By Dow Jones Business News, April 19, 2013, 07:15:00 AM EDT
By Jacob Bunge
Russia's main exchange operator aims to harness the country's resource riches as the company bids for a position among the global exchange elite, according to its chief executive.
Moscow Exchange plans to develop markets in gold and grains and will utilize its ownership in smaller local exchanges as the company seeks to become a regional trading power, according to CEO Alexander Afanasiev.
"Many of the customers of Moscow Exchange, particularly international clients, might see us as a hub for entering other [former Soviet Union] countries for international investing," Mr. Afanasiev said following a visit to the U.S. last week, in his first interview since the exchange's February flotation.
The commodities push places the company alongside foreign-based exchange rivals such as Canada'sTMX Group Inc. (X.T) and ASX Ltd. (ASX.AU) in Australia, both working to parlay those nations' commodity strengths into trading business. Moscow's largest financial markets operate under one roof following the December 2011 merger of the country's two main exchange operators. The enlarged Moscow Exchange has been revamping its stock markets in recent months, upgrading infrastructure for the settlement of trades and pushing for an overhaul of pension-plan rules that could drive more investment in Russian securities.
To hasten expansion efforts, Moscow Exchange is discussing possible alliances with international peers, including Germany'sDeutsche Boerse AG (DB1.XE, DBOEF) and U.S.-based operators CME Group Inc. ( CME ) :doodoo: and NYSE Euronext ( NYX ), Mr. Afanasiev said.
Moscow Exchange's stock, futures and currency platforms cover a broader range of asset classes than many of its foreign-based competitors, but
Russia has struggled against the perception that its financial markets are clubby and tough for outsiders to navigate. Domestic restrictions around securities investing have prompted some Russian companies to list shares in London and elsewhere, while prices for the region's wheat harvests generally remain set in Chicago and Paris.
Moscow Exchange already runs the number-nine derivatives market globally in terms of trading activity, according to data from the Futures Industry Association. Its strength has been in financial futures, such as contracts linked to the RTS Russian stock index, with more than 320 million contracts traded in 2012.
Mr. Afanasiev, a former Russian banker who joined the exchange in 2005 and was named CEO last June,
aims to expand Moscow's commodities franchise into bullion trading by the end of the year, planning a new market in physical metals like gold. Russia ranked fourth last year in terms of global gold production with 205 tons yielded, according to a February report from the U.S. Geological Survey.
The effort will tap existing gold-storage facilities in Moscow, Mr. Afanasiev said.
The country's first exchange-traded funds linked to precious metals like gold and platinum are set to launch in the coming weeks , he said.
Moscow Exchange's ruble-denominated grain markets have potential to be more widely used across the Black Sea region, among the world's biggest growers of wheat, according to Mr. Afanasiev.
To extend grain efforts Moscow could build on its relationship with Kazakhstan's commodity exchange, where Moscow Exchange owns a 61% stake, he said. The Kazakhstan market runs trading in wheat, barley, rye and sunflower seeds.
As it revamps its derivatives and securities markets Moscow Exchange is weighing alliances with CME and NYSE around risk-management services, order routing and pricing data , Mr. Afanasiev said.
Moscow Exchange is also discussing the cross-listing of some futures contracts with Deutsche Boerse, he said, and may offer a version of the German exchange group's money-market trading service. The two exchange companies last November sealed an agreement to explore partnerships.
Representatives for Deutsche Boerse, CME and NYSE declined comment.
Shares in Moscow Exchange have fallen 21% since its initial public offering Feb. 15, touted as a milestone in the Vladimir Putin government's longer-range ambition to elevate Moscow as an international hub for finance. Russia's Micex stock index has declined 12% over that time.
-Lukas Alpert in Moscow contributed to this article.
Write to Jacob Bunge at
jacob.bunge@wsj.com
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