MICEX Group Derivatives Market Directing the Derivative Market

MICEX Group Derivatives Market Directing the Derivative Market Boom – Trends and New Projects Zhanna Smirnova MICEX Vice President

World exchange derivatives market: trends

World exchange derivatives market: products

World exchange derivatives market: regions

Russian derivatives market: history and facts October 1992 Derivatives trading starts in Russia 1990 s: Start as it was… 2000 s: And what’s now Ø Exchang es ü 1992 – Moscow Commodity Exchange No activity since 1998 Till FORTS foundation 2001 Suspended 1998; Restarted 2000 Trading now ü 1993 – Russian Exchange ü 1994 – Moscow Central Stock Exchange ü 1994 – The Exchange “Saint-Petersburg” ü 1996 – MICEX ü 2000 – SPCEX ü 2001 – FORTS (based on SPBEX market) Ø Products (by underlying) GKO Stock indices Stocks, indices FX 1994 1996 STIR CM 1998 2001 2002 2006

Russian derivatives market: dynamics of growth

Russian derivatives market: underlying dynamics 15 -times growth of the MICEX cash markets

Russian derivatives market: traded instruments MICEX FX futures FX options STIR futures STIR options LTIR futures Stock Index Options EQ futures EQ options CM futures CM options RTS + + + SPCEX SPBEX + + Q 3 2007 Q 2 2007 Q 3 2007 2008 Q 4 2007 Q 3 2007 + + + + +

Russian derivatives market: structure

Russian derivatives market: barriers on the way up l Regulative Ø Absence of special acts: derivative instrument market law, clearing and netting law, etc. ; Ø Regulation vacuum of OTC cash-settled √ solved transactions; Ø Tax problems for individual investors; Ø Collateral & bankruptcy law l Infrastructure Ø Low clearing houses capitalization l Educational Ø Generally low educational level; Ø Lack of special educational programs, seminars, etc. √ solved

Russian derivatives market: potential of growth

Russian derivatives market: potential of growth

Russian derivatives market: potential of growth

MICEX derivatives market: infrastructure MICEX SICEX Exchange Clearing organization URCEX MICEX SH SCIEX Settlement organization NCSEX Remote access via Internet for MICEX derivatives market participants and their clients

MICEX derivatives market: membership MICEX Derivatives Market Individual Clearing Members General Clearing Members Trading (non-clearing) Members CLients Banks Non-banks Clients MICEX derivatives market members (as of 01. 05. 07) All GCM ICM ACM GTM ITM 182 28 72 20 48 14

MICEX derivatives market: membership

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 Sberbank GCM 10

MICEX derivatives market: instruments FX futures: $ € €/$ USD/RUB EUR/USD MICEX Group Derivatives market STIR futures: o/n Overnight Mos. IBOR Forthcoming: MICEX Index futures 3 -M 3 month Mos. Prime Rate

MICEX USD/RUB futures: trading statistics

MICEX USD/RUB futures: liquidity

USD/RUB futures: domestic & international market

MICEX STIR futures: trading statistics

ea si ng li New types of orders In cr Combination trading Automatic quoting Market-making programs MICEX FX & STIR futures: nearest plans ng ni de q i Wi u di t ng di ra un rt po p es iti o Synthetic products Futures-type settlement options ty Long interest rate products

MICEX equity derivatives: firm basis MICEX SE derivatives market Exchange MICEX SE Clearing house MICEX Settlement house MICEX SH Technical Center Liquid underlying cash markets of MICEX Group MICEX High-end trading, clearing and settlement IT solutions Strong and effective financial safeguards system Clear market rules and simple transaction procedures

MICEX SE derivatives market: coming instruments ist l … e ts n gl k n e Si toc s um s on dtr s ti on ed in B t op s a d el ure s r t se EX o fu tion p IC ex M nd s ro op P I re u s t dfu tion on ed B t op s a el ure r t EX fu IC ex M nd s I re u ut f

MICEX indices family MICEX Index «Blue chips» MICEX 10 index Sectoral MICEX O&G Capitalization MICEX PWR MICEX Large Caps MICEX TLC MICEX Middle Caps … MICEX Small Caps

MICEX Index: diversification and liquidity Capitalization Liquidity Weighted price of 10 last trades On average 5. 5 ticks per second Calculation 5% Structure min free-float 15% max issuers’ weight 3 month watch list 10 Compliance With regulations 6 month calculation base RF sectors 30 shares 80% capitalizatio 95% EU USA Index Broad-based UCITS Investment security requirements funds index n trading value

MICEX Index: economic sectors MICEX Index structure reflects exchange equity market distribution

MICEX Index: Russian EQ market benchmark MICEX Index RTS RTX … DJ Titans Russia… MSCI Russia FTSE Russia IOB Index DAXglobal Russian equity market in 2006: how many indices the market needs?

MICEX Index: key indicator of Russian EQ market Russian equity market in 2007: strengthening positions of MICEX SE

MICEX Index: basis for index investment funds Russian collective investments in 2007: investors choose MICEX Index

MICEX Index: basis for index investment funds Net asset value growth MICEX Index funds Formed 21 Under formation 2 Registration 5 Total number 28

MICEX Index futures: analogies from abroad Country Key index (national currency) Brazil IBovespa; IBr. X-50 (BRL) Hong Kong Hang Seng Index (HKD) India S&P CNX Nifty (INR) Futures & options availability Key index (foreign currency) (BRL) (HKD) (INR) S&P CNX DEFTY (USD) Korea KOSPI 200 (KRW) Malaysi KLCI (MYR) a (KRW) (MYR) FTSE Bursa Malaysia 100 Index (USD) Futures & options availability

MICEX Index: analogies from abroad Russian currency is a stable one – there is no need to use another

MICEX Index futures: contract specification Underlying Trading Unit Contract Months MICEX Index RUB 20 times MICEX Index 2 nearest months in the March quarterly cycle: Mar, Jun, Sep, Dec Final Settlement Day The 15 th calendar day of the contract month Settlement Method Price Quoting Cash-settled 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 safeguards Overall reliability and stability of MICEX derivative market is confirmed by reports of juridical bureau “Milbank, Tweed, Hadley and Mc. Cloy”, the Institute of State and Law of The Russian Academy of Sciences and by the KPMG company Risk management system fundamentals: daily mark-to-market procedures and calculation of variation margin gross-margining and collateral (performance bonds) prepayment compulsory liquidation of insolvent members’ positions MICEX Reserve Fund accounts for RUB 500 million

MICEX Derivatives Market financial safeguards Current limitations: Gross-margining Cash collateral Strict liquidation procedures Coming flexibility: SPAN based portfolio margining Collective clearing fund Market procedures of settling insolvency situations Variety of financial collateral Net-margining of CMs

MICEX Derivatives Market IT’S TIME TO SERIOUSLY CONSIDER JOINING THE RAPIDLY EVOLVING RUSSIAN MARKET OF LARGE POTENTIAL

Contacts MICEX Derivatives Market Division Ø Phone: +7 (495) 705 -96 -12 +7 (495) 705 -96 -27 Thank You! +7 (495) 705 -96 -03 Ø Fax: +7 (495) 202 -75 -04 Ø e-mail: derivatives@micex. com Ø Web: www. micex. ru