1. What is an exchange? What exchanges are created for?
An exchange Á classical institution of market economy, which forms a wholesale market of goods and financial assets by organizing and regulating exchange trading. The main activity of an exchange is creating favorable conditions for concluding commercial transactions during public trades, held in a certain place at an established time.
2. When and where were the first exchanges established?
Four hundred years of the history of exchange business shows that exchanges have always been one of the main infrastructure elements of the sphere of circulation of market economy. Its mechanism was honed through centuries: The first classical exchange appeared in Antwerp (1531). Later, exchanges appeared in Lyons and Toulouse (1549), London (1556), Amsterdam (1608) and Russia (1703). Some researchers think that the prototypes of the exchange were organized gatherings of merchants, who traded in accordance with established Rules. In Russia, one of the first merchants’ associations was the Ivanov Hundred in Novgorod, named after the Church of John the Baptist; in its vicinity merchants carried out their trading activity in the early 12th century.
“MICEX” means the Moscow Interbank Currency Exchange. Each word in this name has its historical background and conveys the idea of the Exchange at the time of its creation in 1992. In that year, the MICEX was established by Russia’s leading commercial banks for the purpose of organizing exchange trading in foreign currency. Gradually, with the development of exchange trading in Russia and the implementation of new technologies, this name has largely become a trade mark, as the business of the MICEX has become more versatile. At present, the MICEX organizes trading in different financial assets: currency, securities and futures. Over 1000 organizations work on the MICEX. These are professional participants in the exchange market -- leading banks, financial and broker companies.
The MICEX was established on 9 January 1992 as a close corporation on the basis of Center for Interbank Currency Transactions at the Bank of Russia. The founders of the MICEX were the RF Central Bank, leading commercial banks, the Government of Moscow and the Association of Russian Banks. The main aim of the MICEX was organizing interbank trading in currency and other financial instruments. On 1 July 1992, the Bank of Russia began to use the MICEX exchange rate to set the official exchange rate of the ruble against foreign currencies. In 1993, the MICEX started trading in government securities, in 1996 — in futures, and in 1997 — in corporate securities.
5. How is trading in currency organized on the MICEX? How is the exchange rate of the US dollar determined and how different is it from the official exchange rate set by the Bank of Russia?
At present, daily trading is held on the MICEX in seven foreign currencies, including the US dollar and the euro. About 800 banks participate in trading, which hold the currency license of the Bank of Russia. Trading is held in the system of electronic lot trading (SELT), which is a complicated electronic and computing complex, to which a large number of remote participants’ terminals are connected. By means of computers participants enter orders to buy or sell currency, while the system automatically registers transactions under the terms stipulated in the Rules. During one day several thousand transactions in currency are concluded (mainly, in the US dollar) in different amounts of currency and at different prices. Following the results of each trading session, the average weighted exchange rate of each currency is calculated and announced in information bulletins. When determining the official exchange rate of the ruble against the US dollar, the Bank of Russia uses the average weighted exchange rate of the ruble against the US dollar reached in the last morning exchange session (UTS) and rounds it off to one kopeck.
Besides currency, trading is held in stocks and corporate bonds of Russia’s leading issuers, government securities (GKO, OFZ), municipal bonds and futures on the US dollar.
7. Can an individual buy or sell currency (or stocks) on the MICEX? What is necessary for that?
Individuals can not participate in trading directly, but can enter into transactions in exchange assets through official dealers (brokers) -- authorized banks and financial companies — members of the MICEX. For this, an individual must sign a broking agreement with one of them. Recently, individuals have begun to actively use the Internet to enter orders to buy/sell stocks or bonds through their brokers.
8. Where can one find information about the exchange rate of the US dollar and other currencies and stocks quotations on the MICEX?
This information can be regularly received through radio and TV. Professional participants receive information in the real-time mode through the MICEX web site, news agencies (Interfax, Reuters, etc.) or with the help of WAP-technologies.
9. I would like to speculate on the stock exchange but I know nothing about it. Is there any literature on the securities market and financial analysis?
The available literature is vast. One could start with reading the following books:
Exchange Business (manual for universities)/Editied by F.Gryaznova et al. — M.: Financy i Statistika, 1995.
Exchange Portfolio/ Editied by Yu.Rubin — M.: Somintek, 1993.
Ya.Mirkin. Securities and the Stock Market. — M.: Perspektiva, 1995.
Securities (manual)/ Editied by V.Kolesnikov, V.Torkanovski. — M.: Financy i Statistika, 1998.
Kottle S., Murray R., Block F. Securities Analysis of Graham and Dodd / Translated from English — M.: Olymp-Busines, 2000.
Williams B., New Dimentions in Exchange Trading / Translated from English — M.: IK Analitika, 2000.
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