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Moscow Exchange (MOEX) has today announced its financial results for the first quarter (1Q) 2014 according to International Financial Reporting Standards (IFRS). Strong earnings growth was driven by fees and commissions generated by increased trading volumes across markets, particularly the Equity and FX Markets, as well as growth in the depository and settlement businesses.
As an interesting counter-dynamic to many other FX venues and brokerages, MOEX had experienced a considerable upturn in fee & commission income from the FX market, which increased 64.2% YoY to RUB 799.5 mln, while trading volumes rose 95.4% YoY to RUB 53.8 trn. Spot trading volumes grew 60.8% YoY, while swap trading volumes outperformed with 121.6% YoY growth, driven by continued solid demand from customers for liquidity-management products.
These results continued to represent a growth, despite downturns in line with other venues and FX firms during the last few weeks of the first quarter of the year, most notably March’s 20% downturn compared with the previous month, however such a differential between many OTC firms and the FX volume at MOEX bolsters the current interest in exchange-traded FX.
KEY 1Q14 OPERATING AND FINANCIAL HIGHLIGHTS
Total trading volume across all markets increased 43.69% YoY to RUB 120.468 trn.
Total operating income rose 18.0% YoY to RUB 6.51 bln.
EBITDA grew 14.6% YoY to RUB 4.43 bln; the EBITDA margin was 68.0% versus 70.0% in 1Q13.
Net profit increased 23.72% YoY to RUB 3.17 bln; earnings per share (EPS) increased 23.8% YoY to RUB 1.45.
KEY CORPORATE HIGHLIGHTS
Moscow Exchange completed the buyback and subsequently retired quasi-treasury shares from its MICEX Finance subsidiary. This increased existing shareholders’ proportional ownership of the company”s equity and their return on capital (ROC), as well as strengthened corporate governance by preventing voting with these shares.
Moscow Exchange sold its stake in electronic state procurement platform MICEX IT. This move was in line with the strategy of optimising the group”s structure through the disposal of non-core assets.
Moscow Exchange hosted the 2014 Moscow Exchange Forum, one of the largest annual conference of the Russian financial markets community, which brought together more than 1,000 participants.
International central securities depositories Euroclear and Clearstream launched settlement of Russian corporate bonds via their direct links to the Russian CSD, the National Settlement Depository (NSD), a Moscow Exchange subsidiary.
Additionally, Moscow Exchange and Korea Exchange signed a memorandum on cooperation in the field of financial markets, and trading began in an ETF on the MSCI China index.
The start of publication of indicative swap rates increased the relevance and transparency of FX market data.
EVENTS OCURRING AFTER THE END OF 1Q 2014
The new Exchange Council was formed. The Council is Moscow Exchange’s consultative and advisory body, which makes strategic proposals to develop the Exchange”s infrastructure and the Russian financial market.
The Supervisory Board recommended a dividend of 46.83% of FY2013 IFRS net profit, or RUB 2.38 per share.
The risk management systems of the FX and precious metals markets were unified.
Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:”After an outstanding 2013, which was marked by a number of major transformational reforms, Moscow Exchange started 2014 with strong growth of operating and financial results. A volatility spike led to higher trading volumes across most of our markets – Equities, FX, Money Market and Derivatives, which showed significant growth during the first quarter.
“The quarter also saw the first serious market stress-test of our upgraded infrastructure, and I”m pleased to say that we successfully passed through a period of market turbulence. Our risk-management systems worked well, with the Central Counterparty functioning in the T+2 settlement regime, and we have continued to serve our customers by providing uninterrupted access to trading of different asset classes.”
Mr. Evgeny Fetisov, Chief Financial Officer of Moscow Exchange, added: “I”m pleased with the financial performance of Moscow Exchange in the first quarter. Fees and commission and other income demonstrated another quarter of double digit annual growth, hitting a record quarterly number.”
“Our EBITDA margin remained at a healthy level of 68%, while EPS grew by 24% YoY to RUB 1.45. We continued to implement our strategy and were focused on optimizing Group structure following the merger. We sold 100% of our electronic procurement platform (MICEX-IT) as it was a non-core asset, while increasing our stake in NAMEX, the commodities exchange trading grain, to a controlling interest” concluded Mr. Fetisov.
Fee & commission income from the Money Market increased 16.4% YoY to RUB 579.8 mln. Total trading volumes, including repo transactions and the credit & deposit market, increased 20.3% YoY to RUB 46.7 trn. The Central Bank of Russia continued to use the exchange”s infrastructure to inject liquidity into the banking system, leading to 29% YoY growth of Repo transactions with the CBR, while Repo with the Central Counterparty remained in great demand, posting 58x YoY growth.
In the derivatives and market side of the busines, fee & commission income from the Derivatives Market increased 20.7% YoY to RUB 433.7 mln.
While trading volumes increased 25.6% YoY to RUB 14.5 trn (340.3 mln contracts), open interest rose 27.5% YoY to 12.32 mln contracts at the end of 1Q14. Fees and commissions growth was mainly driven by increased volatility and robust activity on spot markets over the quarter. Derivatives on FX grew by 72% YoY and comprised 43% of total trading volume on the Derivatives Market, while derivatives on indices comprised a further 49%.