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. Last Updated: 07/27/2016

D-Day Arrives in Feud Over MICEX Board




The Moscow Interbank Currency Exchange could be on the brink of losing its equity trading license. Monday was the last day of a Federal Securities Commission ultimatum for MICEX to remove a Central Bank official from its board.


MICEX, the Association of Russian Banks and NAUFOR, the association of Russia's stock market participants, have all called on the FSC not to pull MICEX's license. Analysts said that though the exchange was not a particularly important equity trading floor, the dispute was politically significant.


The FSC, Russia's capital markets watchdog, demanded last month that the Finance Ministry and the Central Bank take their representatives off the MICEX board by Dec. 1. The Finance Ministry complied when the ministry's securities department chief Bella Zlatkis quit the board. Central Bank deputy head Alexander Potemkin quit the Central Bank but remained with MICEX. But another Central Bank deputy chief, Andrei Kozlov, kept both his job and his board seat.


"The Finance Ministry has already compromised so the commission should relent," MICEX spokesman Vadim Yegorov said. "After all, shareholders have the right to be represented on the board of directors."


The ministry and the Central Bank together own approximately 7 percent of MICEX, he said.


MICEX has published open letters in the Russian press, appealing to President Boris Yeltsin, the government and the Central Bank to intervene in the conflict.


An FSC spokeswoman said the commission was acting to "introduce more fair play and avoid potential conflict of interest."


About 50 companies, mostly blue chips, are listed on MICEX, which received its share trading license in 1996. Its trading volumes are much smaller than those on the Russian Trading System, an electronic equity trading network.


In October, the FSC suspended equity trading on MICEX for four days over the board issue.


Analysts said the FSC was pushing for Kozlov's dismissal from the MICEX board mainly because of a long-lasting feud with the Central Bank. The two have often quarreled over powers to regulate Russia's capital markets, and the FSC recently ruled a bond issue by the Central Bank was illegal. The Central Bank defiantly continued trading its bonds.


One market analyst said that this time, the FSC may have to relent. "[It] is a bit in the political wilderness right now," he said, speaking on condition of anonymity.


"The Central Bank is an aggressively independent nongovernmental organization," he said, adding that MICEX was not really violating FSC rules by keeping Kozlov on its board.


MICEX's non-equity-related plans for Dec. 1 remain on schedule. Six foreign currencies - the yen, the French and Swiss francs, the Finnish markka, the Italian lire and the pound sterling - will debut on its electronic trading system. At present, U.S. dollars, Deutsche marks and Ukrainian and Kazakh currencies are traded on the exchange.