Moscow Interbank Currency Exchange

Moscow Interbank Currency Exchange, commonly known by the acronym MICEX, was a Russian exchange operator headquartered in Moscow. It developed from currency-auction activity initiated in November 1989 by the Foreign Trade and Investment Bank of the Soviet Union, when an organized market first established a market-based ruble exchange rate against the U.S. dollar. In January 1992, the exchange became the principal venue for currency transactions involving Russian banks and enterprises, helping establish the infrastructure of the post-Soviet financial system. During its operating life, MICEX expanded beyond foreign-exchange trading. In the mid-1990s it prepared systems and market arrangements for trading corporate securities and futures, eventually becoming a universal exchange covering several asset classes. Its members and participating organizations traded on behalf of clients, linking banks, enterprises, investors and issuers through a centralized marketplace. The exchange also had an important relationship with Russia’s monetary authorities: until July 1992, the exchange rate formed on the Moscow Interbank Stock Exchange was used by the Central Bank of Russia for its official quotation of the ruble against foreign currencies. MICEX became the leading Russian stock exchange and one of the largest universal exchanges in Eastern Europe. The reference material reports approximately 550 participating organizations and members. In 2006, transaction volume reached 20.38 trillion rubles, equivalent in the cited source to approximately US$754.9 billion, and represented more than 90 percent of the combined turnover of leading Russian stock exchanges. By December 2010, approximately 239 Russian companies were listed and their aggregate market capitalization was reported at about US$950 billion. These figures illustrate MICEX’s central role in the development and institutionalization of Russia’s securities market, although they describe historical market conditions rather than the company’s current financial position. MICEX’s strategic importance was closely connected with Russian policy goals to consolidate market infrastructure and develop Moscow as an international financial center. On 19 December 2011, MICEX merged with the Russian Trading System, creating a unified exchange initially known as MICEX-RTS. The transaction was intended to reduce duplicated infrastructure, lower transaction costs, provide issuers and investors with a single marketplace, and combine trading across asset classes. The unified organization later adopted the Moscow Exchange brand in 2012. The integration was not technically seamless. During the first trading day after the merger, a malfunction in the clearing system caused a short period of computer errors and led to multiple unauthorized or incorrectly registered deals, with some market participants reporting losses. The incident highlighted the operational risks of combining large exchange infrastructures. MICEX therefore survives primarily as a historical exchange name and predecessor brand of the modern Moscow Exchange rather than as an independent operating institution.

MICEX originated in late Soviet currency-market reforms. In November 1989, the Foreign Trade and Investment Bank of the USSR initiated currency auctions, creating an organized mechanism through which a market-based ruble exchange rate against the U.S. dollar could be established. This was an important departure from a purely administratively determined exchange-rate system and provided an early institutional foundation for the later Russian financial market. In January 1992, amid the transition to a post-Soviet economy, the exchange became the main platform for currency transactions conducted by banks and enterprises. Its exchange rate also acquired official significance: until July 1992, the rate established on the Moscow Interbank Stock Exchange was used by the Central Bank for its official quotations of the ruble against foreign currencies. MICEX thus operated not only as a trading venue but also as part of the infrastructure through which Russia’s emerging monetary and financial institutions interacted with the market. The exchange broadened its activities during the mid-1990s. Preparation began for trading corporate securities and futures, allowing MICEX to evolve from a currency-focused marketplace into a universal exchange. Its membership model connected approximately 550 participating organizations and members with clients seeking access to currency, equity, fixed-income and derivatives markets. This expansion helped make MICEX the dominant Russian stock-market venue and one of the largest universal exchanges in Eastern Europe. The scale of its historical activity was substantial. In 2006, reported transaction volume reached 20.38 trillion rubles, or approximately US$754.9 billion using the historical comparison cited by the reference source. This represented more than 90 percent of the combined turnover of leading Russian stock exchanges. By December 2010, approximately 239 Russian companies were listed on the exchange, with reported aggregate market capitalization of about US$950 billion. The figures reflect the exchange’s position immediately before consolidation with its principal domestic rival. The final major stage of MICEX’s history was its combination with the Russian Trading System. Completed on 19 December 2011, the merger created a single organization initially known as MICEX-RTS. The intended benefits included a unified platform for issuers, traders and investors, fewer organizations performing overlapping functions, lower transaction costs and broader cross-asset trading. The consolidation also supported state and industry ambitions to develop Moscow into an international financial center. The technical integration produced immediate operational difficulties. On the first day of trading after the combination, a clearing-system malfunction caused computer errors and the registration of multiple deals that traders had not authorized. Some participants suffered losses. Although the incident was brief, it demonstrated the complexity of joining exchange, trading and clearing systems that had previously operated separately. During the first half of 2012, the unified organization introduced a new brand, completing MICEX’s transition from an independent exchange identity into the predecessor infrastructure of the Moscow Exchange.

• 2012

  Unified exchange adopts a new brand

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  The merged organization unveils a new brand during the first half of the year, marking the transition toward the Moscow Exchange identity.

• 2011

  Merger with the Russian Trading System

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  MICEX merges with the Russian Trading System on 19 December to form a unified exchange initially known as MICEX-RTS.

• 2006

  Transaction volume reaches a historical high

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  Reported transaction volume reaches 20.38 trillion rubles, representing more than 90 percent of the turnover of leading Russian stock exchanges.

• 1992

  MICEX becomes the principal currency-trading venue

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  In January, MICEX becomes the main platform for foreign-exchange transactions involving Russian banks and enterprises.

• 1992

  Exchange rate used for official ruble quotations

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  Until July, the rate formed on the Moscow Interbank Stock Exchange is used by the Central Bank for official quotations of the ruble against foreign currencies.

• 1989

  Currency auctions begin

  [1]Moscow Interbank Currency Exchangeen.wikipedia.org

  The Foreign Trade and Investment Bank of the USSR initiates currency auctions, creating an early organized market for determining the ruble’s exchange rate against the dollar.

A centralized Russian exchange serving as a core venue for foreign exchange, securities and derivatives trading, and as a major piece of the country’s post-Soviet financial-market infrastructure.

• Currency trading · 1989

  Foreign-exchange market

  MICEX’s original and most historically distinctive activity was organized currency trading. The exchange provided a venue for banks and enterprises to transact in foreign currencies and helped establish a market-based ruble exchange rate against the U.S. dollar. Its currency rates also had an official role in Russian monetary reporting during the early post-Soviet period.

• Securities trading

  Russian equities and corporate securities

  After expanding beyond currency auctions, MICEX developed trading arrangements for Russian corporate securities. It became the leading domestic stock-market venue, connecting listed companies and investors through member organizations that traded for clients. By December 2010, the exchange had approximately 239 listed Russian companies according to the cited reference material.

• Derivatives trading

  Futures and derivatives

  MICEX prepared for futures trading during its mid-1990s expansion into a broader universal-exchange model. Derivatives complemented its currency and securities markets and formed part of the cross-asset infrastructure later consolidated with the Russian Trading System.

• 2012

  Adopt a unified exchange brandStrategy

  Background

  The merged exchange needed a common public identity after the combination of MICEX and the Russian Trading System.

  Action taken

  The unified organization unveiled a new brand during the first half of 2012.

  Aftermath

  MICEX ceased to function as the standalone public-facing exchange identity and became part of the history of the Moscow Exchange.

  Source

• 2011

  Combine MICEX with the Russian Trading SystemM&A

  Background

  Russia’s exchange industry sought to consolidate overlapping market infrastructure and create a stronger unified platform for trading multiple asset classes.

  Action taken

  MICEX merged with the Russian Trading System on 19 December 2011, forming an organization initially referred to as MICEX-RTS.

  Aftermath

  The merger created the predecessor of the modern Moscow Exchange. Early integration included a clearing-system malfunction that caused erroneous or unauthorized deal registrations for some traders.

  Source

• 2012

  The unified exchange introduces a new Moscow Exchange brand[1]Moscow Interbank Currency Exchangeen.wikipedia.org

  Other

  The organization formed through the MICEX and Russian Trading System merger unveiled a new brand during the first half of 2012, moving away from the MICEX-RTS working name.

• 2011

  MICEX merges with the Russian Trading System[1]Moscow Interbank Currency Exchangeen.wikipedia.org

  M&A

  On 19 December 2011, MICEX and the Russian Trading System combined to create a unified Russian exchange, initially called MICEX-RTS. The merger sought to consolidate market infrastructure, reduce duplicated functions and transaction costs, and support Moscow’s ambitions as an international financial center.

• 2011

  Clearing-system errors affect the first trading day after the exchange merger[1]Moscow Interbank Currency Exchangeen.wikipedia.org

  Other

  A short-lived clearing-system malfunction during the first day of trading after the MICEX–Russian Trading System combination caused multiple unsanctioned or incorrectly registered deals and losses for some traders.

1. 1Moscow Interbank Currency Exchangeen.wikipedia.org