Russia Aims to Become Magnet for Capital

Terry Flanagan

Moscow is shaping up as a magnet for low-latency connectivity as both established and emerging markets come to embrace electronic trading for capital raising.

The Moscow Exchange has completed the implementation of Spectra, a new platform for trading and clearing on the derivatives Market and in the standard market sector.

Spectra was the Exchange’s most important technological project of 2012. Implementation of Spectra has resulted in emerging opportunity to develop new interesting products and unique services.

The implementation of the new platform for trading and clearing followed the improvements in the securities and FX market that have taken place.

“We are seeing a lot of opportunity in Russia,” said Emmanuel Carjat, managing director of technology vendor TMX Atrium, which is owned by Canadian exchange operator TMX Group.

“In Europe and North America, spreads are low, the market is extremely well served, and the number of people providing brokerage or market making. This hasn’t been the case in Moscow.”

The Moscow Exchange is the largest exchange group in terms of turnover and has an extensive client base in Russia and Eastern Europe.

The Group was founded on December 19, 2011 as a result of the merger of Russia’s two main exchanges, Micex and RTS. The Moscow Exchange has modernized its infrastructure to trade in shares, bonds, FX, fund units, commodities, derivative financial instruments and all types of assets.

“Unlike North America and Europe, which are highly fragmented, Moscow has one exchange which does everything from equities to options to FX, as well as its own clearing arm,” Carjat said. “Following the merger of Micex and RTS, they are moving all of their systems into a single location, with which we are assisting them.”

The strengths of the new platform are high performance, modular architecture, universal bus for high-speed data transfer, and built-in risk-management system.

The performance of Spectra’s initial configuration is up to 30,000 transactions per second, with system response time less than one millisecond.

“Moscow is trying to make itself prime location for raising capital,” Carjat said. “The key for Moscow is to create a viable platform for raising primary capital. The government has launched a significant drive to help improve capital markets in Russia. Also, lots of Russian nationals have spent time in North America working for bulge bracket firms, and they are now going back to Moscow and applying what they’ve learned to their own markets.”

Moscow has launched a so-called T+2 trade settlement system, which means that the trade is settled two days after the trade date.

Countries in the European Union aim to have a T+2 system in place across all 27 member states by 2015 in order to improve efficiencies across markets and reduce rates of trade failure. Much of Europe currently uses T+3 although nations such as Germany already operate T+2.

“The possibility of shortened settlement cycles is resurfacing and with it the intensified scrutiny of post-trade matching time frames,” said Aite Group analyst Lyn Marcrum in a report.

Most asset managers currently achieve confirmation-to-allocation matching on trade date, which speaks to the efficient automation of not only their own systems but also those of their broker counterparts.

“Larger firms meet T+2 settlement today in several markets,” said Marcrum. “Whereas the threat (or promise) of shorter settlement cycles in the United States and United Kingdom once galvanized the industry to create more efficient and effective post-trade matching, such a prospect today evokes only a mild reaction among larger asset managers.”

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