Micex Overhaul Signals 25% Volume Surge to VTB: Russia Overnight

Russia’s stock market, where volumes are three times less than in Brazil, will grow by as much as 25 percent as the exchange moves to a system of settling trades in line with international standards, according to VTB Group.

The Micex-RTS intends to transition by next year from immediate settlement of transactions to a system where traders are allowed a number of days to complete deals, conforming with norms at exchanges such as Deutsche Borse AG. Volume totaled $900 million on Russia’s 30-stock Micex Index yesterday, compared with $2.91 billion for Brazil’s Bovespa Index, which has 68 members and allows trades to be settled over three days.

“Once you have delivery not right now but in a few days’ time, you have time to expedite the stock,” Oleg Achkasov, head of equity trading at VTB Capital, the investment banking arm of Russia’s second-largest lender, said in an interview in Moscow yesterday. “The volumes will pick up from all those companies that aren’t really trading.”

Russia is reforming its stock exchange and revamping capital markets to lure more foreign investors and transform Moscow into an international financial center. The bourse will introduce a central securities depositary this year, Deputy Finance Minister Alexei Moiseev said on Sept. 25. The move will allow foreign custodian banks to open accounts in local depositaries, boosting the ability of overseas investors such as pension funds to buy Russian equities.

The Micex Index rose 0.2 percent to 1,476.08 by 10:52 a.m. in Moscow. Futures expiring in December on Russia’s RTS Index, which merged with the Micex last year, dropped 0.4 percent to 147,820 in New York. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks listed in the U.S. also fell, declining 0.4 percent to 99.52 as commodities and oil, Russia’s biggest export earner, tumbled yesterday.

‘Right Direction’

The settlement reform is “a big step in the right direction, which has been long awaited by investors,” Ilya Kravets, who helps manage $100 million of investments at ED Capital, said by phone in New York yesterday. “It will fuel appetite for Russian shares and boost liquidity in the market.”

The transition from immediate, or so-called T+0 settlement on the Micex to T+2 or T+3, the mode used for U.S. and Brazilian equities, will take place in the first half of next year, Nikita Bekasov, spokesman for the Micex-RTS, said by phone from Moscow yesterday.

“The system that we have today is from yesterday,” Bekasov said. “We need to adopt the same format that is used by other exchanges to make foreign investors comfortable on the Russian exchange.”

Mechel Sinks

The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, retreated 1.1 percent to $29.02 yesterday, the lowest level since Sept. 28. The RTS Volatility Index, which measures swings in the index futures, slumped 0.8 percent to 28.46.

OAO Mechel, Russia’s largest producer of steelmaking coal, dropped 3.6 percent to $6.78 in the U.S. yesterday, the lowest level since Sept. 10. Mechel was the biggest decliner on the Russia-US Index. The company’s Moscow-traded stock rose 0.1 percent to 215.50 rubles, or $6.93.

OAO RusHydro, Russia’s biggest producer of renewable energy, decreased 2.2 percent to $2.65 in New York. The American depositary receipts closed at a 4.3 percent discount versus the company’s Moscow-listed shares, the most this month. RusHydro stock on the Micex rose 0.6 percent to 86.85 kopeks. One New York-listed ADR equals 100 Moscow-traded shares.

Crude oil for November delivery rose 0.4 percent to $88.46 a barrel on the New York Mercantile Exchange.

Brent oil for November settlement increased 0.5 percent to $108.73 on the London-based ICE Futures Europe exchange.

Urals crude, Russia’s chief export blend, sank 3.1 percent to $106.1 per barrel yesterday.

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