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. Last Updated: 07/27/2016

Costs of Trading Stocks, Bonds to Be Slashed

The government will slash costs for traders of shares and bonds by 50 percent or more before the end of next year, seeking to bolster investors' confidence and stimulate investment, Economic Development and Trade Minister German Gref said Tuesday.

Gref, the architect of President Vladimir Putin's economic policies, said the government must cut taxes on trades and simplify "contradictory" rules to make markets more like Western exchanges.

That should help increase ordinary Russians' investment in securities and boost the types of securities traded, he said.

"The reduction of transaction costs is one of our priorities," Gref told reporters after a government meeting. "If we can implement the measures we set out today then we hope to reduce transaction costs by two to 2 1/2 times by the end of 2004."

Financial markets will not develop "if there is any doubt about ownership rights," Prime Minister Mikhail Kasyanov told the same meeting.

"Companies are afraid to go deep into the financial markets because the rules of the game are not always predictable," he said.

The government is seeking to reassure investors after stocks and bonds dropped following the Oct. 25 arrest of former Yukos chief Mikhail Khodorkovsky and the subsequent freezing of a $13 billion stake in the oil major.

Putin met in the Kremlin with officials from banks and fund managers, including Citigroup, to discuss securities markets five days after Khodorkovsky's arrest.

"Any move to improve Russia's financial markets is greatly welcomed," said John Coast Sullenger, who manages $344 million in emerging market assets at Lombard Odier in Geneva.

Investors such as Mark Mobius, who manages $9 billion in emerging markets at Templeton Asset Management Ltd., have said Russian markets have too few securities, that small amounts of securities change hands and that trading lacks transparency.

Franklin Resources, which owns Templeton, was represented at the Oct. 30 meeting with Putin in the Kremlin, along with officials from Morgan Stanley, Goldman Sachs, Deutsche Bank and Fidelity. California-based Franklin Resources is the largest publicly traded U.S. mutual fund company by market value and had $314.3 billion under management at the end of October.

"I would like to repeat: For us it is obvious that the development of Russia's economy depends a lot on investment activity," Putin said at that meeting, according to a transcript of his comments supplied by the Kremlin. "The necessity of preserving the rights of investors and shareholders is recognized by the Russian business community."

"The Russian market is characterized by a high level of volatility and lack of stability," according to the Economic Development and Trade Ministry report on financial markets presented to the government Tuesday and posted on the government's web site.

The country has too few stocks and too many regulators, obstructing investment, Gref said. That has helped to dissuade many Russians from buying shares so that only about 17,000 citizens have invested in the stock market, he added.

There are six organizations that regulate the markets and they create sets of rules that are contradictory, meaning exchanges must breach some rules if they want to operate. Gref said the Economic Development and Trade Ministry and Central Bank will report by Feb. 1 on proposals to create a "mega-regulator."

The government is also considering legislation to insure individual deposits, which may encourage Russians to trust banks with their savings.

Deposit insurance must be in place before the government can move to reduce the state's 61 percent stake in Sberbank, held via the Central Bank, Gref said. That stake will probably not be reduced until after 2007, he said.

International investors and lenders have urged the government to simplify rules on trading securities and reduce state ownership of the banking sector to boost investment and lessen the country's dependence on commodities such as oil and metals.

Finance Minister Alexei Kudrin said late Monday that the government's "strategic orientation" is to divest itself of all bank holdings.

Kudrin also said that a program to exit the industry "must be prepared" in the near future, RIA Novosti reported. (Bloomberg, MT)