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MICEX-RTS Should Introduce T+3 by Mid-2013, Followed by T+2

27.06.2012 15:14 / Interfax

The National Association of Stock Market Participants (NAUFOR) workgroup has concluded that introducing T+N settlement at the integrated MICEX-RTS exchange is a advisable and must be supported in the interest of keeping the Russian market competitive, says the Association release.

The workgroup was established due to the integrated exchange plans to introduce T+N settlement. Leading brokerages took part in the work.

Today, MICEX-RTS features two spot markets: main (Т+0) and Standard (Т+4).

The workgroup thinks that retaining T+0 after T+N is introduced is irrelevant. “If T+N settlement happens in Russia in the second half of 2013, we should have T+2. Starting 2014, European exchanges, including the London Stock Exchange, switch to T+2 from T+3”, says the release.

For MICEX-RTS, introducing T+N is a key development project. Shareholders link its success with the 2013 prospective float price of MICEX-RTS (IPO tentatively slated for February 2013). First Deputy Chairman of the Central Bank of Russia Alexei Ulyukaev said earlier: “We expect the float to build an organization worth at least USD 6bn”.

The workgroup considers T+N possible about 6 months after the trading technology has been finalized by the exchange, trading and clearing rules have been amended, requirements for clearing brokers are in place, risk management and testing are active.

The exchange rules should allow selling securities that have not been delivered yet, as well as a longer main session, calling for the broker to extend business by 2 hours.

NAUFOR workgroup experts advise combining stock, forex and forward positions. If stock and forex position are combined, T+N will become attractive for foreign investors.

T+N settlement requires amended margin loan rules by regulating the leverage by account, not each client trade, these rules must also be harmonized with foreign regulations on margin loans.

As for internal accounting and reporting by brokers, the workgroup calls for a revision that would include margin and forward trades, and broker risk management systems should be synchronized with the exchange.

T+N will also require a revision of proprietary capital requirements for brokers, as it implies the introduction of clearing brokers, while other trading participants become sub-brokers by status.

Trading infrastructureProject Group №1