Foreign Exchange Market of Moscow Exchange - Introduction

The first exchange currency trading began in 1991 on the site of the State Bank of the USSR currency, and later, January 9, 1992 on the basis of a given currency area was established by the MICEX. Moscow Interbank Currency Exchange – was one of the largest universal exchanges in Russia, the CIS and Eastern Europe.
In the period since 2001 to 2003 on the Russian market the interest of Russian private investors to the stock market rose sharply, in view of this, trading with settlements in roubles became extremely profitable, and the increased role of Internet trading, was followed by interest in bond trading on the stock exchange. MICEX, taking advantage of this, began to take on trading volumes with a rival RTS, which initially focused on foreign investors conducting trades in shares settled in dollars.
Later, in connection with the entry into force of the law from January 1, 2003 “On the Securities Market”, according to which the organizer of trading in the stock market may only open joint stock company, the stock exchange has been presented to claim the regulator – the Federal Commission for the Securities Market (FCSM). To conform to the laws of the structure of the exchange, MICEX has allocated from its subsidiary structure Exchange CJSC "MICEX Stock Exchange", received, in turn, her stock exchange license.
MICEX Stock Exchange provided trading in the securities of about 700 Russian issuers, including shares of more than 230 companies, with a total capitalization of about $ 10 Trln. RUB (about $ 300 Bln.): OAO “Gazprom”, OJSC “Rostelecom”, OJSC “Sberbank of Russia”, OAO “LUKOIL”, OAO NK “Rosneft” and others. The structure of the MICEX Stock Exchange bidders is about 650 organizations – professional participants of the securities market, clients are more than 670 000 private investors.
In February, 2011 it became known that the MICEX Group acquires a majority of its main competitor – RTS.
Russian Trading System (RTS) – represents the largest exchange on which the trading securities are available for both private investors and large companies, and investment funds.
OJSC “RTS” was formed by a group of brokers in 1995. The shares of Russian companies are traded on it, among them are the shares of Gazprom, and the bids did not provide an advance payment, which later became the hallmark of the RTS, which was, in turn, a strong advantage over Moscow Interbank Currency Exchange.
On the unification of the two major stock exchanges – MICEX and RTS, mainly influenced by the desire of the Government of the Russian Federation to develop local financial markets with a view to the subsequent transformation of Moscow into an international financial center on a global scale. For such purpose, of course, there was a need of a developed and powerfully-organized market, with its associated with a strong exchange, which can attract outside capital and liquidity through its toolkit.
However, there was a number of concerns related to the association of stock exchanges into a single platform. The merger of MICEX and RTS had a potential to destroy competition in the Russian stock market, which could lead to the emergence of at least two new problems.
The first problem – is a risk that the joint location as a monopolist can dictate the market price, significantly exceeding the current, and in confirmation of these fears can be reduced by the fact that the MICEX immediately after the signing of the merger agreement with RTS announced an increase in commissions per transaction and the size of the lot.
The second problem was related to a decrease in competition, and hence the slowdown of both sites. Despite the fact that the activities of stock exchanges in many respects did not overlap, a number of successful products, such as RTS Standard and derivatives market FORTS, RTS proposed today, is precisely a result of competition with MICEX. Proponents of the merger of the two platforms were confident that the combined exchange will receive a new impetus to development – the fight for issuers and investors with foreign exchanges. However, competition with foreign grounds made it impossible to compare the success of the various models in the same condition as it was before.
Despite all the fears, MICEX and RTS united December 19, 2011, and it became one of the most important events in the financial sector of the Russian economy in 2011. Integration was initiated by the decree of President Dmitry Medvedev at the end of 2010. Joint exchange is a universal platform providing Russian and foreign participants the opportunity to trade stocks, bonds, derivatives and currencies.
For market participants merging exchanges meant the creation of a common platform for issuers, investors and traders, the reduction of transaction costs, simplify bidding procedures and access, as well as the emergence of new products and services. Shareholders integration – is a factor contributing to profit growth, diversification of sources of income and the ability to create a public company.
The union has opened up new opportunities for further development of the Russian financial market, including the establishment of a central securities depository, needed to build in Moscow IFC – International Finance Centre.
Once the exchange has teamed up – it was called very simply: “MICEX-RTS”, later, work on a new brand began, which was introduced in the first half of 2012. The exchange was called “Moscow Exchange”, but in contract details it retained the name “Moscow Exchange MICEX-RTS”.
In addition, the paper describes Moscow Exchange markets that have changed after the unification, these include :
Stock market (stocks, bonds, shares): Stock Market Group “Moscow Exchange” – is the largest stock market of the CIS countries, Central and Eastern Europe. CJSC “MICEX Stock Exchange”, organizing trade on the stock market of Moscow Exchange, stays within the thirty leading stock exchanges in the world.
Derivatives market (futures and options): Futures and options market – is a leading platform for trading in financial derivatives in Russia and Eastern Europe. Futures market combines developed infrastructure, reliability and the guarantee of OJSC “Moscow Exchange”, as well as the latest technologies for trading futures and options, proven for more than a decade as a stable and successful development of the market.
Money market: As a rule, the money market on the stock exchange is combined with the currency market, calling them “the monetary and foreign exchange market”. Trading in the money market is carried out in two sections: repos section of government securities and money market instruments, as well as section for repurchase of shares and bonds.
Commodity market, precious metals market: Today OJSC “Moscow Exchange” trades only precious metals, but is planning to implement a project for the grain trade, non-ferrous metals, alloys, etc.
Finally, the foreign exchange market : Foreign Exchange Market of Moscow Exchange is the oldest organized trading platform in Russia, which held trading in foreign currency from 1992. Exchange market is the center of liquidity for operations with the rouble. For example, the Bank of Russia sets the official exchange rate of the rouble on the basis of exchange trading.
On May 27, 2013 Moscow Exchange publishes fixing on the dollar / rouble, which is calculated by reference to quotes and transactions in a short time interval, with the January 2014 fixing used by the National Currency Association.
On January 1, 2015 the foreign exchange market of Moscow Exchange accounted for 534 bidders registered, including 494 credit organizations: Russian banks, subsidiaries of foreign banking groups and banks-residents of the EurAsEC (Eurasian Economic Community) and 40 non-credit institutions.
The development of client access has significantly increased the activity of the participants and expanded the customer base through new categories, namely: non-residents, Russian and foreign brokers, individuals.
The foreign exchange market of Moscow Exchange is one of the fastest growing segments of the financial market in Russia. In 2014, the total volume of trading on the currency market of Moscow Exchange reached 228.5 Trln. roubles, an increase of 46% compared to 2013. March 3, 2014 recorded the absolute maximum daily volume of trading on the currency market – 1.71 Trln. roubles ($ 47.3 Bln.). In terms of economic instability and crisis of confidence the MOEX share on the Russian interbank market increased from 30.6% in 2013 to 42.1% in 2014.
MOEX electronic trading system provides trading operations made with US dollar (USD), euro (EUR), British pound (GBP), Hong Kong dollar (HKD), the Chinese yuan (CNY), Ukrainian hryvnia (UAH), the Kazakh tenge (KZT) and Belarusian rouble (BYR), as well as swap transactions with different maturities: 1W, 2W, 1M, 2M, 3M and 6M, 9M and 1Y. The major currency pairs are USD / RUB and EUR / RUB – in 2014 they accounted for over 80% and 15% of the total volume of exchange operations correspondingly.
Convenience and uniqueness of exchange market provide a full range of trading, clearing, settlement and information services. The possibilities that the exchange offers business include the following:
• Universal access to the money market: the work on the Client Access retains all the advantages of direct membership on the stock exchange; the maximum number of counterparties, a wide range of tools for attracting / placing money (currency swaps, repos, deposits), the best rates in the interbank market;
• Conversion: the best rates and the most narrow spreads on USD and EUR throughout the day, flexible payments under the terms of TOD, TOM, SPT, different currencies (US dollar, euro, yuan, Hong Kong dollar, the British pound, the Belarusian rouble, the Kazakh tenge and Ukrainian hryvnia), the ability to “roll over” the position with a currency swap;
• Hedging of currency and interest rate risks through foreign exchange swaps and forwards: operations with a maturity of up to 1 year or even a longer hedge using futures and options.