Actuality October 2006
Company. The RTS

plans additional issue, which is going to dilute ten times holding of shares of shareholders who will not participate in it. Only the joint owners, brokers and banks, are suggested to pay over all

$27 million to save present share. Majority agrees to chip into .

Recently it became clear, how much market participants appraise the RTS. From September,18-22 there was the sale of 10% of its shares. Every day 2% were put up for auction, and a buyer was determined by the open market method – on results of auction of requests. “The costs of transactions made today correspond to capitalization at $89,6 million», it is said in press-release on results of the last day of auctions. This figure shouldn’t be taken seriously, as it is calculated according to only one purchase for scanty sum – $1120. Information company «Prospect» bought 10 of 16 000 shares being on sale that day. Then it was enough to pay as much again, and capitalization would puff up to $179,2 million. If to be oriented on the costs of main transactions, the market value of public corporation gets to$63-67 million what is also quite a lot, because in July, 2004 any participant could buy shares at par based on appraisal of exchange

less than $3 million Thus, during about two years securities rose in price 22 times. And that is in spite of the fact that RTS has just lost one of the important sources of profit – exchange market of shares of Gazprom. Most interesting is ahead.

The public corporation planned additional issue which is going to dilute ten times holding of shares of shareholders. Joint owners will have to pay generally$27 million to save the shares. The largest shareholders are ready to pay. Do they expect for the profit? Probably, but the main thing is the political and imaginary reasons, surplus of capital and unwillingness to become a shareholder with an insignificant holding of shares.
Capital for a renaissance. However, in summer 2004 participants bought air. Just founded public corporation did not even begin auctions at that moment. It was created at the request of regulator who insisted, that for auctions of securities the exchange must become public corporation, instead of noncommercial partnership (NP). Now public corporation has at least one worth asset, moreover very perspective, it is market of the futures and options (FORTS). Lately this thriving segment looks as a tasty morse of RTS.
The exchange conducts restructuring, after which the public corporation will become the central link of the group and the proprietor of almost all its assets. There is a question: if 254 members of partnership gainwin from it, round whom it was created ? In fact to the next summer all, that will remain at this legal entity, is money.

Exactly for settling with partnership the public corporation will use the whole sum rescued from the sale of shares of additional emission. But the NP members won’t see this money in any way. According to the plan partnership as most capitalized link of the group will execute the functions of clearing center. For this purpose it is necessary to fill up funds and backlogs with anything – and it's all in the timing.
All in all the infrastructure is perfected, they are glad in RTS. All members of partnership will be able to use it equally with the shareholders of the public corporation, as well as earlier.

However, RTS will belong not to 254 investment companies and banks participating in its financing and development, but to the limited group of 34 shareholders. Whereas business of the public corporation is less, than of the whole group. According to the RTS information, the public corporation «RTS» brought RUR 8,4 million profit of net income in 2005, and in the first half of 2006 – RUR 36,8 million. According to words of Oleg Safonov, the income of the whole group RTS in 2005 made $10 million, and in the first half of 2006 – $12 million New joint-stock scandal

? Not at all. There are almost no offended. The question about restructuring was discussed at the general meeting of members of partnership in August. Only 8 companies of 183 registered at the meeting voted against (in NP every member has only one vote regardless of size of deposit).
Classicism. In the middle of 1990th few large organizations which mainly served western clients were really significant. The brokers of «the selected circle» traded rather with each other and rarely addressed to«aliens». Before having a deal with according to the principle «pay in the morning, get commodity in the evening» it is important to be sure in solvency and decency of contractor. To limit the risks, brokers led auction limits for each other – the maximum volume of operations which was possible to conduct before completion of previous settling with this contractor were completed.
And at the RTS sources mainly invest companies of “the selected circle”. Bargains were made in the following way. A participant proposes a request on the purchase or sale of shares in the system, meanwhile letters code of declarant, price and desired holding of shares is represented in a terminal. Then sides get in touch on the phone and discuss details: when and how re-registering of securities will pass, where to transfer money.

At such approach it is difficult to trade for a «player without the name»- simply he won’t have the «creditworthiness” (period of 1990th)
The final amount is usually discussed, settlings can be in any currency. That is comfortable for foreign investors and offshore companies full of Russian money.

This scheme has got name as “classic market of RTS”. “Prices are nominated in foreign currency, and it’s possible to buy and sell everything through not assuming Russian market and paying taxes where Cyprus organizations were registered”. Classic market of RTS was ideal for its époque. But it was coming to an end.
Decadence. Before the crisis in August, 1998 auction activity was concentrated on RTS. And exactly according to the index of the RTS investors got used to judge about all Russian market tendencies. And it soon showed in all its glory. Because of default a part of players didn’t carry out their obligations on the transactions made on the «classics». And brokers began to cut down limits on each other to minimize the sharply growing operating risks. The trade turnover of RTS waned quickly. Even that money which remained at the market after «capitulation» of the western investors scared by the crisis passed it. Brokers gave preference to the other exchange – Moscow International Stock Exchange.
If RTS adjusted technologies to the standards already existing at the over-the-counter market, MISEX tried to create rules itself. On it before the pitching of sale request an operator places shares in a calculation depositary – National depositary center (NDC). And a buyer preliminary «brings» money on an exchange. MISEX registers the operation and technically provides its implementation, on that very day. A buyer or a salesman doesn’t know who actually fact acts as their contractor because auctions are anonymous.

On RTS they also introduced the «delivery against payment» system , but without the preliminary «freezing» of money and securities on the exchange, as on MISEX. After the making of transaction a buyer disburses through a bank, or through the nonbank credit organization of RTS (if settlement is in rubles). Re-registering of shares in the settlement depositary of exchange, depositary-clearing, company takes place at the same time.
Last year RTS additionally added to the classic market the anonymous mode of auctions with the partial «freezing» of resources. It is provided only for a few «blue chips» – most liquid shares – and causes contradictory estimations. «After the input of anonymous trade on the row of main issuers RTS finally lost the attractiveness for participants, becoming mainly a ground for stock trade of " the second echelon" shares, as some specialists consider. At the same time other participants of market note that about 70% of turnover of anonymous transactions is made on the «classics».
It's too late now. On RTS they abstain from comparisons with turnovers of MISEX. The President of RTS Oleg Safonov (as his predecessors) insists that reason is not in the enormous break between numbers, but in different nature of indexes. The MISEX Business at the market of actions is based on Inrenet-trading – the fashionable tendency coming from the West. In the whole world «mere mortals» used to «click on quotations» in a hope to increase savings.

And on stock market there appeared the army of ordinary private investors who need for that only a computer with Internet access and ludicrous ( as compared to “classic brokers”) amount of money as minimum initial amount.
«In Russia «big» brokers who determine the policy of RTS at first gave a hostile reception to Internet-trading. They could not accept the loss of enormous income item». The main source of earnings of the whole row of invest companies are not at all commissions, as some investors think. But margin of the purchase cost of papers from other participants and their resale to the own clients. The mechanisms of the classic market of RTS accept «hidden price markup». And in the case of Internet-trad ing the more transparent mechanism of price sett

ing is used. Any participant sees the real current quotations. The profit of broker is limited by his official acquisitions. A broker only technically «delivers» the order of client on an exchange, instead of striking a bargain instead of him (period of events after 1998 – 2004).
Having remembered suddenly, RTS made an effort to do something. Additionally to the «classics» it organized an exchange market following the same pattern. Namely: in the anonymous mode, with pre-depositing of resources, ruble settlement and access to the system through an internet gateway.

But these hopes were not realized. “There is a law called “liquidity”, and there is nothing to be done. In 2001-2003 – it is always easier to create liquidity from scratch, than to try to shift from another ground. RTS would need investments incomparable with future profits”. Being in a role of backward on the start, the exchange never became one of the leaders of segment.

There exists an opinion that RTS in future will be concentrated on the of the second-third echelons.

If MISEX puts into operation the postponed clearing, it will practically monopolize trade with «blue chips». But RTS can battle for one of its main interests – trade of low-marketable shares. At auctions of such securities the proposed prices on the purchase and sale strongly usually differ. Therefore brokers must bargain by phone to agree on acceptable conditions. But it is impossible in the case of an anonymous mode. But the non-anonymous classic market of RTS allows to «throw bridges» between contractors. As well as RTS Board which is the system of exchange of information about shares, bonds and investment shares which do not circulate on an exchange. The proposed quotations serve as a reference point, but optional to follow. You need holding of shares? Call and bargain. Registration of transactions is not foreseen, settlements are made out of stock exchange.

Now over 800 securities are quoted in RTS Board – more than in any other system.

But some of them are so low-marketable, that the real transactions on them aren’t made.
In Russia there are a lot of interesting enterprises, undeservedly offended with the interest of investors. To show out shares of company on MISEX, it is necessary to pass not simple procedure of listing, where both an issuer and a broker are participants. And in RTS Board you fill in a form and trade as much as you like. Thus plenty of the underestimated enterprises go on the RTS floor.

The RTS Reshuffle. Market participants agree that the most perspective project of RTS is FORTS, that means market of exchange derivative instruments (futures and options). As yet its value consists rather in large potential, than in the real indices. On world measurements the Russian urgent market is in the rudimentary state. Abroad the sizes of auctions by shares are several times low, than by futures. And in Russia they are substituted by marginal trade, when a broker credits a client for the security-related operations. RTS was one of those which were the first to let derivatives to stock assets, and now it has all chances to consolidate a position in this segment. Especially as MISEX which was also declaring about such ambitions was limited only to derivatives on currency and on interest rates.

On FORTS options and futures are being bargained for some «blue chips», bonds, the RTS index, and also oil Urals and gold.
As history of RTS was rich in events it has bulky enough and economically ineffective structure preventing from development. That was one of the reasons of restructuring which was undertaken by the ground.

The public corporation «Exchange stock RTS» will occupy a central link and will get the remaining assets of noncommercial partnership – clearing center, clearinghouse, and also share holding of settlement depositary.
«I will vote "for"», says the shareholder who has 3,12% shares. He expects to save a shareholding after additional emission or even increase it due to shareholders who will refuse to participate in buying-out. Taking into account the prospects of Russian market development, and also tendency to the globalization of exchange trade, we take being a part of the capital of exchanges as attractive investments, – the analyst of one of shareholders explains the point of view. – Therefore we participate in a capital not only of RTS but also MISEX and the St. Petersburg currency exchange. In addition, as shareholders we can participate in the ground management and influence on its development taking into account interests of our clients. However, not all brokers divide the optimistic point of view.

Whom does RTS belong to ?
After the sale in September 2006 of the last share holding, remaining at NP the stock exchange RTS, the structure of shareholders of the public corporation looks like the following: OFG (9,9989%), IC «Troika Dialog» (9,9989%), «Aton» (9,752%), «Renaissance Broker» (6,857%), «KIT Finance» (5,562%), IB «KIT Finance» (5,357%), Alfa-bank (5,357%) , «Uralsyb Capital» (5,357%), Gazprombank (4,311%), «Olma» (4,2995%), Oleg Safonov (3%), «Brokercreditservice » (2,803%), «Instroyinvest» (2,679%), «U B S Nominiz» (2,679%), «Region» (2,145%), «Alor Invest» (2%), «Opening» (2%), «Finam» (2%), NP stock exchange "St. Petersburg " (2%), IC «Vitus» (1,862%), the “Entente-Capital» (1,687%), «?lor+» (1,116%), «Interfin trade» (1,071%), «Paradise, Man end Gore security» (1,071%), «Russ-invest» (1,071%), the «Centrocredit bank(1,071%)», Roman Goryunov (0,8%), Dmitry Shatskiy (0,6%), «U B S Security» (0,5%), Sergey Gorbachenko (0,3%), Irene Ionova (0,3%), «Barrel» (0,268%), «Eltra» (0,125%), «Boulevard» (0,00125%).
Born PAPFM
Development of the auction system – future «kernel» of RTS – began in the middle of 1994 on initiative of Professional association of participants of fund market (PAPFM), created by fifteen leading Moscow brokers. Software for participation in auctions was set in companies – members of association, and trial auctions soon began. The quotations indicated in the system were considered to be indicative, but the requirement to strike bargains at proposed prices appeared in summer of 1995. The first official auction session in RTS was opened on July, 5, 1995 at 1 p.m by operation with the «Mosenergo» shares, the volume of auctions according to the results of the day made up $576,000. At that time shares of seven issuers were firmly quoted in RTS, and in total 83 securities were admitted to auctions. In the first session the members PAPFM participated and a few regional associations, uniting largest operators of over-the-counter market.

FINANCES OF THE PUBLIC COMPANY RUSSIAN TRADE STOCK EXCHANGE, MILLION RUB
Index I half of 2006. 2005 ?.
Gain 82,2 61,7
Net gain 36,8 8,4
Assets 135,8 96,8
Cash assets 116,2 88,1
Capital and working balances 126,6 89,8