Recently-merged Russian exchange MICEX-RTS will decide on settlement reforms within the next two months as part of efforts to make its market more accessible for foreign investors.
The bourse has also drafted new rules for trade execution, clearing and settlement which it also plans to roll out to market participants in June or July, together with more details on the exchange’s upgraded technology infrastructure and how to connect to it.
The new settlement procedures, which will be developed in conjunction with Russia's new single central securities depository the National Settlement Depository, will bring the country inline with other markets in Europe by moving from a T+0 settlement period to either a T+2 or T+3 period for equities and bond trading.
“We recognise that the T+ settlement cycle is a big change for domestic market participants but they have been positive to date and we hope they will be well prepared in time for the change,” said Anna Kuznetsova, managing director of equities, MICEX-RTS. “Making our market more accessible to non-resident investors is very important for increasing liquidity.”
The current T+0 settlement model involves stock being deposited prior to a trade taking place. This can be a barrier to investment for firms that are used to longer settlement cycles in other markets and is blamed for low liquidity levels in Russia.
While welcoming the changes to the settlement rules, market participants have urged the exchange to provide more clarity after previous statements suggested RTS-MICEX would use a T+4 settlement period.
“A clearer narrative would be most welcome,” said Andrew Pryer, director of execution sales at ING. “The market needs to understand what will change and when. Continued ambiguity will forestall the opening of the Russian market to foreign investment institutions.”
Meanwhile, starting from November, brokers will be able to connect to the new streamlined exchange infrastructure for simulated trading followed by a period of parallel live running that the exchange hopes to complete by the end of February 2013, when the T+0 systems are scheduled to be switched off for top-30 liquid stocks. The remaining securities will be shifted to the new T+ settlement gradually in future. The exchange is also developing a book-building platform to further enhance its thriving corporate and government bond sector.
Russia’s RTS and MICEX exchanges merged in December last year, and are preparing to float via IPO in 2013. The listing is expected to be worth around US$300 million. The combined bourse is a key plank in the Russian government’s plan to turn Moscow into an international financial centre by attracting new issuers and international investors. International buy- and sell-side firms hope to realise efficiencies from accessing a combined market using a common trading platform and collateral system. At present, RTS is denominated in US dollars whilst MICEX uses the ruble. The exchange group currently requires T+0 settlement.