MICEX-RTS FX Market: New Time, New Instruments, New Liquidity EBRD, NFEA, ISDA Conference London, 14th March 2012

What Is the MICEX–RTS FX Market? High Liquidity: USD/RUB strongest performance across international markets Variety of FX Instruments: USD/RUB, EUR/RUB, CHY/RUB, BKT, SWAP O/N, T/N Benefits of On-Exchange Clearing & Settlement: CCP, PVP ! !! !!! Technological Excellence: API ( transactional FIX 4.4 is available), high productivity, low latency !!!! !!!!! Sponsored Clients’ Access (DMA replica) to FX Market 2

MICEX-RTS FX Market Instruments, Liquidity, and Members Average Daily Trading Volume on the MICEX FX market, USD billion Liquidity  Average daily trading volume in 2011 – more than USD 12 billion  In 2011 the MICEX traded 28% of the USD/RUB volume and 57% of the EUR/RUB volume on the Russian interbank market  FX spot – 56%, FX swap — 44% of total turnover  USD/RUB – 83,4%, EUR/RUB —15,1%, EUR/USD — 1,2%, other— 0,4% High standard post-trading infrastructure  Guaranteed execution of transactions and fulfillment of settlement obligations: National Clearing Center (NCC) as a CCP  Ruble settlement via National Settlement Depository (NSD)  Foreign currency settlement via major international banks : J.P. Morgan Chase Bank; Deutsche Bank AG Instruments  7 currency pairs: USD/RUB, EUR/RUB, EUR/USD (value dates T+0 and T+1), CNY/RUB, UAH/RUB, BYR/RUB, KZT/RUB (value dates T+0)  Basket for RUB/currency pairs (BKT = 55% USD & 45% EUR)  FX Swaps: USD/RUB, EUR/RUB, EUR/USD -O/N, T/N The MICEX’s share on the Russian interbank market, % USD/RUB EUR/RUB 1,3 9,1 10,0 1, ,2 1, ,6 9,3 1, ,3 10,0 2, ,6 9,5 1, ,0 5,8 0, ,9 3,8 0, , , ,6 EUR/RUB USD/RUB 3

Development of FX SWAPs and Forwards at MICEX-RTS 4

Average daily volume and the structure of USD/RUB swaps in Russia, USD million In 2010 average daily global turnover in FX swaps totaled $1765 billion and in FX forwards – $475 billion. According to BIS, swaps with maturity less than 1 week accounted for 74% of the FX swap market, from 1 week to 1 year – 25% and over 1 year – 1% of the market. In 2010 the share of cross currency swaps with maturity over 1 week in developed countries accounts for 20-30% :  USA - 28%  UK - 26%. In 2011 The share of long-term swaps in the UK USD/RUB swaps market exceeds 30%. Long-term (over 1 week) swaps have a quite small market share in Russia – just 3-4% of the FX swap market. According to the Bank of Russia’s and the Bank of England’s official data for 2011, long-term USD/RUB swaps trading volume was almost 4 times higher in London than in Russia. Russian banks must apply position limits against each other as well as sign the General Agreement and to enter into long-term cross-currency swaps on-shore. Bilateral limits between Russian banks are not sufficient to make long term OTC deals. If a counterparty on swap deal will go bankrupt it causes serious problems to bona fide side. As a result, most of the deals are conducted overseas and involve the use of various synthetic instruments. Russian FX swaps and forwards market in comparison with international market SWAP and Forward Markets in London and Russia 5 Average daily volume and the structure of USD/RUB swaps in UK, USD million ,0% 6450,2% ,8% Over 1 year2 0202,1% 6 months to 1 year3 7944,0% 1 month to 6 months ,1% 1 week to 1 month7 6998,1% Less than 1 week ,7% Sources: The Bank of Russia ‘s data based on BIS and United Kingdom's Foreign Exchange Joint Standing Committee (FXJSC) methodology (as of April, 2011) USD/RUB swaps (UK) USD/RUB swaps (Russia) Less than 1 week 1 week to 1 year Over 1 year

Total volume of USD/RUB swaps (short and long positions) made by Russian banks, USD billion As of the end of December, 2011, the outstanding volume of USD/RUB swaps and forwards concluded by Russian banks totaled $115 billion. In 2011 the overall volume of USD/RUB swaps (short and long positions) made by Russian banks grew 31% against 2010 to more than $4 trillion. Until recently, the low share of long-term swaps on the Russian market was explained by the general underdevelopment of the derivatives market in Russia. Due to small limits on long-term instruments, risks of counterparty bankruptcy, insufficient OTC risk management Russian banks prefer to operate off-shore or create synthetic swaps on international markets. A substantial volume of USD/RUB derivative transactions is made on the CME. Monthly volumes exceeded USD 9 billion. Key issues that have to be resolved in order to significantly increase on-shore market share for the long-term USD/RUB swaps are as follows: a) removing counterparty risk; b) protecting bona fide side of the deal; c) introduction of sound risk management What MICEX-RTS could offer to participants:  The CCP's services  Sound risk-management system These factors should facilitate the creation of the exchange-traded cross currency swaps market in Russia. Our expecting market share with long-term swaps is 15-20% against current 3-4% of the domestic swap market. Sources: The Bank of Russia’s data based on BIS & СМЕT methodology. High potential for growth of Ruble swaps and forwards and necessary prerequisites to develop the market on-shore Ruble SWAP Market Has High Potential for Growth 6 USD/RUB derivatives trading volume on the CME, USD billion

SWAP and Forward’s SpecificationsParameter Long-term swap Forward Currency pairUSD/RUB Maturity1W, 2W, 1M, 2M, 3M, 6M1D - 6M Valuation date of the 1 st legTOM (T+1)– Lot 100, 000 USD – anonymous mode 1000 USD – addressed mode 1000 USD Basic exchange rate The basic exchange rate for the currency pair, calculated at the EOD – Margining Unified margining (combined with SPOT instruments), dynamic collateral calculation, compensation payments (variation margin). NFEA SWAP rate is taken as the basis for m-t-m process  Only addressed (off-order-book) orders are accepted for forward transactions  Firstly USD/RUB swaps and forwards will be launched. Other currency pairs will be added later  CCP’s based settlement for SWAP and Forward on-exchange deals 7

8 Who and Why Would Use FX SWAPs at MICEX-RTS Target group :  Russian banks, including foreign banks’ subsidiaries, which are trading members of the MICEX- RTS FX market  Trading members’ clients, including Russian and foreign brokers, corporations and other legal entities (DMA access) Additional opportunities provided by exchange-traded instruments:  No constraints (limited counterparty risk, bilateral agreements are not necessary)  On-exchange liquidity  Combined clearing and the CCP's services on the exchange-based FX market Benefits :  Money market instruments with maturities up to 6 months  Liquidity management and long-term currency risk hedging  Arbitrage and bargain hunting  Application to strategies on global markets

MICEX-RTS FX Market Access 9

MICEX-RTS FX Market Russian Bank – UTS member Clients Individuals Legal Entities Institutional Investors Brokers Broker’s Clients Agency Agreement Bids/offers Brokerage Agreements Sponsored Access Scheme Bids/offers 10

Sponsored Direct Access – the Effective Way to Trade on MICEX-RTS FX Market Settlement acc. Clients Trading/clearing member (Bank) Key Features:  The access to the market is granted by the UTS trading participant – bank, however in fact a client could enjoy all preferences of a direct trading, so MICEX SDA = DMA  Transparency (individual client’s registration at the Exchange)  Flexible position control model via settlement codes assignment  No crossing with the bank – access provider or other bank’s clients Broker Settlement acc. 11

Clients’ Share at the Sponsored DMA to FX Market 1 st phase of the Sponsored DMA for non-banking institutions to MICEX-RTS FX Market was launched in Oct nd phase was introduced in Feb A new version of sponsored DMA allowed to banks – FX Market participants seriously increase the clients base and better control their risks The number of registered clients has grown 5x during Feb 2012 The clients’ volumes are concentrated in the SPOT instruments; This share made 17% of the total in Feb

Coming soon on MICEX-RTS Long term FX SWAPS (1W, 2W, 1M, 2M, 3M, 6M) – Apr 2012 Deliverable FX forwards (flexible maturity up to 6 months)- negotiated deals only – Apr 2012 Trading time extension (till 23:50) – Q3–Q Introduction of more G10 currency pairs – Q4 Re-thinking a new fee structure– more benefits for liquidity providers – Q2 13

THANK YOU FOR YOUR ATTENTION! Contacts: Alexander Ageev, VP, Head of FX&MM Sales Tel.:+7 (495) , ext Web: