MICEX Group Derivatives MICEX Group Derivatives Market Market

Directing the Derivative Market Directing the Derivative Market BoomBoom – –

Trends and New ProjectsTrends and New Projects

Zhanna SmirnovaZhanna Smirnova

MICEX Vice PresidentMICEX Vice President

World exchange derivatives market: World exchange derivatives market: trendstrends

World exchange derivatives market trading value

0

250

500

750

1000

1250

1500

1750

2000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Val

ue

of t

rad

ing,

US

D t

rilli

on

Futures Options

World exchange derivatives market open interest value

0

10

20

30

40

50

60

70

80

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Op

en in

tere

st v

alu

e, U

SD

tri

llion

Futures Options

World exchange derivatives market: World exchange derivatives market: productsproducts

World trading valueproduct structure in 2006

(Total value - 1,809.5 USD trillion)

EQ9,8%

FX0,9%

IR89,3%

World open interestproduct structure in 2006 (Total value - 70.5 USD trillion)

FX0,3%

IR88,8%

EQ10,9%

World exchange derivatives market open interest value growth (to 1996, %)

0%

280%

560%

840%

1120%

1400%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Interest rate Currency Equity index

World exchange derivatives market trading value growth (to 1996, %)

0%

200%

400%

600%

800%

1000%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Interest rate Currency Equity index

Regional structure of the trading value

North America

59%

Europe32%

Asia and Pacific8%

Other1%

Regional structure of the open interest

Other1%

Asia and Pacific6%

Europe33%

North America

60%

World exchange derivatives market: World exchange derivatives market: regionsregions

Russian derivatives market: history and Russian derivatives market: history and factsfacts

1990s: Start as it was… 2000s: And what’s now

October 1992

Products (by underlying)

Derivatives trading starts in Russia

1994 1996 1998 2001 2006

GKO

Stocks,indices

Stock indices

FX

STIR

2002

CM

Exchanges 1992 – Moscow Commodity Exchange No activity since 1998 1993 – Russian Exchange No activity since 1998 1994 – Moscow Central Stock Exchange No activity since 1998 1994 – The Exchange “Saint-Petersburg” Till FORTS foundation 2001 1996 – MICEX Suspended 1998;

Restarted 2000 2000 – SPCEX Trading now 2001 – FORTS (based on SPBEX market) Trading now

Russian derivatives market: dynamics of Russian derivatives market: dynamics of growthgrowth

Russian derivatives market trading value

0,00

0,15

0,30

0,45

0,60

0,75

0,90

1,05

Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

Dai

ly a

vera

ge v

alu

e of

tra

din

g(U

SD

bil

lion

)

Russian derivatives market open interest

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

Op

en i

nte

rest

val

ue

(US

D b

illi

on)

MICEX cash markets value of trading

0

250

500

750

1000

1250

1500

1750

2000

2000 2001 2002 2003 2004 2005 2006

USD billion

Currency market Government bonds market Corporate securities market

15-times growth of the MICEX cash markets

Russian derivatives market: underlying Russian derivatives market: underlying dynamicsdynamics

MICEX RTS SPCEX

SPBEX

FX futures + + + +FX options + +STIR futures + +STIR options +LTIR futures Q3 2007 +Stock Index futures Q2 2007 +Stock Index Options Q3 2007 +EQ futures 2008 +EQ options Q4 2007 +CM futures Q3 2007 + + +CM options + +

Russian derivatives market: traded Russian derivatives market: traded instrumentsinstruments

Value of trading in 2006 by underlying

FX25,8%

EQ72,6%

CM0,8%

IR0,9%

Average open interest in 2006 by underlying

FX57,0%

CM0,5%

IR2,6%

EQ39,9%

Value of trading in 2006 by exchanges

MICEX24,7%

RTS74,6%

SPBEX0,4%SPCEX

0,3%

Average open interest in 2006 by exchanges

MICEX53,6%

SPBEX0,2%

SPCEX2,6%

RTS43,7%

Russian derivatives market: structureRussian derivatives market: structure

RegulativeAbsence of special acts: derivative

instrument market law, clearing and

netting law, etc.;Regulation vacuum of OTC cash-settled

transactions;Tax problems for individual investors;Collateral & bankruptcy law

Infrastructure

Low clearing houses capitalization

Educational

Generally low educational level;Lack of special educational programs,

seminars, etc.

Russian derivatives market: barriers on the Russian derivatives market: barriers on the way upway up

√ solved

√ solved

Russian derivatives market: potential of Russian derivatives market: potential of growthgrowth

Average annual exchange derivatives market trading volume growth, 2004-06

34,93%

85,77%

-2,19%

27,92%

97,66%

3,29%

51,59%

16,22%

16,78%

153,88%

23,95%

14,37%

-20% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180%

USA

Western Europe

Japan

Australia

Brazil

Russia

India

China

Mexico

Korea

Hungary

Poland

Derivatives / cash financial instruments trading value ratio (organized markets), times

0,071,01

30,84

15,76

1,382,12

4,70

0,00

3,00

6,00

9,00

12,00

15,00

18,00

21,00

24,00

27,00

30,00

33,00

North America Western Europe India China Poland Hungary Russia

Russian derivatives market: potential of Russian derivatives market: potential of growthgrowth

Russian derivatives market: potential of Russian derivatives market: potential of growthgrowth

Exchange derivatives market trading value / GDP ratio, times60,26

25,77

2,03 1,29 0,72 0,25 0,24 0,170,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

North America WesternEurope

India Mexico China Poland Hungary Russia

Exchange

Clearing organization

Exchange

Clearing organization

MICEXMICEX

SettlementorganizationSettlement

organization

MICEX SHMICEX SH

Remote access via Internetfor MICEX derivatives market participants

and their clients

SCIEXSCIEX

NCSEXNCSEX

URCEXURCEX

SICEXSICEX

MICEX derivatives market: infrastructureMICEX derivatives market: infrastructure

MICEX derivatives market members (as of 01.05.07)

All GCM ICM ACM GTM ITM

182 28 72 20 48 14

MICEX derivatives market: membershipMICEX derivatives market: membership

General ClearingMembers

Individual ClearingMembers

CLientsTrading (non-clearing)

Members Clients

ClientsBanks

Non-banks

MICEX Derivatives MarketMICEX Derivatives Market

MICEX derivatives market: membershipMICEX derivatives market: membership

Number of MICEX derivatives market members

150

155

160

165

170

175

180

185

01.10.04 01.01.05 01.04.05 01.07.05 01.10.05 01.01.06 01.04.06 01.07.06 01.10.06 01.01.07 01.04.07 01.07.07

MICEX derivatives market: market leaders MICEX derivatives market: market leaders

Position by turnover (Jan-May

2007)

MICEX Derivatives Market participants

Membership Category

1 OJSCo SCB "Metallinvestbank" GCM

2 CJSC IMB GCM

3 JSB Gazprombank (CJSC) GCM

4 JSC Bank of Khanty-Mansiysk ICM

5 Evrofinance Mosnarbank GCM

6 OJSC Bank "Petrocommerce" GCM

7 ZAO Citibank GCM

8 JSC Vneshtorgbank GCM

9 ZAO Standard Bank ICM

10 Sberbank GCM

MICEX GroupMICEX GroupDerivativesDerivatives

marketmarket

€€/$/$€€/$/$ EUR/USDEUR/USD

€€€€ EUR/RUBEUR/RUB

$$$$ USD/RUBUSD/RUB

FX futuresFX futures::

o/no/no/no/n Overnight MosIBOR Overnight MosIBOR

33-M-M33-M-M 3 3 month MosPrime Rate month MosPrime Rate

STIR futuresSTIR futures::

MICEX derivatives market: instrumentsMICEX derivatives market: instruments

Forthcoming:Forthcoming:

MICEXMICEXMICEXMICEX MICEX Index futuresMICEX Index futures

MICEX USD/RUB futures: trading statisticsMICEX USD/RUB futures: trading statisticsMICEX USD/RUB futures: trading statistics

0,0

1,0

2,0

3,0

4,0

5,0

6,0

Jul-

04

Sep

-04

Nov

-04

Jan-

05

Mar

-05

May

-05

Jul-

05

Sep

-05

Nov

-05

Jan-

06

Mar

-06

May

-06

Jul-

06

Sep

-06

Nov

-06

Jan-

07

Mar

-07

May

-07

Mon

thly

vol

um

e of

tra

din

g (m

ln c

ontr

.)

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

Mon

th-e

nd

op

en in

tere

st (

mln

con

tr.)

Monthly volume of trading

Month-end open interest

Open interest distribution of USD/RUB futures series, end-of-May'07

Mar-0810,3%

Aug-077,0%

Jul-0713,1% Nov-07

2,8%

Oct-078,9%

Dec-0724,2%Jun-07

17,4%

Sep-0716,4%

2 666 190contracts

Open interest distribution of USD/RUB futures series, end-of-May'07

Mar-0810,3%

Aug-077,0%

Jul-0713,1% Nov-07

2,8%

Oct-078,9%

Dec-0724,2%Jun-07

17,4%

Sep-0716,4%

2 666 190contracts2 666 190contracts

Turnover distribution of USD/RUB futures series,Jan'07-May'07

12 months13,0%

3 months15,8%

2 months17,5%

6 months9,5%

5 months3,0%

9 months6,0%

1 month25,1%

4 months10,1%

21 234 643contracts

Turnover distribution of USD/RUB futures series,Jan'07-May'07

12 months13,0%

3 months15,8%

2 months17,5%

6 months9,5%

5 months3,0%

9 months6,0%

1 month25,1%

4 months10,1%

21 234 643contracts

21 234 643contracts

MICEX USD/ RUB futures: daily average bid-ask spread

0,01

0,02

0,03

0,04

0,05

0,06

07.0

7.06

14.0

7.06

21.0

7.06

28.0

7.06

04.0

8.06

11.0

8.06

18.0

8.06

25.0

8.06

01.0

9.06

08.0

9.06

15.0

9.06

22.0

9.06

29.0

9.06

06.1

0.06

13.1

0.06

20.1

0.06

27.1

0.06

03.1

1.06

10.1

1.06

17.1

1.06

24.1

1.06

01.1

2.06

08.1

2.06

15.1

2.06

22.1

2.06

29.1

2.06

05.0

1.07

12.0

1.07

19.0

1.07

26.0

1.07

02.0

2.07

09.0

2.07

16.0

2.07

23.0

2.07

02.0

3.07

09.0

3.07

16.0

3.07

Spre

ad (

RU

B)

1 month 3 months 6 months 12 months

MICEX USD/ RUB futures: average spread volume and its duration within trading session

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

07.0

7.20

06

14.0

7.20

06

21.0

7.20

06

28.0

7.20

06

04.0

8.20

06

11.0

8.20

06

18.0

8.20

06

25.0

8.20

06

01.0

9.20

06

08.0

9.20

06

15.0

9.20

06

22.0

9.20

06

29.0

9.20

06

06.1

0.20

06

13.1

0.20

06

20.1

0.20

06

27.1

0.20

06

03.1

1.20

06

10.1

1.20

06

17.1

1.20

06

24.1

1.20

06

01.1

2.20

06

08.1

2.20

06

15.1

2.20

06

22.1

2.20

06

29.1

2.20

06

05.0

1.20

07

12.0

1.20

07

19.0

1.20

07

26.0

1.20

07

02.0

2.20

07

09.0

2.20

07

16.0

2.20

07

23.0

2.20

07

02.0

3.20

07

09.0

3.20

07

16.0

3.20

07

Ave

rage

bid

-ask

spre

ad d

ura

tion

(% o

f tr

adin

g s

essi

on)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Ave

rage

bid

-ask

spre

ad v

olum

e per

futu

res

seri

es (

contr

.)

Average spread duration Average spread volume

MICEX USD/RUB futures: liquidityMICEX USD/RUB futures: liquidity

USD/RUB futures: domestic & international USD/RUB futures: domestic & international marketmarket

Trading value (RUB),Jan'07-Apr'07

MICEX97,5%

RTS2,4%

SPCEX0,1%

Open interest value (RUB),end-of-Apr'07

SPCEX0,1%

RTS1,3%

MICEX98,6%

Daily average turnover (USD mln)

0

40

80

120

160

200

240

280

320

Oct

-04

Jan

-05

Ap

r-05

Jul-

05

Oct

-05

Jan

-06

Ap

r-06

Jul-

06

Oct

-06

Jan

-07

Ap

r-07

MICEX СМЕ RTS

Month-end open interest (USD bln)

0,0

0,4

0,8

1,2

1,6

2,0

2,4

2,8

3,2

Oct

-04

Jan-

05

Apr

-05

Jul-0

5

Oct

-05

Jan-

06

Apr

-06

Jul-0

6

Oct

-06

Jan-

07

Apr

-07

MICEX СМЕ RTS

STIR futures: trading statistics

0

20

40

60

80

100

120

140

May

-06

Jun-

06

Jul-

06

Aug

-06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb

-07

Mar

-07

Apr

-07

May

-07

Mon

thly

vol

um

e of

tra

din

g (c

ontr

.)

0

10

20

30

40

50

60

70

80

90

Mon

th-e

nd

op

en in

tere

st (

con

tr.)

Monthly volume of trading

Month-end open interest

MICEX STIR futures: trading statisticsMICEX STIR futures: trading statistics

MICEX 3-m MosPrime Rate futures: daily average bid-ask spread

0,10%

0,15%

0,20%

0,25%

0,30%

0,35%

0,40%

29.09.06 14.10.06 29.10.06 13.11.06 28.11.06 13.12.06 28.12.06 12.01.07 27.01.07 11.02.07 26.02.07

Spre

ad

1 month 2 months 3 months

Long interest rate products

Futures-type settlement options M

arke

t-mak

ing

prog

ram

s

Aut

omat

ic q

uotin

g

Com

bina

tion

trad

ing

Wid

enin

g trad

ing

opportuniti

es

Incr

easi

ng liquid

ity

New

type

s of

ord

ers

Synthetic products

MICEX FX & STIR futures: nearest plansMICEX FX & STIR futures: nearest plans

MICEX equity derivatives: firm basisMICEX equity derivatives: firm basis

Exchange MICEX SEClearing house

MICEX Settlement house MICEX SH

MICEX SE derivatives

market

Technical Center MICEX

Liquidunderlying

cashmarkets of

MICEX Group

High-endtrading,clearing

and settlementIT solutions

Strong andeffectivefinancial

safeguardssystem

Clear marketrules and

simpletransactionprocedures

MICEX SE derivatives market: coming MICEX SE derivatives market: coming instrumentsinstruments

Single

stock

options

Bond-

relate

d

futu

res

options

MICEX

Index

futu

res

options

Bond-

relate

d

futu

res

MICEX

Index

futu

res

…

Proposed in

struments

list

Proposed in

struments

list

«Blue chips»

CapitalizationCapitalization

Sectoral

MICEX IndexMICEX IndexMICEX IndexMICEX Index

MICEX O&GMICEX O&GMICEX O&GMICEX O&G

MICEX PWRMICEX PWRMICEX PWRMICEX PWR

MICEX TLCMICEX TLCMICEX TLCMICEX TLC

…………

MICEX10 indexMICEX10 indexMICEX10 indexMICEX10 index

MICEX Large CapsMICEX Large CapsMICEX Large CapsMICEX Large Caps

MICEX Middle CapsMICEX Middle CapsMICEX Middle CapsMICEX Middle Caps

MICEX Small CapsMICEX Small CapsMICEX Small CapsMICEX Small Caps

MICEX indices familyMICEX indices family

80%80%80%80% capitalization

9595%%9595%% trading value

30303030 shares

10101010 sectors

RFRFIndex Index

InvestmentInvestmentfundsfunds

EUEUUCITSUCITS

requirementsrequirements

USAUSABroad-basedBroad-based

securitysecurityindexindex

3 3 monthmonth3 3 monthmonth watch list

6 month6 month6 month6 month calculation base

15%15%15%15% max issuers’ weight

5%5%5%5% min free-float

Capitalization

Liquidity

Weighted price of 10 last trades

ComplianceComplianceWithWith

regulationsregulations

StructureStructure

MICEX Index: diversification and liquidityMICEX Index: diversification and liquidity

On average 5.5 ticks per second

CalculationCalculation

2,57%

0,41%0,25%

0,34%

5,61%10,11%11,62%15,55%

53,54%

Oil and Gas Banks Metallurgy

Energy IT and mass media Telecommunication

Machinery Transport Consumer

MICEX Index: economic sectorsMICEX Index: economic sectors

MICEX Index structure reflects exchange equity market distribution

MICEX Index structure reflects exchange equity market distribution

LSE25%

MICEX SE63%

RTS7,0%

DBAG2,3%

NYSE3,2%

MICEX IndexMICEX IndexRTSRTS

FTSE Russia IOB Index

FTSE Russia IOB Index

……

RTXRTX

DJ Titans

Russia…

DJ Titans

Russia…MSCI

Russia

MSCI Russia

DAXglobal Russia

DAXglobal Russia

Russian equity market in 2006: how many indices the market needs?

Russian equity market in 2006: how many indices the market needs?

MICEX Index: Russian EQ market MICEX Index: Russian EQ market benchmarkbenchmark

MICEX Index: key indicator of Russian EQ MICEX Index: key indicator of Russian EQ marketmarket

National exchange equity market turnover

MICEX SE (MICEX Index) - 95,85%MICEX SE (the rest stocks) - 2,47%RTS Classic Stock Market -1,47%RTS Exchange Stock Market - 0,08%SE "Saint-Petersburg" (Gazprom stocks) - 0,13%

Russian equity market in 2007: strengthening positions of MICEX SE Russian equity market in 2007: strengthening positions of MICEX SE

MICEX Index: basis for index investment MICEX Index: basis for index investment fundsfunds

Index funds net asset value

MICEX Index - 93,12% RTS Index - 6,28% Other Indices - 0,61%

Russian collective investments in 2007: investors choose MICEX Index Russian collective investments in 2007: investors choose MICEX Index

100%

300%

500%

700%

900%

Dec

-05

Jan-

06

Feb

-06

Mar

-06

Apr

-06

May

-06

Jun-

06

Jul-

06

Aug

-06

Sep-

06

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb

-07

Mar

-07

MICEX Index funds All funds

Net asset value growthNet asset value growthMICEX Index fundsMICEX Index funds

MICEX Index: basis for index investment MICEX Index: basis for index investment fundsfunds

2121FormedFormed

Under formationUnder formation 22

Total numberTotal number 2828

RegistrationRegistration 55

MICEX Index futures: analogies from MICEX Index futures: analogies from abroadabroadCountry Key index

(national currency)

Futures & options

availability

Key index (foreign

currency)

Futures & options

availability

Brazil IBovespa;IBrX-50 (BRL) (BRL)

Hong Kong

Hang Seng Index (HKD) (HKD)

India S&P CNX Nifty (INR) (INR)

S&P CNX DEFTY (USD)

Korea KOSPI 200 (KRW) (KRW)

Malaysia KLCI(MYR) (MYR)

FTSE Bursa Malaysia 100 Index (USD)

Mexico IPC Index(MXN) (MXN)

MICEX Index: analogies from abroadMICEX Index: analogies from abroad

Russian currency is a stable one – there is no need to use another

Russian currency is a stable one – there is no need to use another

Foreign exchange rates dynamics

40%

50%

60%

70%

80%

90%

100%

110%

Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06

BRL/USD MXN/USDINR/USD IDR/USDJPY/USD RUB/USD

MICEX Index futures: contract MICEX Index futures: contract specificationspecification

Underlying MICEX Index

Trading Unit RUB 20 times MICEX Index

Contract Months2 nearest months in the March quarterly

cycle:Mar, Jun, Sep, Dec

Final Settlement Day The 15th calendar day of the contract month

Settlement Method Cash-settled

Price Quoting MICEX Index times 100

Minimum Price Fluctuation

25 price points or RUB 5 per contract

Final Settlement Price

MICEX Index determined on the final settlement day times 100

Fee RUB 1 per contract

MICEX Derivatives Market financial MICEX Derivatives Market financial safeguardssafeguards

Risk management Risk management system system fundamentals:fundamentals:

daily mark-to-market proceduresand calculation of variation margin

gross-margining and collateral(performance bonds) prepayment

compulsory liquidation of insolventmembers’ positions

MICEX Reserve Fundaccounts for RUB 500 million

Overall reliability and stability of

MICEX derivative market is

confirmed by reports of juridical bureau “Milbank,

Tweed, Hadley and McCloy”, the

Institute of State and Law of The

Russian Academy of Sciences and by

the KPMG company

MICEX Derivatives Market financial MICEX Derivatives Market financial safeguardssafeguards

Current Current limitationslimitations::

Coming flexibilityComing flexibility::

Gross-margining

Cash collateral

Strict liquidationprocedures

SPAN basedportfolio margining

Variety of financialcollateral

Market procedures ofsettling insolvency

situations

Collective clearing fund

Net-margining of CMs

MICEX Derivatives MarketMICEX Derivatives Market

IT’S TIMEIT’S TIMETO SERIOUSLY CONSIDERTO SERIOUSLY CONSIDER

JOININGJOININGTHE RAPIDLY EVOLVINGTHE RAPIDLY EVOLVING

RUSSIAN MARKETRUSSIAN MARKETOF LARGE POTENTIALOF LARGE POTENTIAL

PhonePhone:: +7 (495) 705-96-12

+7 (495) 705-96-27

+7 (495) 705-96-03

FaxFax:: +7 (495) 202-75-04

e-mail:e-mail: derivatives@micex.com

WebWeb:: www.micex.ru

PhonePhone:: +7 (495) 705-96-12

+7 (495) 705-96-27

+7 (495) 705-96-03

FaxFax:: +7 (495) 202-75-04

e-mail:e-mail: derivatives@micex.com

WebWeb:: www.micex.ru

ContactsContacts

MICEX Derivatives Market DivisionMICEX Derivatives Market DivisionTh

an

k Y

ou

Th

an

k Y

ou!!