TMX Atrium: Moscow Exchange drives emergence of Moscow as an international financial center
Russia’s abundance of natural resources and the dramatic transformation of free market reforms during the 1990s have created a culture of growth and prosperity. A culture reinvigorated by entrepreneurialism and international commercial interest is set to ensure that Russia will continue to achieve its predicted growth targets.
Russia is clearly determined to compete with the international markets. Its own stock exchange, notably the Moscow Exchange, ripe with commodity-driven activity and interest, is taking significant and dramatic steps to make trading faster and easier for international trading participants.
The Moscow Exchange’s issuance of an IPO has put the exchange on an equal footing with other global exchanges and is a significant move that will help drive the market forward. The fact that Moscow Exchange chose to list purely on its own market and not list Depository Receipts on alternate markets is a clear indication that the Exchange is trying to bring liquidity and trading volume back to Moscow. In addition to this IPO activity, the much-anticipated move to a more international settlement cycle is better aligned with international brokerage firms’ trading and liquidity patterns which also suits the increasing number of Russian brokerage firms setting up operations outside Russia. The creation of the National Settlement Depository (NSD), the sole Central Securities Depository (CSD) in Russia, should result in reduced settlement time, lower cost of post trade, and reduced risk. In addition, CSD’s agreements with Euroclear and Clearstream offer non-Russia participants direct settlement of some of Russia’s most liquid traded assets.
Capital flows are being boosted into and out of Moscow, and we anticipate this will create a further explosion in activity on the Moscow Exchange. Similarly, firms such as Sberbank are changing the traditional role and face of the Russian investment bank, bringing it in line with other global entities.
Accessing and participating in the Russian capital markets, however, is not without its challenges. Cultural, language, infrastructure, and time zone differences need to be circumnavigated. The rewards will be attractive for those who do though, not only in anticipation of market opportunity, but also in taking advantage of Russia’s geographical advantage offering a mid-way point between London and East Asia which itself can offer considerable benefit to the industry.
When building an international trading community, it serves to examine other global markets as a development template. Competition has created fragmentation and history has shown that the emergence of dispersed liquidity clusters offered early signs of the growth witnessed in both the North American and European markets. These fragmented marketplaces attract new entrants and create innovative ways in which to take advantage of the trading opportunities on offer. Moscow will be no exception.
Nurturing the appetite and developing the trading infrastructure requires Russian-based expertise to support it. Over recent years, we have seen an increase in the numbers of Russian nationals returning home armed with knowledge gleaned from working in international financial organizations. Combined with the emergence of Russian nationals in leadership roles across Europe, this is proving to yet further instill global understanding, standards, commitment and collaboration.
I believe that TMX Atrium serves as a good barometer for financial services sentiment. We go where our customers want us to go. We build international routes on the demand from buy and sell side firms. Today, we are responding to ever-increasing demand and interest in helping our international customers access the Russian markets.
To further support the argument that the Russian markets are growing and ever-successful is the interesting observation that fertility rates are also on the increase. Demographic studies suggest that this is a well-respected indication of confidence in a booming, successful economy.
Some may say that as an emerging market, Russia has some way to go to attract international liquidity. I can’t help feel that Moscow markets aren’t emerging; they have emerged.