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. Last Updated: 07/27/2016

A Stock Exchange for the Small Alternative Investments on the RTS

The most popular trading ground for Russian companies with small and medium capitalization is AIM on the London Stock Exchange. Since 2000, more than 10 companies have placed their securities there, two this year alone.

But throughout this year, 15 prominent companies have launched IPOs in Russia, and smaller companies are looking to get in on the action.

For such companies a special trading floor is being created at the RTS. The alternative investment market RTS START is being created with the aim of increasing the number of securities traded on the Russian market and allowing companies with revenue of zero to 1.2 billion rubles and capitalization of zero to 3 billion rubles to place their shares.

Launching an IPO on the Russian market has its advantages. Preparation of an IPO takes less time. In Britain, the process of preparation and placement takes eight to 18 months, whereas in Russia it only takes three to 12 months.

Also, launching an IPO in Russia is less expensive. According to investment banks, placement in Russia is 1 1/2 to two times cheaper. Moreover, Russian legislation requires fewer documents for a placement to be made.

Another advantage for companies launching an IPO in Russia is brand recognition, which is unlikely to happen abroad.

The demand for IPOs placed in Russia exceeds the offer greatly. The well-recognized practice of price-formation on the Russian securities market gives excellent opportunities for capitalization growth, which increases the attractiveness of shares for investors.

Most foreign investors are also able to acquire Russian companies' securities in Russia.

As opposed to the London Stock Exchange, where AIM is an independent trading floor (that is, securities traded on AIM cannot be placed on the main trading floor of the LSE), RTS START is a segment of the RTS stock exchange. This means that both the clients and the companies can use the stock exchange's resources and potential. Securities can be traded on RTS START as well as on another segment of the RTS.

The main characteristic of RTS START is the obligatory presence of a market maker and an authorized financial consultant, or AFC. These will be professional securities market participants who have a license to provide broker or dealer services on the securities market. The market maker will be an RTS trade participant, and the AFC will receive the official status of financial consultant from the FCSM and will be accredited by the exchange.

The market maker will support quotations on a company's securities and display them for a certain period of time of a trading session. The parameters will be set by a signed contract between the company, the market maker and the stock exchange.

The AFC will monitor information disclosed by a company, estimate the capitalization of a company's securities listed and, in case of additional emission, sign prospectuses confirming the fullness and reliability of information disclosed.

The presence of these participants will allow companies with small capitalization to attract investors, and the presence of the AFC in particular will help small companies to reduce costs on hiring securities specialists within the company.

Securities listed on RTS START can also be included on, following appropriate listing procedure, the "B", "V" or "I" quotation lists. The inclusion of several quotation lists will allow the company to develop on the stock exchange on meeting all necessary requirements.

The lists available on RTS START actually have fewer limitations than quotation lists available for companies with larger capitalization and have fewer requirements to the corporate governance of a company.

When launching an IPO, companies can obtain consultations on securities placement, IPO scheme preparation and emission documents from the RTS stock exchange. In addition, the RTS helps to get securities included on quotation lists and admitted to trading on the open market. After the placement the stock exchange continues to cooperate with the company, supporting the listing and meeting the norms of corporate governance.

The RTS started working on the RTS START project last spring and it is expected to be up and running at the start of 2007.