Trade Halt ‘Not a Good Start’ to Merged Bourse: Russia Overnight

Russia’s newly merged Micex-RTS exchange halted equity futures trading on its first day, sparking concern the Moscow bourse won’t be able to compete with global peers.

Futures expiring in March on the dollar-denominated RTS index in Moscow stopped trading about 12 minutes into the U.S. session yesterday due to a “technical problem,” Anton Storozh, a technical support specialist at the exchange said by phone from the Russian capital. Trading resumed 50 minutes before the end of the session, with the contracts sliding 1 percent to 133,350.

The world’s 10th biggest futures market, according to the Futures Industry Association, became part of Russia’s newly combined exchange yesterday after the Micex and RTS united in a bid to lure local companies and investors back to their home market. After halting trading more than 30 times in the second half of 2008, the Micex (INDEXCF) cut the number of stoppages to once in 2009 and five this year, according to spokesman Nikita Bekasov.

“It’s not a good start,” Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp., said by phone from New York. “Investors have been complaining, wondering if this is what they should expect going forward, especially in this environment when there is already so much happening in Russia politically and otherwise.”

Otkritie handles about 38 percent of futures and options trading on the RTS, according to Saenz.

U.S.-traded shares of Russian companies also declined, with the Bloomberg Russia-US 14 Index slipping 3.1 percent to 87.03, the lowest level since Oct. 7.

‘Great Deal of Discomfort’

American depositary receipts of coal producer OAO Mechel (MTL) plunged to a 2 1/2-year low as European Central Bank President Mario Draghi said “substantial downside risks” remain for the economy of Europe, which provided 19 percent of Mechel’s sales last year and is Russia’s largest trading partner.

The ruble-denominated Micex, which handles about 70 percent of equity transactions in Russia, and the dollar-priced RTS, which dominates derivatives trading, merged to get more of the share of “internal investing in Russia” and to lure more companies to list on the local market and undertake initial public offerings, Ruben Aganbegyan, president of the Micex-RTS, said in a Bloomberg Television interview conducted from Moscow on Dec. 16.

“We feel a great deal of discomfort because of this,” Bekasov, a spokesman for the merged Micex-RTS exchange said by phone from Moscow yesterday. The problems were caused partially by the “merger of two different technologies that have been used by RTS and Micex when the two exchanges developed independently. Those are similar technologies and yet they are different,” he said.

Shifting Listings

Calls to the Micex-RTS’ two customer technical support hotlines weren’t answered after hours in Moscow yesterday.

Polyus Gold International Ltd., Russia’s biggest gold producer, moved its primary listing to London from Moscow in November to gain access to foreign investors. OAO Phosagro, a Moscow-based fertilizer maker, sought approval from the Federal Financial Markets Service to allow 21.38 percent of its shares to be traded overseas, the company said in an e-mailed statement yesterday.

Mechel (MTLR), which acquired its U.S. subsidiary Bluestone Coal Corp. in 2009, may move an IPO of its coal and iron-ore mining unit to New York next year after delaying a planned $2 billion sale in London in September. The deal may take place in April or May, three people with knowledge of the matter said, declining to be identified.

Rusal Declines

United Co. Rusal (486), the world’s largest aluminum producer, lost 1.6 percent to HK$4.81 in Hong Kong trading as of 1:23 p.m. local time. The MSCI Asia Pacific Index advanced 0.2 percent following a 1.8 percent slump yesterday.

Mechel stock fell 8.6 percent to $8.18 in New York, the lowest level since July 2009, while shares in Moscow fell 1.1 percent to 279.20 rubles, or the equivalent of $8.70. One Mechel ADR is equal to one ordinary share. Societe Generale cut its 12- month target price on Mechel’s ADRs to $20 from $34 yesterday, according to an e-mailed report.

OAO Gazprom (OGZPY) slipped to the lowest level since Oct. 11 in New York trading as the Communist Party, which boosted its seats in Russia’s parliament to 92 from 57 in Dec. 4 Duma elections, called for higher taxes on the nation’s gas export monopoly.

Poll Majority

While suffering its worst electoral result since 2003, Prime Minister Vladimir Putin’s United Russia party retained a majority in the poll, which observers have described as being marred by violations such as ballot stuffing. Opposition political groups are preparing to stage a demonstration in Moscow on Dec. 24 of as many as 50,000 people, twice the size of the crowd estimated by police at a Dec. 10 rally to protest alleged fraud in the elections.

Gazprom, the world’s largest natural gas producer, fell 4.2 percent to $10.15 after shares on the Micex-RTS main market declined 2.5 percent to 166.05 rubles, or the equivalent of $5.17. One Gazprom ADR represents two ordinary shares.

The RTS Volatility Index, which measures expected swings in the index futures, rose for the first day in four, gaining 1.9 percent to 48.37 points. The Market Vectors Russia ETF (RSX), a U.S.- traded fund that holds Russian shares, fell for the seventh time in eight days, losing 2.6 percent to $26.10.

To contact the reporters on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net, or Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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