AFDC Workshop on Developing Corporate Bond Market




   Russian Corporate Bond Market:
     Architecture & Challenges


 ...
Intro


Russian corporate bond market background:
  started in 1999 after the 1998 Russian financial crisis
  build on the...
Scope of Contents

  Regulation
  Instruments
  Market Segmentation
  Infrastructure
  Market Participants
  Listing & Tra...
Regulation

Russian Securities Market Regulator:
  Federal Financial Markets Service of the
  Russian Federation (FFMS)
  ...
Russian Domestic Market Segmentation


Corporate bond domestic market segmentation:
  Exchange-traded market
    Including...
MICEX Group: Background

MICEX was established in 1992 as a
currency exchange in the form of a
closed-end joint-stock comp...
MICEX Group: Organization Chart

                                                                   MICEX                 ...
MICEX Stock Exchange:
     Shareholder Structure



   Banks                        Brokers

       69%
                  ...
MICEX Stock Market:
        Advanced Information Technologies

Two computer centers: main & back-up
Trading software X-str...
MICEX Stock Exchange:
           Core Russian Financial Infrastructure
                St.-Petersburg
                    ...
Instruments


Corporate bonds issuers:
  Financial institutions
  Private corporations
  Quasi-government companies
Types ...
Corporate Bond Market Size
              (MICEX Stock Exchange)


            Number of      Number of      Outstanding
  ...
Duration & Yield to Maturity of Corporate Bond Market



             Indicators of corporate bond market in Russia

14   ...
Corporate Bond Market Outstanding Volume
   Breakdown by Sector (October 2006)



                                        ...
Trading Members & Clients
                               (MICEX Stock Exchange)

          Trading members
               ...
Membership Requirements


Single admission to trading on all exchange-
traded stock markets (equities, corporate,
municipa...
MICEX Stock Exchange:
              Membership base


All major players of all types:
   banks
   investment companies
   ...
Members Participants - Global Players
       (MICEX Stock Exchange)

ABN AMRO Bank          ING BANK
BNP PARIBAS          ...
Russian Exchange-traded Corporate Bond Market
                 Composition


On-exchange corporate bond market:
  Listed c...
Listing Requirements
                                           (MICEX Stock Exchange)

            Requirement           ...
Russian Domestic Capital Market in Figures

In 2006 MICEX Stock                   Turnover of the Russian exchanges
Exchan...
MICEX Stock Exchange:
                                          Average Daily Turnover

bln USD
     4


  3.5
           ...
Corporate Bonds On-Exchange Trading
           (MICEX Stock Exchange)

Primary on-exchange market:
   Price auctions
   Co...
MICEX Stock Exchange:
                           Basic Market Features

Anonymous Market                      Negotiated D...
Corporate Bonds Primary Placements
                 (MICEX Stock Exchange)




                 Number of    Number of    ...
Primary Placements Parameters
                  (MICEX Stock Exchange)




                      Average Issue      Averag...
Corporate Bond Market Dynamics 2005-2006


               Indicators of corporate bonds m arket at MICEX SE


500         ...
Corporate Bond Secondary Market Parameters

               Turnover,     Number of    Average Daily    Average     Average...
Corporate Bond Market Liquidity Indicators
            (MICEX Stock Exchange)


Overall market velocity (10 month 2006) = ...
Market Concentration (October 2006):
TOP 5 Corporate Bonds’ Market Share (turnover)




                  8%   7%         ...
Corporate Bond Secondary Market Structure
       by Type of Participant (October 2006)

Market concentration (top 30 = 84,...
MICEX Stock Exchange:
       Basic Clearing & Settlement Data

Cash Obligations Netting Rate (2005):
  Banks - 73,6%
  Non...
Russian Repo Market


MICEX:
  100% of the Central Bank of Russia repo
  operations (CBR monetary policy operations with
 ...
MICEX Repo Market Milestones

1997 – Central Bank of Russia (CBR) started its repo
operations with federal bonds (GKO-OFZ)...
Repo Average Daily Turnover (Jan-June 2006)



MICEX Stock Exchange (MICEX SE):
   equities – RUR 9,0 bln
   corporate & m...
MICEX Repo Market Main Features


                          Repo with federal bonds      Repo with corporate &         Rep...
MICEX Stock Exchange:
             REPO in Bonds & Equities

REPO trading volume in        70
                            ...
MICEX SE Repo Trading Volumes
                (RUR bln)




300


200


100


  0
       2002      2003          2004     ...
MICEX SE Quarterly Repo Trading Volumes (RUR bln)



800

600

400

200

 0
      1 кв.   2 кв.    3 кв.   4 кв.    1 кв. ...
MICEX SE Repo vs Secondary Trading
            Volumes



 300


 200


 100


   0
       2002      2003          2004   ...
Number & Average Size
                                                             of Repo Deals


                       ...
Maturity Structure of Repo
                                   (Jan-June 2006)


                        Equities          ...
Number of Instruments in Repo




500

400

300

200

100

 0
      2002   2003         2004           2005       2006
   ...
Number of Repo Participants



300


200


100


  0
       2002      2003          2004           2005       2006
       ...
Repo Counterparties


                     Equities                                      Bonds


                         ...
Future Repo Market Developments

         Modes                                                              International...
Russian Corporate Bond Market Prospects

International harmonization & standardization (MiFID,
Prospectus Directive, Best ...
MICEX: Federal Bond Market

MICEX organizes primary and                     The volume of transactions
                   ...
MICEX: Market Value of Federal Bond Market

Market value of the federal bond   bln USD
                                   ...
Russian Sovereign Risk Reduction


           Dynamic of government bond yields in Russia and USA

14
12
10
 8
 6
 4
 2
 0...
Short-term nature and high dispersion of yields




       Source: investment company “Trust”
Two main types of bank bonds that differ by term and yield.
Depends on quality




      Source: investment company “Trust”
Among energy borrowers Gazprom and Lukoil are the best




         Source: investment company “Trust”
MosPrime Rate:
      Key Russian Money Market Indicator
Calculated by National Currency Association with EBRD support
from...
2%
                  3%
                       4%
                            5%
                                 6%
     ...
Outstanding volume of corporate debt
                                linked to MosPrime Rate
Миллиарды




               ...
Russian Corporate Eurobonds


                 Eurobonds in Russia (amounts outstanding)
bln. USD

100

  80

  60

  40

...
Contacts

Address:
   Bolshoy Kislovsky per. 13, Moscow, 125009, Russia
Phone:
   (+7 495) 234-48-11
Fax:
   (+7 495) 705-...
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Russian Corporate Bond Market Russian Corporate Bond Market ...

  1. 1. AFDC Workshop on Developing Corporate Bond Market Russian Corporate Bond Market: Architecture & Challenges Georgy Oksenoyt Chief Advisor MICEX Stock Exchange
  2. 2. Intro Russian corporate bond market background: started in 1999 after the 1998 Russian financial crisis build on the same fully automatic state-of-the-art technical platform as the Russian federal bond market backed up by the experience of creating Russian government securities market and by it’s robust clearing and settlement infrastructure now it is an exchange-traded and the most fast growing Russian securities market and may be the World’s biggest on-exchange corporate bond market
  3. 3. Scope of Contents Regulation Instruments Market Segmentation Infrastructure Market Participants Listing & Trading Clearing & Settlement Market Monitoring Information Disclosure Future Developments
  4. 4. Regulation Russian Securities Market Regulator: Federal Financial Markets Service of the Russian Federation (FFMS) Overall regulation under the Federal Law on the Russian Securities Market Central Bank of Russia: Banks participation & supervision on the Russian securities market Under the Federal Laws on the Central Bank of Russia and on the Russian Banking System
  5. 5. Russian Domestic Market Segmentation Corporate bond domestic market segmentation: Exchange-traded market Including corporate bonds traded on the government securities market OTC market Corporate bond market turnover breakdown (October 2006): MICEX Stock Exchange – 87,7% (in average - 70-80%) OTC – 12,3% (in average – 20-30%)
  6. 6. MICEX Group: Background MICEX was established in 1992 as a currency exchange in the form of a closed-end joint-stock company Shareholders: Central Bank of Russia Association of Russian Banks Sberbank RF Vneshtorgbank 12 other leading commercial banks In 2004 on the base of MICEX stock market the MICEX Stock Exchange (MICEX SE) was founded
  7. 7. MICEX Group: Organization Chart MICEX National Mercantile E-Stock Exchange • Technological support of • Trading in the MICEX projects commodities • Currency, derivatives & federal bonds markets • The State commodity • Clearing & IT services interventions in the grain market National Clearing Center National MICEX Settlement Depositary Center MICEX Stock Exchange House • Listing & Trading in Equities, • Settlement Depository Corporate & Regional Bonds • Settlement Bank Regional currency & stock exchanges St.-Petersburg Yekaterinburg Samara N. Novgorod Novosibirsk Rostov-on-Don Vladivostok
  8. 8. MICEX Stock Exchange: Shareholder Structure Banks Brokers 69% 69% MICEX MICEX SE 12% 19% 28% Central Bank of Russia
  9. 9. MICEX Stock Market: Advanced Information Technologies Two computer centers: main & back-up Trading software X-stream developed by Computershare (now - OMX) with similar systems at SWX, Shanghai SE, TSX Hard- & software complex is built on Hewlett-Packard UNIX-servers (over 80) MICEX TE currently processes: up to 500 000 orders per day up to 250 000 trades per day 11 telecom providers & more than 1500 trading workplaces connected International vendors of broker systems: GL Trade, ORC Software, ION Trading
  10. 10. MICEX Stock Exchange: Core Russian Financial Infrastructure St.-Petersburg Novosibirsk N. Novgorod Moscow Samara Rostov-on-Don Yekaterinburg Vladivostok
  11. 11. Instruments Corporate bonds issuers: Financial institutions Private corporations Quasi-government companies Types of corporate bonds: Book-entry form only All maturities (short, medium, long term) Coupon (fixed, index/inflation-linked), discount (zero-coupon), amortization bonds
  12. 12. Corporate Bond Market Size (MICEX Stock Exchange) Number of Number of Outstanding Issuers Issues Volume (traded) (traded) (traded), bln RUR 30.12.200 5 202 251 382,8 31.10.200 656,6 6 277 362 (24,3 bln USD)
  13. 13. Duration & Yield to Maturity of Corporate Bond Market Indicators of corporate bond market in Russia 14 800 13 700 12 600 11 500 10 400 9 300 8 200 7 100 6 0 01.07.03 01.07.04 01.07.05 01.07.06 Yeild weighted average, % duration, in days (secon. axis)
  14. 14. Corporate Bond Market Outstanding Volume Breakdown by Sector (October 2006) Financial Sector 21% 24% Telecoms Oil & Gas Transport Machinery 12% 7% Metallurgy Electric Power 7% Others 10% 9% 10%
  15. 15. Trading Members & Clients (MICEX Stock Exchange) Trading members Investors September 2006 575 (1st level) January 1, January 1, October 1, January 2006 546 2005 2006 2006 Total 117 382 134 440 239 650 January 2005 538 January 2004 517 Legal Entities 20 066 19 069 23 666 January 2003 500 Private January 2002 473 investors 96 529 109 714 207 110 January 2001 459 Non-residents 787 1 145 2 041 January 2000 366 Institutional 0 100 200 300 400 500 600 Investors 4 512 6 833
  16. 16. Membership Requirements Single admission to trading on all exchange- traded stock markets (equities, corporate, municipal & subfederal bonds, REPO markets) Russian residents (might be 100% foreign owned) Broker-Dealer License of FFMS Special categories of market participants: Market-makers Specialists
  17. 17. MICEX Stock Exchange: Membership base All major players of all types: banks investment companies internet brokers nonresidents institutional investors Over 80% of the total capitalization of Russian banking system & investment community
  18. 18. Members Participants - Global Players (MICEX Stock Exchange) ABN AMRO Bank ING BANK BNP PARIBAS Goldman Sachs Citibank J.P. Morgan Bank СOMMERZBANK International Credit Suisse First Morgan Stanley Bank Boston Bank Raiffeisenbank Deutsche Bank UBS Securities HSBC Others
  19. 19. Russian Exchange-traded Corporate Bond Market Composition On-exchange corporate bond market: Listed corporate bonds: List A1 - 22 issues (MICEX SE) List A2 – 24 issues (MICEX SE) List B – 63 issues (MICEX SE) List V (new) List I (innovation and growing companies) Corporate bonds admitted to on-exchange trading without listing – 293 issues (MICEX SE)
  20. 20. Listing Requirements (MICEX Stock Exchange) Requirement A1 Listing A2 Listing B Listing One person and/or his affiliated persons can own no more than 75% of the issuer’s common registered equities No more than 90% (only for shares) CS — 10 bln RUR CS — 3 bln RUR CS — 1.5 bln RUR Market value of the issue PS — 3 bln RUR PS — 1 bln RUR PS — 500 mln RUR Period of issuer’s existence 3 years 1 year not less than Break-even years 2 our of 3 last years — Volume of the bond issue 1 bln RUR 500 mln RUR 300 mln RUR open/interval — 10 mln RUR open/interval — 5 mln RUR Net assets of mutual fund closed — 50 mln RUR closed — 10 mln RUR Monthly trading volume for shares — 25 mln RUR for shares — 2.5 mln RUR for shares — 1.5 mln RUR for last 3 years for bonds — 10 mln RUR for bonds — 1 mln RUR for bonds — 500 thousand RUR for shares — 50 mln RUR for shares — 5 mln RUR for shares — 3 mln RUR for bonds — 25 mln RUR for bonds — 2.5 mln RUR for bonds — 1 mln RUR Monthly average volume for 6 months for mutual fund shares — for mutual fund shares — for mutual fund shares — 500 thousand RUR 300 thousand RUR 100 thousand RUR Issuer’s observance of the The formalized requests on observance of the Corporate Governance norms with confirmation documents Corporate Governance norms Compilation and disclosure the financial statements according to Financial statement — accounting standards IAS and US GAAP Information disclosure According to standards of FFMS
  21. 21. Russian Domestic Capital Market in Figures In 2006 MICEX Stock Turnover of the Russian exchanges Exchange’s share in the in 2003-2006, bln USD Russian exchange-traded stock market turnover is up to 90% (from June 2006) Jan-Sep 2003 2004 2005 2006 Volume of transactions in 2005 was 49,2% over 2004 MICEX / Volume of transactions in Jan- 99,1 151,2 225,6 500,7 MICEX SE Sept 2006 reached 500,7 bln USD which is: RTS 13,3 26,1 43,8 55,2 Group 3,4 times more than in Jan- Sept 2005 already 2,2 times more than the total 2005 turnover
  22. 22. MICEX Stock Exchange: Average Daily Turnover bln USD 4 3.5 3.37 3.40 3 3.12 3.17 2.5 2.61 2.65 2 2.19 1.94 1.75 1.5 1.30 1.31 1 1.20 1.22 0.84 0.85 0.71 0.74 0.75 0.77 0.5 0.58 0.49 0 Jan-05 May-05 Jan-06 May-06 Mar-05 Jun-05 Jul-05 Oct-05 Sep-05 Nov-05 Dec-05 Mar-06 Jun-06 Jul-06 Sep-06 Feb-05 Apr-05 Aug-05 Feb-06 Apr-06 Aug-06
  23. 23. Corporate Bonds On-Exchange Trading (MICEX Stock Exchange) Primary on-exchange market: Price auctions Coupon rate tenders Mixed (price + coupon rate) auctions Secondary on-exchange market: Anonymous (order-driven) market Negotiated deals mode (named orders, quote- driven market) Fully electronic markets World-wide Internet access
  24. 24. MICEX Stock Exchange: Basic Market Features Anonymous Market Negotiated Deals Market REPO Market Insruments - Equities, Corporate, Municipal & Subfederal Bonds Screen-Based Trading, Remote Terminals, Global Internet Access Order-Driven Market Quote-Driven Market Negotiated Deals Mode Locked-in-Trades Real Time Positions Monitoring (Worst Case Scenario) Multilateral Netting (without CCP) Rolling Settlement, Forced Settlement (T+0) DVP (3d Model, BIS) (Central Bank Money, intraday finality, same day funds, no zero-hour rule, without CSD) Mark-to-market, margin calls, - haircuts Pre-funding of assets Pre-funding of assets on the settlement date before the trade Settlements (RUR) Settlements (RUR) Settlements (RUR) "T+0" from "T+0" to "T+30" from "T+0" to "T+180"
  25. 25. Corporate Bonds Primary Placements (MICEX Stock Exchange) Number of Number of Placed Volume Issuers Issues (face (placed) (placed) value), bln RUR 2005 year 126 145 259,5 Jan-Oct 2006 160 165 335,7
  26. 26. Primary Placements Parameters (MICEX Stock Exchange) Average Issue Average Maturity, Size, bln. RUR days 2005 year 1,79 1302 Jan-Oct 2006 2,03 1404
  27. 27. Corporate Bond Market Dynamics 2005-2006 Indicators of corporate bonds m arket at MICEX SE 500 80 70 400 60 300 50 40 200 30 20 100 10 0 0 01.2005 04.2005 07.2005 10.2005 01.2006 04.2006 07.2006 10.2006 Emission, bln. RUB (secondary axis) Turnover of secondary market, bln. RUB (including REPO)
  28. 28. Corporate Bond Secondary Market Parameters Turnover, Number of Average Daily Average Average bln USD Trades Turnover, Deal Size, Daily bln USD mln USD Number of Trades 2005 year 41,7 192 931 168,0 0,22 778 Anonymous 4,8 136 294 19,3 0,04 550 NDM 25,2 37 031 101,7 0,68 149 Repo 11,6 19 606 47,0 0,59 79 Jan-Oct 2006 99,7 230 953 483,9 0,43 1221 Anonymous 7,6 146 724 37,1 0,05 712 NDM 43,8 41 437 212,6 1,06 201 Repo 48,2 42 792 234,2 1,13 208
  29. 29. Corporate Bond Market Liquidity Indicators (MICEX Stock Exchange) Overall market velocity (10 month 2006) = 4,09 times including: anonymous market velocity = 0,31 times NDM market velocity = 1,8 times The most liquid corporate bond issues (RZD, Gazprom, FSK EES): average daily bid-ask (closing) spreads = 9-12 b.p. (Oct 2006) average Intraday Volatility (max/min) = 10-20 b.p. (Oct 2006)
  30. 30. Market Concentration (October 2006): TOP 5 Corporate Bonds’ Market Share (turnover) 8% 7% РЖД об06 4% 4% ФСК ЕЭС об02 2% РЖД об07 УК ГидроОГК об01 75% РАФ об03 Прочие
  31. 31. Corporate Bond Secondary Market Structure by Type of Participant (October 2006) Market concentration (top 30 = 84,4%): top 10 participants – 44,1% of the market turnover next 10 – 18,8% next 10 – 11,5% Dealer trades – 41,2% including: Dealer-to-Dealer trades – 17,2% Dealer-to-Customer trades – 24% Customer operations – 58,8% including: nonresidents – 20,8% corporations – 29,5% trustees – 8,1% natural persons – 0,3%
  32. 32. MICEX Stock Exchange: Basic Clearing & Settlement Data Cash Obligations Netting Rate (2005): Banks - 73,6% Non-banks - 88,6% Total – 84,53% (86,4% in 2006) Corporate Bonds Netting Rate (2006): Gazprom Bonds A6 – 62,4% FSK EES Bonds 02 – 65,2% RZD Bonds 06 – 58% Cash Pre-deposits/Obligations (coverage) Rate (2005): Gross – 1,09 times Net – 5,87 times Cash Future/Total Obligations Rate (2006): 50-60%
  33. 33. Russian Repo Market MICEX: 100% of the Central Bank of Russia repo operations (CBR monetary policy operations with federal & CBR bonds, euro-, corporate & municipal bonds) 100% of the inter-dealer repo market with federal bonds (OFZ) MICEX Stock Exchange: > 80% of the total Russian repo market with equities, corporate & municipal bonds
  34. 34. MICEX Repo Market Milestones 1997 – Central Bank of Russia (CBR) started its repo operations with federal bonds (GKO-OFZ) at MICEX 2002 – start of repo at MICEX’ equity, corporate & municipal bond market Switch to modern repo technologies (according to ICMA/TMBA GMRA-2000): 2003 – MICEX federal bond market (for both repo with the CBR and inter-dealer repo markets) 2005 – MICEX Stock Exchange corporate & municipal bond market 2006 – MICEX Stock Exchange equity market
  35. 35. Repo Average Daily Turnover (Jan-June 2006) MICEX Stock Exchange (MICEX SE): equities – RUR 9,0 bln corporate & municipal bonds – RUR 7,3 bln MICEX: federal bonds (OFZ) & CBR bonds – RUR 9,5 bln All data refer to the 1st legs of repo only
  36. 36. MICEX Repo Market Main Features Repo with federal bonds Repo with corporate & Repo with equities (MICEX) municipal bonds (MICEX SE) (MICEX SE) International Standards GMRA-2000, classic GMRA-2000, classic Classic repo, term, repo, term, special repo, term, special special collateral, both collateral, cash-driven, collateral, both cash-and cash-and stock-driven, fixed rate stock-driven, fixed rate fixed rate Trading mode On-exchange, fully On-exchange, fully On-exchange, fully electronic, negotiated electronic, negotiated electronic, negotiated deals mode (named deals mode (named deals mode (named orders) orders) orders) Repo maturity 0-180 days 0-180 days 0-90 days Risk management Upon the agreement Upon the agreement Upon the agreement between counterparties: between counterparties: between counterparties: haircuts, fully automatic haircuts, fully automatic haircuts, fully automatic daily mark-to-market, daily mark-to-market, daily mark-to-market, margin calls notices and margin calls notices and margin calls notices, manufactured payments, manufactured payments, other risk management other risk management other risk management tools tools (blocking of tools collateral, limits)
  37. 37. MICEX Stock Exchange: REPO in Bonds & Equities REPO trading volume in 70 bln USD January-September 2006 65 reached 132,6 bln USD which 60 Bonds REPO is 5 times more than in 55 Stocks REPO January-September 2005 50 25,1 45 40 35 20,4 30 25 20 11,3 36,8 15 9,5 26,1 10 4,9 3,3 12,9 5 2,6 10,7 5,6 7,1 2,9 0 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006
  38. 38. MICEX SE Repo Trading Volumes (RUR bln) 300 200 100 0 2002 2003 2004 2005 2006 (1st Half a Year) Equities Bonds Total
  39. 39. MICEX SE Quarterly Repo Trading Volumes (RUR bln) 800 600 400 200 0 1 кв. 2 кв. 3 кв. 4 кв. 1 кв. 2 кв. 2005 2005 2005 2005 2006 2006 Bonds Equities
  40. 40. MICEX SE Repo vs Secondary Trading Volumes 300 200 100 0 2002 2003 2004 2005 2006 (1st Half a Year) Equities Bonds Total
  41. 41. Number & Average Size of Repo Deals Equities Bonds 100 12 000 30 40 000 С р е д н и й р а з м е р с д е л к и (т ы с . С р ед н и й р азм ер сд ел к и 35 000 80 10 000 25 С д е л к и (т ы с . ш т .) С д е л к и (т ы с . ш т .) 30 000 8 000 20 (т ы с . р у б .) 60 25 000 р у б .) 6 000 15 20 000 40 15 000 4 000 10 20 10 000 2 000 5 5 000 0 0 0 0 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 (полугодие) (полугодие) Количество сделок. Средний размер сделки. Количество сделок. Средний размер сделки.
  42. 42. Maturity Structure of Repo (Jan-June 2006) Equities Bonds 29% 31% 28% 27% 17% 23% 18% 27% Репо на 7 дней. Репо на 14 дней. Репо на 7 дней. Репо на 14 дней. Репо на 1 день. Другие даты исполнения РЕПО. Репо на 1 день. Другие даты исполнения РЕПО.
  43. 43. Number of Instruments in Repo 500 400 300 200 100 0 2002 2003 2004 2005 2006 (1st Half a Year) Equities Bonds Total
  44. 44. Number of Repo Participants 300 200 100 0 2002 2003 2004 2005 2006 (1st Half a Year) Equities Bonds Total
  45. 45. Repo Counterparties Equities Bonds 3% 2% 4% 0,03 % 17% 61% 37% 1% 40% 35% Inter-dealer Legal entities Inter-dealer Legal entities Nonresidents Private persons Nonresidents Private persons Local mutual & pension funds Local mutual & pension funds
  46. 46. Future Repo Market Developments Modes International Practice (estimated market share) * Trading Mode Anonymous repo (11-12%) Repo participants Tri-party repo (11,3%) Repo terms Open/Demand/Call repo Repo-to-maturity Roll (rollover) repo Repo rates Floating/indexed rate (10,5% рынка) Open rate (8,2%) Types of collateral General collateral (GC) (over 70%) Collateral management Collateral management/substitution of collateral/CTD (over 50% ) Manufactured payments Manufactured dividend (equity repo) Other modes Cross-currency repo, Flex repo, build-in SWAPs, Structured products * Market share estimations based on the 11th European Repo Market Survey by ICMA EU Repo Council (June 2006)
  47. 47. Russian Corporate Bond Market Prospects International harmonization & standardization (MiFID, Prospectus Directive, Best Execution, etc.) Full range of instruments (“Exchange-traded-only” short- term corporate bonds, RDR, ABS/MBS, SWAPs, derivatives, structured products, etc.) Simplifying issuance procedures Post-trade transparency (OTC trades reporting) Corporate governance Further infrastructure development (CSD, CCP, STP) Investor base improvement (lack of institutional investors) etc.
  48. 48. MICEX: Federal Bond Market MICEX organizes primary and The volume of transactions and the RGBI Index secondary market for federal points 125 bln USD 60 bonds & Bank Of Russia bonds Volume of transactions in 2005 120 50 has reached 101 bln USD, which is 2 times more than in 115 40 2004 110 30 Volume of transactions in Jan— Oct 2006 has reached 100.5 bln 105 20 USD, which is 1.7 times more than in Jan—Oct 2005 100 10 95 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2003 2004 2005 2006
  49. 49. MICEX: Market Value of Federal Bond Market Market value of the federal bond bln USD 30 market has grown 3.7 times during 2003-2005 25 Market value of the federal bond market in Jan—Oct 2006 has 20 increased by 25.8% to 31.7 bln USD 15 Share of OFZ-AD in the market value of the federal bond market 10 — 61.3% Turnover velocity of the federal 5 bond market in Jan—Oct 2006 was 64.4% 0 1H 2H 1H 2H 1H 2H 1H 2H 1H 2002 2003 2004 2005 2006
  50. 50. Russian Sovereign Risk Reduction Dynamic of government bond yields in Russia and USA 14 12 10 8 6 4 2 0 01.01.03 01.01.04 01.01.05 01.01.06 Yield of US Treasury 10Y Zero coupon yield in Russia 10Y
  51. 51. Short-term nature and high dispersion of yields Source: investment company “Trust”
  52. 52. Two main types of bank bonds that differ by term and yield. Depends on quality Source: investment company “Trust”
  53. 53. Among energy borrowers Gazprom and Lukoil are the best Source: investment company “Trust”
  54. 54. MosPrime Rate: Key Russian Money Market Indicator Calculated by National Currency Association with EBRD support from April 2005 (LIBOR-type, 3 month, Tom, 12:30 Moscow time). 8 quoting prime banks: ABN Amro West-East LB Vneshtorgbank Gazprombank MIB Saving Bank of Russia Citi Bank Raiffeizen Bank Firm quotes on the day of EBRD local bonds coupon calculation.
  55. 55. 2% 3% 4% 5% 6% 7% 01.05.2005 01.06.2005 01.07.2005 01.08.2005 01.09.2005 01.10.2005 01.11.2005 01.12.2005 01.01.2006 01.02.2006 01.03.2006 01.04.2006 01.05.2006 01.06.2006 01.07.2006 01.08.2006 MosPrime Rate Trend 2005-2006 01.09.2006 01.10.2006
  56. 56. Outstanding volume of corporate debt linked to MosPrime Rate Миллиарды Рост обязательств, привязанных к ставкам MosPrime Rate (публичные сделки) 45 Накопленный объем 40 7 обязательст в (руб.) 35 30 6 25 5 20 15 4 9 10 3 8 5 2 0 1 апр.05 май.05 июн.05 июл.05 сен.05 окт.05 ноя.05 дек.05 фев.06 мар.06 апр.06 май.06 июн.06 июл.06 сен.06 окт.06 авг.05 янв.06 авг.06 8-9) первые ипотечные кредиты в рублях с плавающей ставкой
  57. 57. Russian Corporate Eurobonds Eurobonds in Russia (amounts outstanding) bln. USD 100 80 60 40 20 0 1.6.02 1.6.03 1.6.04 1.6.05 1.6.06 Government eurobonds Corporate bonds
  58. 58. Contacts Address: Bolshoy Kislovsky per. 13, Moscow, 125009, Russia Phone: (+7 495) 234-48-11 Fax: (+7 495) 705-96-22 E-mail: info@micex.com Web: www.micex.ru www.micex.com

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