Moscow Trading Floor to Open Soon

The Moscow Stock Exchange, a pet project of populist Moscow Mayor Yury Luzhkov, will start operations in two months in what city officials boast will be a trading floor to match those in other world financial hubs such as Tokyo, New York and London.


Russia already has an efficient share trading mechanism in the electronic Russian Trading System (RTS). But Viktor Sakharov, president of the new exchange, stressed Thursday that his new Moscow exchange will offer benefits of its own.


The MSE will be the first physical trading space for shares in Russia.


"Our founder-shareholders are 176 top brokerages and banks all around Russia," said Sakharov, who was appointed MSE president at a foundation meeting Feb. 20. "We will offer access to all kinds of traders and investors on the model of the New York Stock Exchange."


Founder-shareholders include Moscow Sberbank and Inkombank, as well as top brokerages Troika-Dialog, Renaissance Capital and Creditanstalt Grant.


"Renaissance and Mayor Luzhkov are betting that Moscow will not be peripheral to Europe and the world," said Leonid Rozhetskin, head of investment banking with Renaissance. "The domestic industrial base and domestic savings are sufficient to support a vibrant stock market here."


Sakharov said that the exchange would run a mixed system, providing participants with both a physical trading floor and its own electronic trading infrastructure to bring in traders from the rest of the country.


Despite the likelihood that MSE's electronic system will provide competition for the RTS, the head of the association which runs RTS said he was unruffled.


"Competition is a good thing, so long as it stays civilized," said Dmitry Ponomaryov, president of the Professional Association of Stock Market Participants, or PAUFOR. "It is a big new stock market project backed by Luzhkov, and I welcome it."


After two years of operation, RTS is well-positioned in the market. A more serious threat, however, may face the Moscow Interbank Currency Exchange (MICEX), which announced plans in January to expand its T-bill trading to include a share trading system based on infrastructure.


As the only T-bill trading floor, MICEX is the exclusive preserve of banks and is closely allied with the Central Bank. The MICEX project is to be set up in conjunction with the Central Bank.


"We are going head with our plan," MICEX spokesman, Vadim Yegorov, said Thursday. "The launching of shares and corporate bonds is our priority this year."


A potential for tension between MICEX and the MSE may lie in a tradition of sparring between the Central Bank and the Federal Commission on the Securities Market for control of the securities market.


The commission, which serves as Russia's securities watchdog, clearly has a hand in the MSE project.


Likewise, Sakharov's claim to fame is a share holding and settlement union for Russian regions.