Alexei Panich, an expert with the MICEX futures department, said the exchange would launch futures trade in March, and options in May. He said the move is designed to attract larger Russian banks, whose speculative investment opportunities on organized markets are presently limited to hard currency, T-bills and interbank credits.
"Most banks have nowhere to go," he said. "The present futures market is too small for banks to participate, while a liquid options market is next to nonexistent."
Russia's largest dollar futures venue is located at the Moscow Commodities Exchange, which trades about $35 million a day. But the MCE focuses on small and middle-sized banks, shunning larger banks for fear they would control trade.
Mikhail Kuznetsov, a securities dealer with Alfa-Bank who has been trading dollar futures at the MCE for a year and a half, said the volume of trade there is too small for his bank.
"At the MCE one dealer can only have about $10 million in open positions," he said. "We would like to have about $100 million." He added that when the MICEX launched trading he would leave the MCE.
But Vyacheslav Sychov, the MCE's vice-president, was not worried about the MICEX's plans.
"The MICEX is not a competitor for us," he said. "We occupy different niches in the market."
The MICEX, which was founded in 1992 as a hard-currency exchange, has seen its ruble-dollar trade decline over the past year as banks have opted to trade privately among themselves. A 0.1 percent city tax imposed on the exchange's turnover in March, and stricter Central Bank regulations introduced after the ruble's "Black Tuesday" crash in October, have made the official exchange even less attractive.
Panich said the MICEX already has about 110 applications from banks and brokerages for 70 seats on the new exchanges, and added that about 60 banks from St. Petersburg, Novosibirsk and Vladivostok will soon be linked to the MICEX trading. He said participants must have banking licenses from the Central Bank; brokerages will trade through banks with seats on the exchanges.
The MICEX plans to start by trading three-month dollar futures with a standard lot of $5,000, gradually expanding up to nine months. Panich said officials at the MICEX are still working out the exchange's commissions and details of T-bill futures trading.
Participants will provide a deposit of 5 percent of each contract and contribute up to 2 percent of each contract to a guarantee fund.
If a contract is not fulfilled, compensation will be paid out from the guarantee fund and deposits. The defaulter would automatically be expelled from the exchange.
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