Acess to MICEX stock exchange

In the Russian securities market foreign investors had for several years only been trading securities OTC. The settlements was executed Free of payment with USD cash payment sent from the buyer once the securities trade had settled. This meant that the seller gave away their securities before receiving the payment and had a risk on the counterparty. After the financial crisis 2008 many foreign investors started to demand DVP (Deliver Versus Payment) settlement.

This demand was met by the creation of a DVP product by DCC (Depository Clearing Company) who started to offer DVP T+3 settlements in USD. Since DCC is the dedicated depository of RTS (Russian Trading System) stock exchange this meant that foreign investors now could access the securities traded on RTS on a T+3 settlement schedule.

The other major stock exchange in Russia is MICEX (Moscow Interbank Currency Exchange) with their depository NSD (National Settlement Depository). Besides equities MICEX is also the dedicated trading exchange for Rubles (RUB), Bonds and Fixed Income. Many of the equities traded on this stock exchange are the same as on the RTS and where the best price or liquidity is could differ from equity to equity. The total turnover for Equities and Bonds are higher on the MICEX.

The trading and settlement on MICEX offers some challenges but also possibilities. The Settlement is T+0 in RUB, this means that you need to get RUB and securities to the accounts with NSD before brokers would execute trades. This also means that you get the securities or cash on the same day from the counterparty. There is also a bridge solution in place between DCC and NSD for over 100 equities that you can transfer during the same day between the depositories. Using this possibility you can trade the same shares on two different stock exchanges during the same trading day.

The author, Fredrik Törnberg, is Network Manager with SEB.