Director of Equity Financing, FINAM Investment Company, Moscow
A nice view of the Moscow River and the Kremlin at night
In the last six months we have heard a lot of comments pointing to Moscow rapidly becoming one of the leading centers of global finance. Recently some impressive information was released at the 4th Annual Russian Securities Forum that supports this thesis.
Just three years ago the average daily trading volume on the Russian stock exchanges was about $600 million; in 2006 this modest number had reached $ 2.5 billion; and in Q1 2007 the total volume was almost $4 billion. A few years ago trading was evenly spread 50-50 between the Russian Trading System (RTS) and the Moscow Interbank Exchange (MICEX); now the MICEX share is 70%. The MICEX itself has changed drastically in the last few years.
The MICEX and Russia's regional stock exchanges are linked in a national trading system
According to the MICEX exchange’s data, more than 270,000 clients are connected to its trading system. The MICEX trading complex processes more than 700,000 orders every day and more than 350,000 transactions per day. The percentage of foreign traders using the MICEX increased from 17% in 2006 to the current 32%.
Additionally, here is some information about where the MICEX ranks among the top exchanges in the global equity marketplace:
Several participants at the Russian Securities Forum noted that the Russia’s stock market infrastructure is on the verge of drastic changes – and that these updates are based on the goal of satisfying the present and future needs of the investor community. One of the most significant comments was made by Konstantin Korishenko, Russian Central Bank Deputy: “The first steps in the post election period will be associated with the changes of the market infrastructure”. Nikolay V. Egorov, Vice President of the MICEX, stressed the need for more international integration of financial infrastructure.
Demonstrating concrete steps beyond just discussions, Hong Kong Exchanges and Clearing Limited (HKG:0388) (HKEx) and the MICEX signed a Memorandum of Understanding (MOU) on cooperation and the exchange of information on July 3, 2007. Some Russian experts view this event as one of the major undertakings of global market integration. Now Chinese investors have an open path to the Russian market, and Russian companies are welcome to issue IPOs in China. This all is extremely interesting in light of several facts: (a) U.S. markets are still less attractive for IPOs than Europe due to the onerous requirements of the Sarbanes-Oxley Act; (b) The London Stock Exchange and the FSA are tweaking their listing rules and some experts note “LSE fatigue” among Russian companies; (c) the rising global position of the Hong Kong Exchange.
Where the MICEX ranks among stock markets worldwide
In general, experts point to the fact that if this Russian-Chinese financial cooperation develops in a favorable way, Moscow could become the world’s third most important financial center (after New York and London) given the little opportunity for other European capitals to take this spot. So, what might we expect from the MICEX-HKEx union?
The establishment of cross-border listing?
Opening up a direct channel for Chinese investors to invest capital in Russia?
Listing of Chinese companies in Russia via RDRs?
In many respects, the latest news from Russian financial markets shows that these ambitious dreams may now be turning into reality, and Moscow may very well become the third most important financial center in the world.
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and are reproduced here solely for educational purposes. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.
