Equity and Bond market
The total securities trading volume in 2016 was RUB 23.9 tn, up 16% year-on-year. Bond trading volume rose by 31% to RUB 14.6 tn, while that of the Equity Market amounted to RUB 9.3 tn, 1% less than in 2015. Bond issuance increased by 91% to RUB 5 tn, of which OFZs accounted for RUB 1.1 tn (up 70%) and corporate and regional bonds for RUB 3.9 tn (a two-fold increase). In 2016, total equity market capitalisation rose by 31%, reaching RUB 37.8 tn (USD 627.5 bn).
The reporting year saw the launch of a variety of new bond instruments, which boosted market liquidity. In particular, the shortest-term (overnight) bonds kicked off at the end of October. By year-end, 49 issues of such bonds were placed (for a total of RUB 1.4 tn).
Another new type of bonds – Russian law-governed foreign currency bonds – appeared on the market as an alternative to borrowing in global markets. In 2016, three issuers offered foreign currency bonds worth a total of USD 1.4 bn.
The Exchange saw a large number of registrations and placements of bonds as part of exchange-traded bond programmes, which make access to the debt market considerably simpler. During the year, the Exchange registered 71 programmes of 67 issuers worth a total of RUB 11.1 tn, and, as part of these programmes, 128 issues of exchange-traded bonds with a total par value of RUB 4.43 tn. There were also 91 offerings with a total par value of RUB 2.3 tn.
In addition, Moscow Exchange continued to launch new ETFs, of which there are 12 today. In March, the Exchange launched its first ETF on the RTS Index. During the year, total ETF trading volumes increased more than threefold to RUB 9.8 bn.
In July, USD-denominated shares of eight ETFs were admitted to trading in the negotiated trades mode with settlement in USD.
In 2016, Moscow Exchange continued to improve its technology to facilitate trading by market participants and their clients.
A shared registration system was introduced, allowing for intraday batch registration of clients. The new technology simplified trading member registration and reduced the time it takes investors to join the Equity and Bond Market.
Opening and closing auctions have new order types for USD-denominated instruments, offering investors new trading opportunities.
The Exchange implemented an automated solution to developing an exchange-traded bond programme, which saves issuers a significant amount of time in preparing the required documentation.
In 2016, to support OFZ trading, Moscow Exchange developed a trading technology to control the exchange of bond pools (basket for basket). September saw eight amortised OFZ issues (OFZ-AD) exchanged for three issues of fixed-rate coupon OFZs (OFZ-PD), which boosted the liquidity of government securities.
Transfer of Eurobonds to T+2 Settlement
As of 25 January 2016, USD-denominated Eurobonds could be traded partially collateralised with deferred settlement. Transfer of Eurobonds to the Т+2 trading mode boosted their liquidity and enabled trading participants to use other assets as collateral for Eurobond transactions. As of year-end, Eurobond trading volumes jumped twentyfold versus 2015.
Moscow Exchange continued to grow the retail investor market. At the end of 2015, private investors were allowed to open brokerage accounts remotely using the Unified System for Identification and Authentication (USIA) and the Interagency Electronic Interaction System (IEIS). These technologies facilitate the registration of new clients, encouraging private investors to open more accounts in the Russian Equity and Bond Market, including individual investment accounts.
In 2016, Moscow Exchange increased the share of private investors by 9.6% to 1.1 million, with the share of active clients who made at least one transaction during the year growing by 42% to 293,900.
By year-end 2016 investors had opened a total of 195,200 individual investment accounts (versus 88,900 accounts as of year-end 2015). In January 2017, the number of individual investment accounts exceeded 200,000.
Around 100 brokerage and investment management companies opened individual investment accounts for their clients. Over 35% of all these accounts are held by new clients with no experience in the securities market.
Innovation and Investment Market
In 2016, the total trading volume on Moscow Exchange’s Innovation and Investment Market (IIM) increased 3.4 times year-on-year to RUB 187.1 bn. The MICEX Innovation Index (MICEXINNOV) rose 58.7% to 386.92.
The IIM was established in 2009 at the initiative of Moscow Exchange and RUSNANO to facilitate investments primarily in small and medium-sized innovative Russian businesses.
The IIM’s liquidity gained ground in part thanks to favourable legislative changes and tax incentives. Amendments to the Russian Tax Code that entered into force on 1 January 2016 mean personal income tax and corporate income tax will no longer be levied on income from selling Russian equities and bonds or on investment units issued by innovative and high-tech businesses, provided the investor holds them continuously for at least one year.
The Industrial Development Fund (IDF) and Moscow Exchange signed an agreement to promote the Russian high-tech sector by providing companies access to capital markets. For example, the IDF is planning to offer leverage to MICEX’s IIM issuers on preferential terms, enabling them to pledge their securities and to issue bonds and subsidise coupon rates.
New Premium Segment
Moscow Exchange's Innovation and Investment Market features a premium segment for equities and bonds from innovative businesses. In 2017, the first issuers to be included in the new segment were United Aircraft Corporation and RUSNANO. The inclusion of securities in the IIM-Prime segment will increase investors' interest for the largest, most reliable and most promising innovative Russian companies.
MOEX continues to monitor the investment quality of issuers, and it removed six issuers from the IIM during the year due to non-compliance with requirements and disclosure standards.
In order to boost the IIM Development Committee’s expert capabilities, MOEX signed a contract in September to engage independent experts from the Skolkovo Foundation to screen IIM issuers.
To foster independent analytical coverage, MOEX issued two analytical reports for the investment community in 2016: FinTech Sector Overview (in partnership with Da Vinci Capital and EY as the vendor) and Trends in the Global and Russian Pharmaceutical Markets (in partnership with the IDF and Frost & Sullivan as the vendor).
Programme to Boost Liquidity
In 2016, a market-making programme was launched for promising IIM equities to increase liquidity and incentivise listing agents. The programme covers equities with the most weight in the MICEX Innovation Index basket.
Equity & Bond Listing
In 2016, Moscow Exchange continued to refine its Listing Rules by establishing additional requirements for issuers, listed securities and market participants, with a view to enhancing the quality of the securities admitted to trading.
In particular, Moscow Exchange amended the free float requirements for ordinary shares to be admitted to, and maintain a listing on, Level 2. However, there is an option for shares to be admitted to Level 2 without complying with the free float requirement if it is expected that the shares will be in compliance with the requirements upon completion of a planned offering.
There is no longer a limitation in respect of the number of directors who may be qualified as independent directors by a Board resolution. At the same time, Moscow Exchange introduced additional corporate governance requirements for any member of the board to qualify as an independent director, and requiring that the issuer disclose the relevant resolution on its website.
A new Ticket System web service was launched for issuers, who are now able to file their listing applications with the Exchange online, and can be informed of the status and progress of their ticket and application by reference to their ticket number, which is assigned automatically.
A new requirement has been introduced whereby any holders of unsecured bonds should appoint a representative.
Concessionary issuers whose bonds are admitted to the Level 1 List are now subject to an additional requirement requiring them to disclose information on concession arrangements and their efforts to implement those arrangements.
As of the end of 2016, 1,867 securities from 692 issuers were admitted to trading on Moscow Exchange, including 299 shares from 242 issuers and 1,268 bonds from 386 issuers. Level 1 and Level 2 lists now include 789 securities from 279 issuers.
In January 2017, Moscow Exchange completed the first stage of its listing reform launched in 2012. Issuers were granted a transition period of more than two years to bring their corporate governance systems into compliance with the new listing rules. After a review of issuers and their securities, 20 shares from 18 issuers were downgraded in their listing level as of 31 January 2017. Thus, the Level 1 List now includes 60 shares from 52 issuers, and the Level 2 List includes 35 shares from 33 issuers.
- The number of independent directors in companies from the top quotation list increased 1.5 times to 222 directors.
- The percentage of independent directors has risen from 23% to 32%.
- The number of issuers in the highest-level quotation list, which was 64 at the end of 2015, has now been reduced to 52. The Level 2 List contained 44 issuers in 2015, with 33 remaining as of now.
The second stage of the listing reform is to be completed in October 2017, after which equity issuers will have to comply with the expanded list of criteria for an independent director and expanded duties for corporate secretaries. This stage of the reform will come fully into force in January 2018.
The purpose of the listing reform is to improve the quality of corporate governance practices in public Russian companies and to enhance transparency and the investment appeal of the Russian equity market with a view to protecting the interests of both retail and institutional investors.
In late 2016, the Bank of Russia approved a list of credit rating agencies and credit ratings for the purposes of including securities in the Level 1 List. Based on this action by the regulator, Moscow Exchange, beginning from 31 January 2017, downgraded the listing level of the bonds of 13 issuers, since their rating was lower than required or was assigned by a rating agency not included in the Bank of Russia’s list of recognised credit rating agencies.
Expert Council on Listing
To ensure deeper analysis and improve the quality of securities upon their admission to trading and as they continue as listed companies, Moscow Exchange created a new consultation body called the Expert Council on Listing.
Consisting of 37 members, the Expert Council was approved at the end of 2016.
The Expert Council’s key function is to develop recommendations for Moscow Exchange on matters of listing, delisting and changing the listing level of securities. Decisions made by the Expert Council are not mandatory, but are intended to augment the Exchange’s expertise. Thus, this function has been reassigned from the Stock Market Committee, the Fixed-Income Securities Committee and Collective Investment Committee to the Expert Council on Listing. The procedure for issuing recommendations has also been changed: now, each specific matter will require a dedicated working group consisting of relevant experts.
Listing Development Strategy
At the end of 2016, Moscow Exchange adopted a Listing Development Strategy for the period to 2020. This document provides for certain step-by-step measures to improve Exchange procedures and to refine listing requirements.
Its key strategic objectives include:
- to improve the quality of listings on Moscow Exchange;
- to increase the number of new issuers and instruments;
- to develop technologies to automate communication between issuers and the Exchange.
In 2017, Moscow Exchange intends to pilot several stress tests in order to forecast issuers’ financial and economic stability, taking into account their industry profile.
Accumulated statistics from an index of violations committed by issuers in their disclosure obligations is to be applied to issuers at the stage of maintaining their securities in quotation lists (introduction of threshold index values).
New issuer-oriented services and IT tools will be developed and implemented. In particular, a form constructor for the second part of the resolution to issue Exchange-traded bonds is expected to be launched shortly (in addition to the existing form constructor for Exchange-traded bond programmes), as well as for the resolution to launch a standalone issue of Exchange-traded bonds. By the end of 2017, each issuer’s online account will feature a digital signature mechanism, thus reducing paper-based correspondence with the Exchange.