Moscow Exchange expands instruments for equities, bonds and repos trading and settlement

Moscow Exchange expands instruments for equities, bonds and repos trading and settlement

Moscow Exchange expands instruments for equities, bonds and repos trading and settlement

The FINANCIAL -- Effective 1 June 2015, Moscow Exchange has implemented a number of planned upgrades and new product roll-outs to the equity, bond and repo markets, thereby expanding the range of facilities and opportunities available to its clients.

T+1 TRADING IN OFZS

All anonymous trading in OFZs will settle on the T+1 cycle, replacing T0 and T+2 settlement. T+1 reduces participants" costs and will boost trading volumes as trades do not require full pre-funding. It will also increase market makers" efficiency, thereby promoting OFZ market liquidity. Effective 1 June, T0 settlement is reserved for negotiated trades only.

BLOCK TRADING IN OFZS

The new system for block trading in OFZs will allow firms to fill large orders at the average market price, thereby reducing transaction costs for participants. Trading will take the form of discrete auctions held twice daily, from 11:47 am to 12:00 pm MSK, and from 4:47 pm to 5:00 pm MSK. The new auctions will allow large orders to be filled as quickly as possible due to the liquidity concentrated in short periods of time when bids are collected and matched. The new system allows for block trading in OFZs with minimum effect on their market price.

DISCRETE AUCTIONS FOR SHARES

Effective 1 June, the Exchange has changed the discrete auction mechanism for shares. Auctions will be run once or twice a day (currently only once a day) and only for shares included in the MICEX Index (currently for all Level 1 List shares). Shares will continue to be available for block trading and repo with the CCP during the auctions.

OPENING AND CLOSING AUCTIONS

The Exchange is also launching opening auctions from 9:50 am to 10:00 am MSK for OFZs and equities, replacing the pre-trading period. The auctions will allow participants to enter market orders, ensuring that the opening price is a true market price and protecting the market price from manipulation. Closing auctions for OFZs replace the post-trading period. The closing auction mechanism for OFZs and equities is the same.

EXPANDED LIST OF SECURITIES ADMITTED TO TRADING WITHOUT FULL PREFUNDING

The list of securities admitted to trading without full prefunding will be expanded due to the division of securities into "eligible as collateral" and "admitted to trading without full prefunding". To be eligible as collateral, securities will need to meet criteria set by the Central Counterparty, including parameters such as credit rating and inclusion in the Bank of Russia"s Lombard List or the MICEX Index.

CROSS TRADES

Agency cross trades will be launched for clients of a single market participant, provided that such trades are made via the Central Counterparty. Agency cross trades will be allowed in the central order book and negotiated trading modes. Member firms will be responsible for granting permission for cross trading to clients on an individual basis.

REPO WITH THE CCP

Settlement in USD and EUR will become technically available for repo and negotiated trades with the CCP, in addition to RUB settlement. This new service aims to offer participants an additional tool to manage liquidity.

The maximum term for repo and negotiated trades with the CCP will increase to seven days. This will facilitate liquidity management over longer periods and allow synchronization of CCP-cleared repo transactions with certain Bank of Russia repo transactions, as well as enabling participants to reduce interest rate risk, according to Moscow Exchange.

SETTLEMENT IN FOREIGN CURRENCY

From 1 June, foreign securities (shares of companies incorporated outside Russia as well as depositary receipts) are technically eligible for settlement in USD, in addition to RUB. Moscow Exchange will announce the admission date for such securities in due course.
In addition, the Exchange has started to offer trading in bonds denominated in CNY and GBP with settlement in those currencies.
USD, EUR and OFZs may be accepted as contributions to the Guarantee Fund.

CLEARING

To coordinate clearing with settlement batches, the intraday clearing session on the Equity & Bond Market will begin one hour later, at 5:00 pm MSK, starting 1 June.

The period for mandatory rollover of obligations carried out by the NCC as the CCP in the event of a default will be shortened to two consecutive settlement days for funds, and four settlement days for securities.