Trading Procedure
The trading procedure in the MICEX government-backed securities market is based on the “order-driven market” principle – a market of competing orders where a trade is automatically executed when the terms of two counter orders match.
The trading system is fully computerized: orders are entered and trades are executed electronically. When a Dealer enters an order, this signifies his unconditional consent to make a trade on the terms specified in the order.
Orders are entered and trades are made during the trading day during the following periods:
- main trading session;
- additional trading session.
In the main trading session, trades in the main trading mode and negotiated deals are made.
The procedure for the additional trading session is established by the Bank of Russia. It is designed for making and executing REPO trades against the Bank of Russia and negotiated deals with the Bank of Russia.
In the system (main) trading mode, anonymous trading is carried out on the “order-driven market” principle. Traders enter “non-addressed” orders (orders that do not indicate a specific counterparty) into the Trading System.
In the main trading mode, entering limit orders and market orders is allowed. A limit order is fulfilled at a price not higher (buy order) or lower (sell order) than the price indicated in the order. A market order is fulfilled at the best counter order price on the market at the time it is entered.
Limit orders are subdivided into two types: competing and non-competing orders. Unlike competing orders where the price of security is indicated by the Dealer himself, non-competing orders are entered into the Trading System at the average weighted price as of the time they are entered, which is automatically calculated by MICEX. Orders may be entered with or without remaining in the Orderbook.
All trades in the system mode are made with full preliminary reservation of funds and securities (settlement code Т0)
Negotiated deals are made on orders that indicate a specific counterparty, therefore the market is an “address” market.
Negotiated deals may be divided into those without confirmation (negotiated deals between a Dealer and an Investor served by the Dealer, or between two Investors served by the same Dealer) and with confirmation (negotiated deals between Dealers acting in their own names and at their own expense, or at the expense of and under the instructions of Investors).
Traders may make negotiated deals with preliminary reservation of funds and securities (settlement code Т0) or without preliminary reservation (settlement code Sn) When making negotiated deals, the Trader may select settlement codes from the list of those available. The allowable values of n are set by the Bank of Russia.
It should be noted that all trades are executed solely on the “delivery vs. payment” principle.