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. Last Updated: 07/27/2016

RTS Sets Back Settlement Date

Russia's leading association of brokerages said Tuesday it was pushing back a deadline for members to settle trades conducted during last week's stock market crisis in hopes of buying time for smaller firms to complete transactions.


Concerns that some brokerages will renege on promised buys left a cloud of uncertainty over the Russian marketplace, contributing to low volumes.


"Now everyone is waiting for the settlements to occur," Samit Yakovlev, head of equities at United City Bank, said of the expanded deadline that RTS set for brokers Tuesday. "For now, only the leading brokerages are trading with each other."


But Dmitry Ponomaryov, president of the Russian Trading System, said the situation should become clearer by the end of the week after his organization pushed back the settlement period for Moscow-registered shares from five days to seven days. Shares registered in the regions have 12 days to be settled, he said.


Without the changes, small brokerages would have been forced to settle their accounts Tuesday.


The Moscow Times Index of 50 leading shares closed at 333.34 on Tuesday, down 1.91 percent on the day. Unified Energy Systems lost 2.7 percent to close at $0.335, while LUKoil slipped 1.5 percent to close at $22.56, and Mosenergo fell 1.2 percent to $1.52.


Ponomaryov added that beginning Monday, market-makers using the RTS electronic trading system can conduct sales using an electronic mouse -- a time saving device, which he said could greatly increase volumes from Tuesday's $59 million to the average $120 million to $140 million in trades.


Despite new trading rules, brokers "are still cautious," Ponomaryov said.


"Right now, transactions made on Monday [Oct.27] are being settled," he said. Although Ponomaryov said that currently there are no indications that anyone will renege on their payments, concern has brought much of the market to a standstill.


One case that has received attention from brokerages involves $10.5 million worth of Gazprom shares, which the brokerage Renaissance Capital sold Oct. 24 to Slavyansky Bank, an affiliate of Bank Imperial.


Four days after the deal was concluded over the phone, Gazprom shares fell 26 percent at the height of the crisis, and Slavyansky has since refused to pay. It is unclear whether Renaissance has any recourse, as Slavyansky is not a member of NAUFOR, so the deal falls outside the purview of the RTS system.


"When the market was stable, everyone took each other's word," said Andrei Ippolitov, director of the Prospect investment company. "This situation once again demonstrated that our market is not civilized."


Market participants continue to worry that a similar incident could happen with an RTS-registered transaction. To improve the situation, Ponomaryov said RTS officials will ask traders to deposit their shares with the Depository Clearing System before settlement day -- within three days of concluding a deal.