Late-Night Moscow Trading Looms as Winter Time Takes TollLyubov Pronina and Ksenia Galouchko
While Russia’s elimination of its annual winter clock change may be providing the intended health benefits to farmers and milk cows, the move is pushing OAO Moscow Exchange to search for ways to regain lost stock trading.
The exchange is considering extending the market’s close by an hour to 7:40 p.m. Moscow time so there’s more overlap with the U.S. day, giving American investors time to trade in Russia, Chief Executive Officer Alexander Afanasiev said. Russian stocks traded in New York slipped 0.4 percent by 11:12 a.m. while the benchmark Micex Index closed little changed in Moscow.
Exchange officials have stepped up efforts to boost trading in Moscow, where volumes averaged 50 percent of Russian stock trading in London last year, data compiled by Bloomberg showed. The bourse transitioned to a two-day stock settlement in September and Russian equities are set to become available through Euroclear Bank SA next year. The ending of winter time, which then-President Dmitry Medvedev said was aimed at helping the biorhythm of people and milk cows, hurt those efforts.
“The overlap with the U.S. market trading, which traders across the world focus on, is just 15 minutes now,” Afanasiev said in an interview in London on Dec. 9.
The Micex gauge is set for an annual decline of 0.6 percent. Growing concern about the slowest economic growth since the recession in 2009 and corporate governance has spurred a record outflow from Russian stocks with equity funds losing $3.02 billion this year, according to EPFR Global. The Bloomberg Russia-US Equity Index fell to 97.49.
If trading is extended by one hour, trading volumes on Moscow Exchange can increase by as much as 8 percent, Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by e-mail.
“Extending trading hours to say matching the NYSE close would be optimal in my view,” Saenz said. “This way western investors can trade Russia in a better light, closer to their time zone. It would be a win-win situation. Investors can trade longer, and the Moscow Exchange will have increased volumes as a result.”
U.S. stock trading hours more than doubled beginning in the 1990s, when upstart venues such as Island ECN started facilitating transactions outside the regular hours of 9:30 a.m. to 4 p.m. New York time. Although the bulk of trades still happen during the regular session, investors can now execute orders as early as 4 a.m. and as late as 8 p.m.
A number of state companies plan to sell shares as part of the government privatization program next year and many privately-owned companies are getting ready for an initial public offering, Afanasiev said without naming them.
These are “Russian companies of ‘new economy’ in the consumer, media and information technologies sectors,” he said. “A few companies that de-listed in the past are considering to come back.”
Trading Russian shares and corporate bonds through Euroclear and Clearstream Banking SA next year will help bring new investors that are not specializing on Russia, Afanasiev said. The share of foreign investors in domestic corporate bonds may become comparable to that of sovereigns which has reached about 25 percent this year, he added.
“There are talks about extending the exchange’s trading hours, I think that’s wrong,” Sergey Grigoryan, chief investment officer at UralSib Asset Management in Moscow, said in an interview. “We need to decide on a time corridor and simply work in it. As an alternative, you could go further and make the exchange work around the clock. Then everyone can choose time convenient for them.”
Russia may resume the practice of turning clocks back for the winter in October 2014, Vedomosti newspaper reported Oct. 11, citing a person close to the presidential administration.
Afanasiev said that his team had expected a return to the winter time which didn’t happen. He said so far the majority of market participants do not support the extension of trading hours as it would also entail additional costs for them.
“This will not increase the turnover at the exchange,” Konstantin Tserazov, managing director, head of fixed income, currencies and commodities at Otkritie Capital in Moscow said by e-mail. “It will increase the staff costs of the financial markets professionals which they will not be able to monetize, for private individuals it could make sense.”