OREANDA-NEWS On 18 February 2009 was announced, that 2008 was one of the most challenging years for the Russian equity market. Whilst last May the RTS Index hit an all time high of 2487.92 points (as of May 19, 2008), in September – October it reported a significant decline, falling to 549.43 points.

Despite the sharp changes in the economic environment, the total trading volume on the RTS markets in 2008 reached 756,5 billion dollars, which is a 10% increase on the previous year. Over 50% of the trading volume growth was generated on FORTS, the  derivatives section of RTS.

RTS, as an integral part of the market infrastructure, has performed at its best under all economic conditions and demonstrated proven settlement reliability and remarkable technology developments. To an extent this became possible thanks to the introduction of the Central Counterparty trading with settlement guaranteed by the exchange.

Further development of the equity market is one of the priorities for RTS. The most significant event of the last year in this field was upgrading the CCP technologies and the launch of netting on RTS, a technology meeting the best practices of exchange trading. The introduction of netting resulted in reduced funding costs, simplified settlement procedure and improved market performance. RTS expanded the number of stocks available for CCP trading by adding Sberbank and VTB Bank shares.

In 2008 the RTS Index strengthened its status of the leading benchmark for the Russian stock market, and gained international recognition as a valid investment tool. The RTS Index became a registered trademark in the US, and was chosen by  foreign investment companies and banks such as Credit Swisse, Valartis Bank AG and Nomura as the underlying asset for their structured products.

RTS Global, a unique initiative launched by RTS last September, is another step towards establishing a global financial center in Moscow. RTS Global is a regulated OTC market for foreign securities facilitating local investors to easily and effectively access foreign assets. By the end of 2008 51 securities were trading on RTS Global. This project is the first move towards setting up  a regulated on-exchange market for foreign securities and an IPO center for international issuers in Moscow.

In 2008 the RTS derivatives market, climbed to a more prominent position in the global rating provided by the US "Futures Industry Magazine", which is published under the backing of the "Futures Industry Association" and tracks global industry statistics. After the first half of 2008 FORTS was rated 13th in the top 30 leading global exchanges trading in equity derivatives, beating such renown venues as the American Stock Exchange, Zhengzhou Commodity Exchange, OMX Group, Hong Kong Exchanges & Clearing, London Metal Exchange and others.

According to FIA the trading volume in the RTS Index futures gained 511% in the first quarter of 2008 compared to the similar period last year. This makes it the fastest growing derivatives contract worldwide. The US "Futures Industry Magazine" also put the futures contract on RTS Index in  15th place in the trading volume rating (measured in contracts) among the 20 equity derivative instruments most actively traded worldwide. In the first half of 2008 the gold futures traded on RTS was called the fastest growing commodity contract (240.34%) among other 20 derivatives on metals (measured in contracts).

In 2008 RTS became an associated member of the Futures Industry Association (FIA).

RTS continues to develop and extend the range of instruments offered on FORTS. In 2008 the futures contract on the average MosPrime credit rate was launched in the FORTS money section. In the commodity section options on silver and futures on Brent oil were introduced. The Brent oil contract is very popular with investors, and allows for arbitrage if traded together with the Urals oil futures contract. The equity section was completed with a new sectoral index (RTSI – Telecom) and several single stock contracts. In May RTS launched an effective hedging instrument, a futures contract on the basket of RAO UESR shares, in response to the price risks associated with the restructuring of RAO UESR in the period from the suspension of trading in these securities to the start of trading in the shares of split-ups.

The introduction of the evening trading session on FORTS on May 26, 2008 was another breakthrough of  last year. Now, trading on RTS is open till 11:50 pm MSK. The increased  time span allows the local market participants to react to the global cues that come out after the closure of the main trading session and also opens up new opportunities for international and local investors that can access the market only after 6 pm MSK. In September through November it became clear that an evening trading session is a necessity in a turbulent market environment, with evening trading volumes exceeding 30% of that during the main trading session which is a very high ratio. Typically not more than 10% of global trading is done in the evening hours.

In 2008 RTS expanded its business to CIS markets. Last May RTS partnered with the leading Ukrainian market participants to establish the Ukrainian Exchange. The new Kiev-based exchange is 49% owned by RTS and 51% by the Ukrainian companies. In December the Securities and Stock Market State Commission of the Ukraine (the state regulator) granted the Ukrainian Exchange a license authorizing it to act as the organizer of exchange trading. Last December also saw RTS and The Regional Financial Centre of Almaty City (RFCA) setting up a commodity exchange – JSC "Eurasian Trading System" headquartered in Almaty, Kazakhstan.

There was one more significant event for the RTS Group in December 2008 - Thomas Murray, an international rating agency which specializes in estimating risks related to global and national custodians, has awarded the Depository Clearing Company a CSD rating of A+, being a low overall risk rating with a stable outlook. Thomas Murray reports that over the last year DCC has made significant progress in many areas of its activities. The rating was upgraded when the financial crisis had already escalated to its full size, which has a special meaning to us and proves that DDC is a highly reliable depository.

In the bid to provide fully guaranteed settlement all the clearing operations were consolidated into one entity – the RTS Clearing Center. The size of the Guarantee Funds was increased to 1.5 bln roubles.

Throughout the year RTS was upgrading its technological platform keeping up with its high tech exchange image, and implemented FIX (FInancial eXchange protocol), a global messaging standard, for exchange of data between the RTS trading system and brokers or other trading participants. The new version enables them to manage their orders on FORTS, the RTS derivatives section, with regard to the specific features of the evening trading session on FORTS and on the anonymous section of the RTS Classic Market.

RTS has a good track record in terms of effective performance, positive development and growth. Having come a long way to where it is now RTS entered the New Year with a new much-anticipated corporate brand. Brand renewal is a part of our long-term strategy, the result of many months of hard work that marks an important milestone in the history of our progress.

With the new brand RTS positions itself as "the Exchange shaping the Russian market". The new RTS brand embodies our strong performance on the market and our commitment to keep on contributing to the benefit of the Russian economy.

Indices

Over the year the RTS Index decreased by 72.41%, and closed at 631.89 points on December 21, 2008. Last year saw sharp price fluctuations on the equity market. The RTS Index values ranged from its lowest of 549.43 points as of October 24, 2009 to the record high of 2487.92 points as of May 19, 2008.

The "second-tier" stock index – RTS-2 lost 79.2% to 548.20 points. The lowest value of the RTS-2 Index of 539.39 points was registered on December 30, 2008, and the highest value was reached on January 15, 2008 – 2670.61 points.

The largest decline was shown by the industrial sector, with the RTS Index - Industrials losing 85.2%, and the slightest drop was reported by the oil & gas sector, with the corresponding index decreasing by 66.5%.