derivative market is confirmed by reports of juridical bureau “Milbank, Tweed, Hadley and McCloy”, the Institute of State and Law of The Russian Academy of Sciences and by the KPMG company MICEX Derivatives Market financial safeguards Risk management system fundamentals: daily mark-to-market procedures and calculation of variation margin gross-margining and collateral (performance bonds) prepayment compulsory liquidation of insolvent members’ positions MICEX Reserve Fund accounts for RUB 500 million

  37. MICEX Derivatives Market financial safeguards Current limitations: Coming flexibility: SPAN based portfolio margining Gross-margining Collective clearing fund Cash collateral Market procedures of settling insolvency situations Strict liquidation procedures Variety of financial collateral Net-margining of CMs

  38. MICEX Derivatives Market IT’S TIME TO SERIOUSLY CONSIDER JOINING THE RAPIDLY EVOLVING RUSSIAN MARKET OF LARGE POTENTIAL

  39. Contacts MICEX Derivatives Market Division • Phone: +7(495) 705-96-12 +7 (495) 705-96-27 +7 (495) 705-96-03 • Fax:+7(495) 202-75-04 • e-mail:derivatives@micex.com • Web:www.micex.ru Thank You!

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