The Moscow Exchange is in talks to give investors in Japan and Poland easier and cheaper ways to trade Russian securities, an attempt to lure business home and reduce the stock trading that takes place overseas.
Russia’s National Settlement Depository, known as the NSD, is discussing setting up a direct settlement link that will bypass intermediaries to cut the time and cost of transactions, according to Eddie Astanin, the head of the Moscow-based organization’s management board.
The arrangement would be “an extra way to channel liquidity into the Russian stock market from foreign investors,” Astanin said in a telephone interview on Sept. 20 from Moscow. “This is being done as part of the development of the Moscow Exchange.”
The exchange wants to reduce the number of Russian equities traded abroad to between 20 percent and 25 percent of the total by 2015, from about 40 percent currently. RTS futures trading in New York fell 0.4 percent on Sept. 20 while the Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. lost 1.5 percent to pare a third weekly gain.
Seeking to boost trading of its companies in Moscow, Russia mandated this month that equity transactions settle in two days rather than on the same day. The country’s stocks will also become available through Euroclear Bank SA’s international platform in 2014. NSD already struck an agreement with the Austrian Central Securities Depository, operated by Oesterreichische Kontrollbank AG, last week that gives investors direct access to stocks and other securities in Russia.
Poland’s national depository for securities, KDPW, has made some inquiries among local branches of European banks and is now looking to provide a link that will allow investors to hold Russian OFZs on its account with Russia’s NSD, said Michael Lukac, KDPW’s head of international client relations.
“We believe we have a particular business opportunity here,” Lukac said by phone from Warsaw. “We presume that we will be able to offer lower” fees to Polish investors for keeping Russian government OFZ bonds on their account with the NSD rather than Russian banks, he added.
Astanin said that NSD and the Japan Securities Depository Center Inc. are beginning to work out details for a link to provide access to Russian securities. If Russian clients show interest in Japan, the link can work both ways, he added.
By opening these connections, “we create various channels of access to the Russian market,” Astanin said. “We get an extra investor base.”
The Moscow bourse wants to repatriate part of the fund flow from international markets back home, cutting the number of Russian equities traded abroad to between 20 percent and 25 percent of the total by 2015, from about 40 percent currently, Chief Executive Officer Alexander Afanasiev said in a June interview.
The bourse raised 15 billion rubles ($472 million) in February in the biggest initial public offering on Russia’s bourse since 2007. Euroclear Bank SA, operator of the world’s largest bond-settlement system, began settlement of Russian government bonds, letting foreign investors bypass local brokers.
The Bloomberg Russia-US gauge advanced 3.1 percent to 98.20 in the week. American depositary receipts of OAO Sberbank, the country’s biggest lender, jumped 8.1 percent, the steepest surge in four months.
The Market Vectors Russia ETF (RSX) rose 2.6 percent to $28.89. The RTS Volatility Index, which measures expected swings in futures, climbed 2.3 percent to 24, while futures on the RTS gauge slipped to 145,700 in U.S. hours.
The ruble dropped 0.7 percent to 31.8530 against the dollar, the biggest retreat since in three months. Non-deliverable forwards, which provide a guide to expectations of currency movements, showed the ruble at 32.2988 per dollar in three months.