EDX London, the London Stock Exchange’s derivatives business, and OMX will offer futures and options based on Russian securities traded on the London Stock Exchange's International Order Book (IOB) from 1 December 2006.
The Russian IOB Equity Derivatives service will meet demand from banks active in over-the-counter Russian derivatives trading for the lower costs, reduced risk and improved operational efficiency offered by on-exchange trading.
The service will offer trading in index derivatives based on the new FTSE Russia IOB Index, which measures the performance of the ten biggest and most liquid Global Depositary Receipts (GDRs) issued by Russian companies on the London Stock Exchange. In addition, single stock options and futures will be available on all ten index constituent companies. Key benefits of the service include:
- Access for a wider range of market participants
- Dedicated Market Makers providing liquidity support on the order book
- Central counterparty clearing and multilateral netting of payments between participants
- Automatic settlement into DTCC or Euroclear
- Efficient processing of corporate actions via the London Stock Exchange
- Physical delivery of single stock derivatives
- Free broking and trade support through EDX London and OMX Market Place Services
- Flexibility to report bilaterally negotiated trades through the Cleared-Only service.
Martin Graham, Director of Markets at the London Stock Exchange, said: "The provision of the first on-exchange derivatives service is a major step for the growing market in Russian GDR derivatives and a significant development for EDX London. The new derivatives will reduce the cost of trading and provide far greater operational efficiency; improving liquidity, and making it easier for a wider range of participants to gain derivatives access to one of the largest and fastest growing markets in the world. Trading in Russian IOB securities so far this year has reached £183.1 billion, an increase of 188 per cent on the same period last year, demonstrating that the London Stock Exchange's Russian GDRs are fast becoming an established market."
Henrik Paulsson, President of Derivatives Markets at OMX, said: "We are seeing strong interest in the Russian market and the Energy sector. Therefore, we are extremely excited to launch a standardised derivatives service focusing on Russian products. This is a unique opportunity to gain access in a cost-efficient way to the liquidity of the developing market in Russia."
Roger Naylor, Head of Equity Trading, CEEMA at Deutsche Bank, said: "This is the first on-exchange derivatives service for DRs in one of the world's most important and fast-growing markets. It will bring significant savings for us in terms of cost, efficiency and risk reduction and we are delighted to be involved right at the very start."
Trades reported through the Cleared-Only Service will benefit from on-exchange efficiencies, including the clearing of trades to LCH and OMX and the management of a trade through its lifetime under transparent and neutral rules. Trade data on cleared-only trades will not be published to the market and trades can be reported up to one day after trade execution.