Russian Trading System

» see rts.ru as it lived, on the wayback machine

~ the obit ~

In 1995 Russia had a stock market in the sense that shares existed and people traded them, scattered across regional floors with no common price. A group of market professionals set up a non-profit partnership that September to pull those floors into one screen-based system, and called the result the Russian Trading System. It was modeled on NASDAQ's trading and settlement software. By 1998 the exchange was running a system it had built itself.

What made RTS distinct from the exchange across town was the currency. MICEX, the older Moscow Interbank Currency Exchange, quoted in rubles and settled in rubles. RTS quoted and settled in dollars, and ran on non-anonymous quotes without requiring either side to pre-deposit the shares or the money. That made it the exchange foreign money actually used, and it made the RTS Index, first calculated on 1 September 1995 and denominated in dollars, the number the rest of the world read when it wanted to know what Russia was worth that morning.

It was a brutal number to be in charge of. The index was above 570 in late 1997 and had lost more than nine tenths of that by October 1998, when the government defaulted and the ruble went. It climbed back through the oil decade to close at 2,487.92 on 19 May 2008, touching 2,498.10 that day, then fell by three quarters in the following six months. Two decades of Russian economics are legible in one line on a chart.

The end was policy rather than failure. Russia wanted Moscow recognized as an international financial center, and having two competing exchanges with two different settlement regimes was the obvious thing to fix. MICEX and RTS agreed to merge, and the opening bell on 19 December 2011 was rung for one exchange instead of two. The merged company was named MICEX-RTS at first, then simply Moscow Exchange.

~ the rap sheet ~

~ the dollar index ~

Quoting a national stock market in a foreign currency is a decision with a meaning attached. It says the buyers you care about are not the ones who earn in rubles, and in the Russia of the late 1990s that was accurate. The RTS Index made currency risk and equity risk the same number, which is why it fell so much harder than its ruble-denominated twin in both crashes.

The exchange in the news where I grew up was the one in Istanbul, and in 1998 a Turkish teenager was watching the lira do its own version of this. The two countries ran parallel experiments in what happens to an inflation economy with a young stock market attached, and the charts from those years rhyme more than anyone in either country enjoyed.

~ the derivatives half ~

RTS also owned FORTS, which by the late 2000s was the main venue for Russian futures and options and carried volumes the equity side could not match. That business is the real reason the merger terms looked the way they did: MICEX had the cash market and the ruble settlement, RTS had the derivatives franchise and the foreign relationships. FORTS kept trading through the merger and is the derivatives arm of Moscow Exchange today.

~ what carries the name now ~

The RTS Index is still there. Moscow Exchange calculates it every trading day from the same basket of large Russian names, still in dollars, as the companion to the ruble-denominated MOEX index. An exchange that stopped existing in 2011 left behind the single most quoted number about Russian equities, and foreign desks kept reading it long after the institution that invented it had been absorbed.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »