National Clearing Centre National Clearing Centre 2008

2 National Clearing Centre (NCC) NCC was incorporated on October 24, 2005, as a closed joint-stock company NCC’s shareholders are: Moscow Interbank Currency Exchange, % National Depository Center, 0.671% Authorized capital: – in 2008, the authorized capital will increase to million roubles (~ EUR 49 million). – today, the equity is 824,4 million roubles, including the authorized capital of 700 million roubles.

3 MICEX Settlement House MICEX NDC Cash settlements Depository operations Organization of trade: foreign currency, government securities, bonds, standard contracts. Clearing in government securities markets (stock and futures markets) Engineering project support and development of new IT products Saint PetersburgYekaterinburgSamaraNizhni Novgorod Novosibirsk Rostov-on- Don Vladivostok Regional currency and stock exchanges MICEX Stock Exchange National Mercantile Exchange Organization of trade in stock, corporate and municipal bonds, units in mutual funds, stock index futures Government intervention in the grain market Trade: petroleum products, grain NCC NCC in the MICEX Group Clearing operations and trade settlements

4 NCC’s Operating Principles NCC is the central counterparty control of collateralization of executed transactions control of performance of obligations based on PVP and DVP principles ongoing maintenance of NCC’s liquidity, specifically through the retention of liquidity suppliers NCC takes risks associated with possible non-performance of clearing obligations by clearing members

5 Basic Elements of NCC’s Risk Management System Limitation of traded instrument price fluctuations Preliminary depositing of participants’ funds Availability of guarantee funds Fixing of various types of limits Setting requirements for the clearing participants’ financial standing and control over it Mechanism for the substitution of an unfair participant by the Bank of Russia MICEX’s of 2.6 billion rubles guarantees NCC’s capital

From December 10, 2007, National Clearing Centre operates as central counterparty in the MICEX FX market

7 NCC TODAY NCC’s total balance as of April 1, 2008, is 37,8 billion roubles Total balance of derivative transactions as of April 1, 2008, is billion roubles USD- and EUR-denominated account balance as of April 1,2008, in the rouble equivalent exceeds 10 billion rouble The total number of banks-clearing participants is 464, including 338 Moscow banks and 126 regional banks 228 banks participate in the USD 4,6 million Risk Covering Fund The equity is 824,4 million roubles, including 700 million roubles of the authorized capital Daily turnover of FX trade in March reached USD 7 billion

8 Volumes of Trade in the Foreign Exchange Market Involving the Central Counterparty January 2007 February 2007 March 2007 January 2008 February 2008 March 2008 Total trade volumes (roubles in billions) 1,466.32,093.62,028.92,749.43,468.32,484.5 Including EUR- denominate d volumes ,8

9 Correspondent Banks JPMorgan Chase Bank, New York The Bank of New York, New York Deutsche Bank, Frankfurt/Main VTB Germany, Frankfurt/Main BELVNESHECONOMBANK, Minsk PRIVATBANK, Dnepropetrovsk Bank TuranAlem, Almaty

10 NCC’s Regional Settlement Model Saint Petersburg Moscow Nizhny Novgorod Novosibirsk Rostov-on-Don Yekaterinburg Vladivostok Samara

11 Development of NCC’s Clearing Operations Introduction of the central counterparty in the REPO government securities market Upgrading of risk management system Broadening the range of services provided Extension of clearing to other financial market segments

12 NCC in the REPO Government Securities Market NCCoperates as the central counterparty Deals are concluded under the following terms: full or partial preliminary collateralization for the first part of a repo; partial preliminary collateralization for the second part of a repo; REPO deals are concluded upon matching of dealers’ requests and confirmations from NCC The first and second parts of REPO deals are settled upon transaction settlement requests received from dealers and NCC

13 Improvement of Risk Management System in the Currency Market Setting of the exchange rate fluctuation limits and preliminary depositing standards depending on the external market situation adjusted for the current composition of two- currency basket: - - symmetric increase of the exchange rate fluctuation limits with respect to the central rate of the current trading day and a proportionate increase in preliminary depositing standards; - non-symmetric setting of the exchange rate fluctuation limits with respect to the central rate of the current trading day towards the external market trend without changing preliminary depositing standards. Increase of the Risk Covering Fund Setting of various modes of operations performed by trade participants depending on the assessment of the current market volatility and the status of their open positions Insurance of the NCC operational risks Extension of Risk Management System to various financial market segments Establishing of the Risk Committee and arranging of its functioning

14 Modes of Operations Participant will have the opportunity to operate depending on the assessment of the current market volatility and the status of his open market positions: Basic mode: the participant’s operations are not limited, for collateral fully covers potential exchange rate risk associated with his positions; Restricted mode: with the scale of the participant’s potential losses reaches the amount of collateral, the participant will have the opportunity to operate only for closing the existing positions; Position close-out mode: if the participant fails to allocate collateral or its amount is not sufficient, the participant’s operations are put on hold and his position is closed out during the trading session.

15 NCC’s Services Development Setting the limits of EUR-denominated net operations Currency band regulation Online matching of clearing participants’ positions Intraday crediting of clearing participants to facilitate their obligations’ settlement Maintaining a single ruble-denominated position of participants in exchange markets Offering clearing participants an opportunity to settle securities transactions in foreign currency Offering participants an opportunity to execute transactions in the stock market with partial preliminary collateral Creating a single clearing participant’s “portfolio” to settle operations in various financial market segments Beginning of operation in the interbank credit market

REGULATION OF CLEARING OPERATIONS

17 Today’s Regulatory Framework for Clearing Operations Clearing operations are governed by: - Federal Law No. 39-FZ of April 22, 1996 “On the Securities Market”, which defines clearing and clearing operations only in the securities market; - Resolution of the Federal Commission for the Securities Market No. 32-ps of August 14, 2002, which only defines ordinary, multilateral and centralized clearing in the execution of securities transactions; - Regulations of the Central Bank of the Russian Federation No. 219-P of March 25, 2003 and No. 220-P of February 25, 2003, which govern clearing in the government securities market. Standards applied to clearing in the securities market are used for clearing in the currency and government securities markets.

18 Improvement of Clearing Laws in Russia The central counterparty’s (CCP) legal status defining will allow to introduce the CCP in the financial market as an independent infrastructural entity which concludes transactions for clearing purposes without being a trade participant and is rewarded for rendering clearing services. Determination of the legal status of deposited and blocked funds (property) of clearing participants for securing their obligations will allow to reduce the risk they litigate the use of the above-mentioned funds by the CCP. Introduction of separate legal status and usage mode for clearing accounts to prevent them from being used in the bank account mode envisioned by the Civil Code of the Russian Federation, including unconditional cash debiting upon the clearing participant’s request. The clearing institution needs to have the right to withhold the clearing participant’s funds until its obligations are fully fulfilled.

19 Improvement of Clearing Laws in Russia (contd) Amendment to the Laws “On Joint-Stock Companies” and “On Limited Liability Companies” stating that the standard for major and related-party transactions will not apply to transactions concluded in the course of organized trade, which will reduce the risk of litigation of the above-mentioned transactions by market participants, including transactions with the CCP. Establishing the possibility and procedure for using assets of the Risk Covering Fund and guarantee funds in full volume. Introduction of the procedure for the fulfillment of obligations by the clearing participant in case of his bankruptcy or license withdrawal will allow to terminate the obligations of such participant only after their fulfillment. Establishing legal grounds and procedures for the cancellation of clearing service agreement will allow to cancel such agreement by mutual consent between the parties rather than at any time as provided for by Chapter 39 of the Civil Code of the Russian Federation.

20 Improvement of Clearing Laws in Russia (contd) Establishment by law of the procedure and new way for termination of obligations in the course of clearing will allow a clearing institution to define and terminate the obligations of clearing participants. None of the ways for termination of obligations currently envisioned by the Civil Code of the Russian Federation allows the clearing institution which is not a party in the transaction to terminate the clearing participant’s obligations. This does not allow to conduct ordinary or multilateral clearing operations. Clearing with the CCP is not envisioned by laws of the Russian Federation. Centralized clearing operations can only be performed using the assignment of rights what requires the consent from the other party in the transaction. The clearing centre has to track the rights and obligations of the party so as not to become the all-in-one debtor and creditor in the result of assignment.

21 National Clearing Centre Thank you for your attention! Our address: Russia, , Moscow, Bolshoy Kislovsky Pereulok, 13 Telephone: +7 (495) Internet: