4.1.2. Clearing on the Securities, Deposit, and Credit Markets
On the securities and deposit markets of Moscow Exchange Group, NCC provides its clients with the most extensive range of services, while clearing trades made in different trading modes, either with or without performing the central counterparty’s functions. Since November 2011, NCC has been performing clearing on the securities market and since 2017 has been performing centralized clearing, while acting as CCP under RUB deposit agreements. Till December 2016, CJSC “MICEX Stock Exchange” had acted as the trading organizer. Further this function has been performed by Moscow Exchange. Clearing settlements on the securities market are performed by NCC.
In December 2020, Moscow Exchange launched the credit market trading, which is cleared and settled by NCC. Clearing is performed without CCP’s engagement. Settlements are posted to clearing member’s own trading accounts, thus enabling credit market participants to manage efficiently the liquidity in all segments of the securities, deposit, and credit markets.
In April 2020, the deposit market participants were provided with the functionality to consolidate deposits on their settlement account. The implementation of the above objective resolved the problem of processing and accounting of a large number of deposit trades, which might arise due to a large number of rather small counterorders in the on-order book mode (blotter) and/or large intraday volume of funds placed by a market participant.
During the reporting period, the money market functionality was expanded considerably by implementing such objectives and opportunities as a launch of floating rate repo with the Bank of Russia; repo trade made with CCP in case of lack of information on the following coupon (coupon rate being unknown); executing trades with coupon with unknown rate under the interdealer repo; unifying the rate interval of repo and deposits; automating admission of bonds placed at Moscow Exchange to repo with CCP.
In general, 22 companies, including manufacturing, insurance, management companies and non-state pension funds, were admitted to the deposit market trading with CCP during 2020. The total number of participants of the above market reached 130, and the volume of transactions totaled RUB20.7 trn.
Due to implementation of new objectives and facilities on the securities, deposit, and credit market, the amount of the commission fee earned by NCC was RUB8,874 mln (2019: RUB6,643 mln) during the reporting period thus ensuring 33.6% growth. Stock and repo trades with the central counterparty, including repo trades with general collateral certificates, were the key drivers of growth.
4.1.3. Derivatives Market Clearing
NCC has been providing clearing services on the derivatives market of Moscow Exchange since 2012. The derivatives market is Russia’s largest one and one of the world’s leading venues for trading in derivative financial instruments combining high liquidity, wide range of products, guarantees of the central counterparty, which functions are performed by NCC. Currently, the Company provides clearing services on the derivatives market with respect to derivative financial instruments, which underlying assets are stock indexes, shares of Russian and foreign issuers, federal loan bonds, foreign currency, interest rates and commodities (oil, precious and non-ferrous metals, agricultural commodities).
In 2020, the daily average trading volume grew by 59% on the previous year. The growth drivers were FX section contracts (+115% on 2019 ADTV) due to high volatility of RUB last year. Positive dynamics was also observed in the section of derivative contracts for indexes and stocks (+56%). The RTS growth index for the most liquid contracts for USD/RUB futures was +124%, +89%.
Despite significant increase in the trading volume, the amount of open positions decreased. By the end of 2020, the total amount of open positions on the derivatives market reduced to RUB560.5 bn, down 9% compared to the end of 2019. The amount of the commission fee earned by NCC on the derivatives market grew by 60% and was RUB1,621 mln (2019: RUB1,013 mln) mainly due to the growing volumes of trading in foreign futures contracts and index futures.
In 2020, the facility for making trades on SPECTRA TCS with negative prices for Brent futures contracts was implemented. Besides, in addition to the existing option assessment model based on the Black Scholes model, there appeared the facility to switch to another assessment model (Bachelier model) in case of sharp decline in prices.
At the end of the reporting year, the large-scale project – launch of deliverable futures contract on wheat, which was intended to become the first Russian price benchmark of wheat – was implemented together with the commodity market and with support of VTB Capital. Launch of the wheat futures on the derivatives market of Moscow Exchange provides participants of the grain market with instrument to hedge price risks.