April 10, 2008

Two new contracts will help develop commodity derivatives within the MICEX Group

On April 9, the National Mercantile Exchange (NAMEX), part of Russia’s MICEX Group, launched trading in delivery futures on wheat. This is a major contribution to the development of Russia’s grain industry and its financial markets.

Market participants will be able to trade two types of wheat futures: contract for wheat futures on FOB terms, Port of Novorossiysk, and contracts for wheat on EXW (franco-elevator) terms, on grain elevators located in the Southern Federal District. Initially, trading will be with delivery in July, September and November 2008.

The introduction of on-exchange trading in grain futures on the NAMEX will contribute to the creation of a new international trading center setting grain prices in the Black Sea region. It should also help to achieve the long-term goal of further developing Russia into one of the world's major financial centers, with a well-developed system of on-exchange trading in strategic commodities, as set by the Russian Federation’s President.

In recent years, Russia has become a major exporter of grain, and today the country is beginning to play a leading role in world food markets. Using exchange-based mechanisms, primarily derivatives, to insure against price risks is common practice in the international grain market.

The development of the on-exchange grain market in Russia will help to:

• form representative prices for grain; obtain a price indicator from the grain market that can be used to help form government price policy in terms of the market price for farm products

• enable market participants to insure against the risk of adverse movements in grain prices, and optimize the financial planning of their economic activities. This includes bank provision of credit to agricultural producers

• improve the competitiveness of domestic agricultural producers in the international market

• attract participants in the grain market from Kazakhstan and Ukraine to on-exchange trading in Russia, and create better conditions for the formation of a unified export policy for the CIS countries

The project is being implemented based on the MICEX’s technological infrastructure, with the support of the Russian Federation’s Ministry of Agriculture, the Administration of the Krasnodar Region and the Russian Grain Association.

Another advantage of the contracts launched is the structure within which trading and settlement are all organized within the MICEX Group – the NAMEX organizes trading, the MICEX acts as the technological centre and the clearing organization, and the MICEX Settlement House handles settlement. This structure should considerably improve the reliability of trading and delivery. Settlement for contracts is effected in Russian roubles only.

The parameters of the new futures contracts were developed with the participation of the Russian Grain Association and major operators of the grain market. The intention is for them to become base price indicators and hedging instruments for participants in the grain market as they reflect commodity flows (including export flows) in the Russian grain market.

To celebrate the launch of the grain futures market, the NAMEX held its traditional ceremony, which included striking the Exchange’s bell. The ceremony was attended by the Minister of Agriculture Alexei Gordeyev, President of the Russian Grain Association Arkady Zlochevsky, President of the Russian Exchange Association Anatoly Gavrilenko, the MICEX President Alexander Potemkin, and Director of the NAMEX Sergey Naumov.

First trades were made by the following members of the Section and their clients: Alor-Invest, Rosselhozbank, Unified Electronic Systems Corporation, Police Invest Investment Company, Agrotek and others.

In the course of the first trading session, participants in trading concluded 23 transactions in wheat futures for the overall amount of 11.3 million rubles.

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