Equity trading focus | DMA | Sergey Sinkevich & J.P. Natkin Solid foundations
Direct market access is well established in the world’s growth markets, but Russia is going through a step change in a bid to attract foreign investors and secure a seat at the top table of global financial centres. Sergey Sinkevich and J.P. Natkin* review these reforms and map out the path ahead.
a result, trading in Russian stocks has become easier and more attractive to international investors and Russian companies do not need to go to London and New York to find access to foreign capital. Recent reforms to the
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n Russia, a modernisation of financial regulation, a growing appreciation for investor appetite and concerns, and a vision for the future have created the right foundations. Now we must build. Russian securities have
proved their popularity among international investors over the last decade with five securities listed among the most liquid stocks on the London Stock Exchange. Russia has recognised this immense potential and the Moscow Exchange has now introduced a series of technological and regulatory reforms aimed at opening its financial markets to the world in a bid to transform Moscow into one of the world’s leading financial centres. As
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Moscow Exchange have brought Russia’s trading and settlement environment to international standards. In February, the Exchange switched from T+0 (when trades had to be pre- settled), to T+2, which actually puts Moscow ahead of some of its European peers. This month, the Moscow Exchange will add 35 securities to T+2 settlement, increasing the total number of equity securities trading in T+2 to 50; the T+0 settlement process will be retired in September. Additionally, the launch of the Central Depository has finally clarified the fragmented settlement structure. Prior to the establishment of the Central Depository funds from North America could not use depositories in Russia due to Rule 17f-7. With two obstacles out of the way, the Moscow
Exchange is now closer to its ambition of becoming one of the leading centres of liquidity and price discovery.
On the right track Russia is now on the right track and recent measures introduced to allow international investors to gain direct access to Russian stocks are showing results, as demonstrated by success stories such as the listing of the Moscow Exchange. The Moscow Exchange’s IPO has clearly shown that large offerings can be successful in Russia. The US$500 million IPO was one of the largest transactions ever fully placed in local form on the Russian market and was still significantly oversubscribed, with most of the demand coming from international investors. A few more successful deals, probably as part of the government’s privatisation programme, would go a long way towards establishing Moscow as the platform of choice for Russian primary offerings. The Russian government
Best Execution | Summer 2013
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