1. MICEX Group Derivatives Market Directing the Derivative Market Boom – Trends and New Projects Zhanna Smirnova MICEX Vice President

2. World exchange derivatives market: trends

3. World exchange derivatives market: products

4. World exchange derivatives market: regions

5. Russian derivatives market: history and facts 1990s: Start as it was… 2000s: And what’s now October 1992  Products (by underlying) Derivatives trading starts in Russia 19941996 1998 20012006 GKO Stocks, indices Stock indices FX STIR 2002 CM  Exchanges 1992 – Moscow Commodity ExchangeNo activity since 1998 1993 – Russian ExchangeNo activity since 1998 1994 – Moscow Central Stock ExchangeNo activity since 1998 1994 – The Exchange “Saint-Petersburg”Till FORTS foundation 2001 1996 – MICEXSuspended 1998; Restarted 2000 2000 – SPCEXTrading now 2001 – FORTS (based on SPBEX market)Trading now

6. Russian derivatives market: dynamics of growth

7. 15-times growth of the MICEX cash markets Russian derivatives market: underlying dynamics

8. MICEXRTSSPCEXSPBEX FX futures++++ FX options++ STIR futures++ STIR options+ LTIR futuresQ3 2007+ Stock Index futuresQ2 2007+ Stock Index OptionsQ3 2007+ EQ futures2008+ EQ optionsQ4 2007+ CM futuresQ3 2007+++ CM options++ Russian derivatives market: traded instruments

9. Russian derivatives market: structure

10. Regulative  Absence of special acts: derivative instrument market law, clearing and netting law, etc.;  Regulation vacuum of OTC cash-settled transactions;  Tax problems for individual investors;  Collateral & bankruptcy law Infrastructure  Low clearing houses capitalization Educational  Generally low educational level;  Lack of special educational programs, seminars, etc. Russian derivatives market: barriers on the way up √ solved

11. Russian derivatives market: potential of growth

14. Exchange Clearing organizationMICEX Settlement organization MICEX SH Remote access via Internet for MICEX derivatives market participants and their clients SCIEX NCSEX URCEX SICEX MICEX derivatives market: infrastructure

15. MICEX derivatives market members (as of 01.05.07) AllGCMICMACMGTMITM 1822872204814 MICEX derivatives market: membership General Clearing Members Individual Clearing Members CLients Trading (non-clearing) Members Clients Banks Non-banks MICEX Derivatives Market

16. MICEX derivatives market: membership

17. MICEX derivatives market: market leaders Position by turnover (Jan-May 2007) MICEX Derivatives Market participants Membership Category 1OJSCo SCB "Metallinvestbank"GCM 2CJSC IMBGCM 3JSB Gazprombank (CJSC)GCM 4JSC Bank of Khanty-MansiyskICM 5Evrofinance MosnarbankGCM 6OJSC Bank "Petrocommerce"GCM 7ZAO CitibankGCM 8JSC VneshtorgbankGCM 9ZAO Standard BankICM 10SberbankGCM

18. MICEX Group Derivativesmarket €/$€/$ EUR/USD EUR/USD €€ EUR/RUB EUR/RUB $$ USD/RUB USD/RUB FX futures: o/no/n Overnight MosIBOR 3-M 3 month MosPrime Rate STIR futures: MICEX derivatives market: instruments Forthcoming: MICEXMICEX MICEX Index futures

19. MICEX USD/RUB futures: trading statistics

20. MICEX USD/RUB futures: liquidity

21. USD/RUB futures: domestic & international market

22. MICEX STIR futures: trading statistics

23. Long interest rate products Futures-type settlement options Market-making programs Automatic quoting Combination trading Widening trading opportunities Increasing liquidity New types of orders Synthetic products MICEX FX & STIR futures: nearest plans

24. MICEX equity derivatives: firm basis Exchange MICEX SE Clearing house MICEX Settlement house MICEX SH MICEX SE derivatives market Technical Center MICEX Liquid underlying cash markets of MICEX Group High-end trading, clearing and settlement IT solutions Strong and effective financial safeguards system Clear market rules and simple transaction procedures

25. MICEX SE derivatives market: coming instruments Single stock options Bond- related futures options MICEX Index futures options Bond- related futures MICEX Index futures … Proposed instruments list

26. «Blue chips» Capitalization Sectoral MICEX Index MICEX O&G MICEX PWR MICEX TLC …… MICEX10 index MICEX Large Caps MICEX Middle Caps MICEX Small Caps MICEX indices family

27. 80%80% capitalization 95% trading value 3030 shares 1010 sectors RFIndexInvestmentfundsEUUCITSrequirementsUSABroad-basedsecurityindex 3 month watch list 6 month calculation base 15%15% max issuers’ weight 5%5% min free-float Capitalization Liquidity Weighted price of 10 last tradesComplianceWithregulations Structure MICEX Index: diversification and liquidity On average 5.5 ticks per secondCalculation

28. MICEX Index: economic sectors MICEX Index structure reflects exchange equity market distribution MICEX Index structure reflects exchange equity market distribution

29. MICEX Index RTS FTSE Russia IOB Index … … RTX DJ Titans Russia… MSCI Russia DAXglobal Russia Russian equity market in 2006: how many indices the market needs? Russian equity market in 2006: how many indices the market needs? MICEX Index: Russian EQ market benchmark

30. MICEX Index: key indicator of Russian EQ market Russian equity market in 2007: strengthening positions of MICEX SE

31. MICEX Index: basis for index investment funds Russian collective investments in 2007: investors choose MICEX Index

32. Net asset value growth MICEX Index funds MICEX Index: basis for index investment funds 2121 2121 Formed Under formation 2 2 Total number 2828 2828 Registration 5 5

33. MICEX Index futures: analogies from abroad CountryKey index (national currency) Futures & options availability Key index (foreign currency) Futures & options availability BrazilIBovespa; IBrX-50 ( BRL) (BRL) Hong Kong Hang Seng Index (HKD) (HKD) IndiaS&P CNX Nifty (INR) (INR) S&P CNX DEFTY (USD) KoreaKOSPI 200 (KRW) (KRW) MalaysiaKLCI (MYR) FTSE Bursa Malaysia 100 Index (USD) MexicoIPC Index (MXN)

34. MICEX Index: analogies from abroad Russian currency is a stable one – there is no need to use another Russian currency is a stable one – there is no need to use another

35. MICEX Index futures: contract specification UnderlyingMICEX Index Trading UnitRUB 20 times MICEX Index Contract Months 2 nearest months in the March quarterly cycle: Mar, Jun, Sep, Dec Final Settlement DayThe 15 th calendar day of the contract month Settlement MethodCash-settled Price QuotingMICEX Index times 100 Minimum Price Fluctuation 25 price points or RUB 5 per contract Final Settlement Price MICEX Index determined on the final settlement day times 100 FeeRUB 1 per contract

36. MICEX Derivatives Market financial safeguards Risk management system fundamentals: daily mark-to-market procedures and calculation of variation margin gross-margining and collateral (performance bonds) prepayment compulsory liquidation of insolvent members’ positions MICEX Reserve Fund accounts for RUB 500 million Overall reliability and stability of MICEX derivative market is confirmed by reports of juridical bureau “Milbank, Tweed, Hadley and McCloy”, the Institute of State and Law of The Russian Academy of Sciences and by the KPMG company

37. MICEX Derivatives Market financial safeguards Current limitations: Coming flexibility: Gross-margining Cash collateral Strict liquidation procedures SPAN based portfolio margining Variety of financial collateral Market procedures of settling insolvency situations Collective clearing fund Net-margining of CMs

38. MICEX Derivatives Market IT’S TIME TO SERIOUSLY CONSIDER JOINING THE RAPIDLY EVOLVING RUSSIAN MARKET OF LARGE POTENTIAL

39. Phone:  Phone:+7 (495) 705-96-12 +7 (495) 705-96-27 +7 (495) 705-96-03 Fax:  Fax:+7 (495) 202-75-04 e-mail:  e-mail:derivatives@micex.com Web:  Web:www.micex.ru Contacts MICEX Derivatives Market Division Thank You!