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Moscow Exchange to Launch Share Market Liquidity Boost Program in January

29.11.2012 17:09 / Interfax

Moscow Exchange MICEX-RTS plans to launch a market making program to boost share market liquidity in January 2013, Stock Market MG Anna Kuznetsova announced at the All-Russia Algorithmic Trading Conference on Thursday.

"Today, exchange robots account for 36% of the stock market share trading volume, versus 60-70% elsewhere in the world. I hope we reach the same level, and to this end the exchange plans to introduce a market-making program for the key 18 shares early next year", she said.

Kuznetsova said that the most liquid securities in the stock market today are Sberbank (SBER) and Gazprom (GAZP), with 25% and 17% of the whole trading volume respectively: "Our goal is to raise the liquidity of other Top 20 shares, which will be covered by the market making program".

Kuznetsova called algorithmic traders “potential market makers” in this program. "A client may call his broker and instruct him to join the market making program. The exchange will sign the contract with the broker", she said.

According to her, traders with daily volumes over RUB 100mn for two weeks are eligible for the market making program.

"We have a number of requirements for market making program participants, including a bid-offer quotes spread", she said, adding that the spread will be set at 0,5-1%, depending on security.

The exchange will reimburse its fee to traders to generate interest, said Kuznetsova. She compared the program incentive to the widespread global practice of returning part of the exchange fee to the market maker.

She said that the compensation for market making program participants will consist of a fixed and a premium amount. "The fixed part will be RUB 100 per share daily, the premium will depend on the volume of trades done at market maker’s quotes. Market making program participants will be ranked by activity in each security, which will affect the premium", said Kuznetsova, noting that the market maker will be potentially compensated for up to 50% exchange fee.

She said that the Exchange Board Stock Market Committee will meet in mid-December to discuss the fine details of the market making program. "Following that, the details will be posted on the website”, she said.

"I would love to see all of you take part in this competition", Kuznetsova told the Conference participants.

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