By Irina Filatova
MICEX Group will make an offer to buy the RTS after it gets its own house in order, turning the rival stock exchange into a full subsidiary, a Central Bank official said Wednesday.
MICEX Group may exchange its own shares for a controlling stake in the RTS after finishing the asset consolidation that it started last year, said Sergei Shvetsov, head of the Central Bank’s department for financial markets. That means that it must first gain complete control over the MICEX exchange, stakes in which are owned by a range of other banks.
“MICEX has nothing to offer RTS without vertically integrating the MICEX system itself,” Shvetsov said, adding that amendments to current legislation were needed for MICEX Group to buy out the MICEX Stock Exchange. “Right now, it’s impossible,” he said.
Besides its stake in the MICEX Stock Exchange, MICEX Group also holds an 86.3 percent stake in the MICEX Clearing House, a 46.7 percent stake in the National Depositary Center, and 99.3 percent of the National Clearing Center.
A merger would not immediately mean a physical consolidation of the two exchanges, said Vladimir Milovidov, head of the Federal Financial Markets Service. He added that such a consolidation could follow in the future.
First it is necessary to allow securities depositaries to service both exchanges, which will “push the stock exchanges to discussing integration and requirements unification,” he said, adding that both the markets service and Central Bank are proposing such a change in regulations.
The MICEX Stock Exchange’s clients are currently served by the National Depositary Center, while the Depositary-Clearing Company serves the clients of the RTS. If the exchanges agree, their clients will be allowed to choose which depositary they want to work with, Shvetsov said at the MICEX 2010 forum.
Traders are optimistic about the new proposal, since it will make trading much easier, said Karen Isadzhanyan, a client manger at Rye, Man & Gor Securities.
Many securities trading on the RTS have become rather illiquid since the most liquid securities have been transferred to MICEX, Isadzhanyan said. That’s why clients of the RTS will feel more comfortable after the new plan comes into force.
Merging the two stock exchanges is a key step toward making Moscow an international financial center, since it would help to attract more foreign investors to Russia’s financial market, he said.
Government and business leaders have been pushing for reforms that would transform Moscow into a global financial center, along the lines of London, Singapore or New York. They are hoping that liberalized financial laws and robust institutions will attract foreign investors to Russia.
First Deputy Prime Minister Igor Shuvalov reiterated such hopes at a meeting Tuesday with representatives of investment banks.
He said that while efforts to create an international financial center had slowed down because of the economic crisis, doing so was still a priority.
Russia would provide a number of advantages for such a center, including liberal tax legislation, well-educated employees and an opportunity to invest in big infrastructure projects, market players said.