Moscow Exchange Announces Results for the First Quarter 2016

Moscow Exchange (MOEX) today announces its financial results under International Financial Reporting Standards (IFRS) for the first quarter (1Q) 2016. The quarter saw a significant increase in fee and commission income from the Money Market, FX Market and Derivatives Market, as well as Bond Market.

KEY FINANCIAL HIGHLIGHTS FOR 1Q 2016

• Operating income declined 1.1% YoY to RUB 11.7 bln; fee and commission income increased 32.2% YoY to RUB 5.0 bln;
• EBITDA amounted to RUB 9.2 bln, down 2.6% YoY; the EBITDA margin was 78.1%;
• Net profit amounted to RUB 7.0 bln, down 3.1% YoY; basic earnings per share were RUB 3.1.

KEY CORPORATE HIGHLIGHTS FOR 1Q 2016

• A new product, clearing participation certificates (GCCs), was launched on the Money Market, giving participants greater flexibility to manage their collateral and thus potentially increasing liquidity;
• MOEX benchmarks for the FX, equity, bond and money market segments were recognised as compliant with International Organization of Securities Commissions (IOSCO) principles. This is expected to further strengthen recognition of the Exchange's benchmarks among global as well as domestic investors and market participants;
• New types of centrally cleared OTC transactions, FX swaps and FX forwards, were added to the product line. These were in addition to central counterparty (CCP) cleared OTC interest swaps and CCP-cleared on-exchange FX, interest and cross-currency swaps and FX forwards;
• T+2 settlement cycle was introduced for U.S. dollar-denominated Eurobonds. Moving Eurobonds to T+ is aimed at boosting liquidity and allowing participants to trade Eurobonds against other assets as collateral;
• Shared registration for clients of market participants has been implemented to unify procedures across the Exchange"s markets, revamp the client registration system and cut costs for market participants;
• Trading began in the FinEx Russian RTS Equity UCITS ETF, the first exchange-traded fund tracking the RTS Index.

EVENTS OCURRING AFTER THE REPORTING DATE

• On 27 April MOEX"s AGM approved record dividends of RUB 16,2 bln for 2015 (the record date was May 16) and elected a new 12-member Supervisory Board, which includes five independent directors. Alexey Kudrin was re-elected as Chairman;
• The seventh annual Moscow Exchange Forum, the flagship event of the Russian financial market, was held in Moscow and drew more than 1,900 financial market professionals;
• MOEX expanded its relationship with CQG, a leading software provider for global financial markets, to provide equities and FX trading via CQG's API division Continuum, in addition to derivatives. The move aims to ease access to MOEX"s markets for international traders.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:

"We are pleased to announce substantial 32.2% growth of fee and commission income in the first quarter. This excellent financial result at a time of subdued economic activity and declining market interest rates once again highlights the strength of Moscow Exchange"s diversified product line and the reforms to the market infrastructure we have implemented in recent years.

"We devote a great deal of attention to new products that open up opportunities for market participants and allow us to maintain high levels of profitability. I am particularly pleased to note the growing popularity of repo operations with the CCP and repo with GCCs.

"Our priorities for the second half of the year remain expanding the range of products and services we offer to improve trading and clearing efficiency, attracting more Russian retail clients and continuing our work to promote the Russian market and Russian issuers among international investors."

Evgeny Fetisov, Chief Financial Officer of Moscow Exchange, added:

"We made a strong start to the year. Fee and commission income increased across almost all our products, with the highest growth rates on the Derivatives Market (+108.3% YoY), Money Market (+50.6% YoY) and FX Market (+48.1% YoY). Lower interest rates led to contraction of interest income as expected, while on the other hand overall client activity increased. Costs remained tightly controlled, rising 7.2% YoY amid higher inflation. Cost discipline allowed us to deliver an impressive EBITDA margin of 78.1%."

FINANCIAL HIGHLIGHTS

ANALYSIS OF 1Q 2016 FINANCIALS

Total Operating Income. Operating income declined 1.1% YoY to RUB 11.7 bln. Fee and commission income increased 32.2% YoY, thanks to robust trading volume growth across almost all markets, in particular the Money Market (+36.7%), FX Market (+59.5%), Derivatives Market (+107.6%) and Bond Market (+25.6%). Interest income contracted by 16.6% YoY due to lower market interest rates.

Securities (Equities & Bond) Market. Fee and commission income from the Equities Market declined 7.4% YoY to RUB 398.1 mln. Total trading volumes in 1Q 2016 were RUB 2.3 trln, down 6.0% YoY. The total capitalisation of the Equities Market was RUB 31.3 trln (US$ 459.4 bln) as of 31 March 2016. Fee and commission income from the Bond Market increased by 26.3% YoY to RUB 281.0 mln. Issuance of federal government bonds (OFZs) grew by 163.3% YoY to RUB 243 bln. Total trading volumes in 1Q 2016 were RUB 2.7 trln, up 25.6% YoY. Listing and other services fees increased 16.7% YoY to RUB 101.2 mln.

FX Market. Fee and commission income from the FX Market increased 48.1% YoY to RUB 1.3 bln. Trading volumes on the FX Market totalled RUB 89.0 trln, up 59.5% YoY. Thanks to continued FX rate volatility, spot trading volumes rose 69.1% YoY, while swap trading volumes increased 53.8% YoY on the back of continued demand for liquidity-management products.

Money Market. Fee and commission income from the Money Market demonstrated solid growth of 50.6% YoY, reaching RUB 1.2 bln. Total trading volumes on the Money Market including repo transactions and the deposit and credit market grew 36.7% YoY to RUB 68.6 trln. Repo with the CCP trading volumes continued to grow robustly (+228.3% YoY) and accounted for 52.2% of total repo transactions. 

Derivatives Market. Fee and commission income from the Derivatives Market grew by 108.3% YoY to RUB 513.3 mln. Trading volumes in contract terms increased 78.1% YoY and amounted to 556.5 mln contracts totalling RUB 35.5 trln, largely driven by growth of futures on commodities and FX, and options. Options trading volumes grew by 120.9% YoY and reached Rub 17.9 mln contracts. Open interest reached RUB 586.8 mln by end of 1Q, a 74.4% YoY increase.

Depository and Settlement Services. Fee and commission income from depository and settlement services increased 1.9% to RUB 838.4 mln. Assets on deposit at the National Settlement Depository (NSD) increased to RUB 31.7 trln as of 31 March 2016 from RUB 27.4 trln at 31 March 2015, and averaged RUB 32.0 trln for 1Q 2016.

Other Fee and Commission Income. Other fees and commissions increased by 23.7% and amounted to RUB 394.8 mln. The biggest contributors were revenue from the sale of market data and information services (RUB 202.6 mln, up 14.9%) and revenue from the sale of software and technical services (RUB 152.7 mln, up 20.0%).

Net Interest & Other Finance Income. Interest and other finance income decreased 16.6% YoY to RUB 6.7 bln due to lower market interest rates and a reduction in the investment portfolio. Funds available for investments averaged RUB 1,151 bln in 1Q 2016, down 14% YoY due to lower market participant balances.

Expenses. Operating expenses grew by 7.2% YoY to RUB 3.1 bln in 1Q 2016, below Russia's inflation rate. Administrative and other expenses grew by 1.8% YoY to RUB 1.4 bln. Higher depreciation and maintenance of property and equipment and higher market maker fees were offset by cost savings on rent and office maintenance, professional services and taxes other than income tax. Personnel expenses grew by 12.4% YoY to RUB 1.6 bln, driven by execution of vested rights to purchase shares granted to the management team and higher spending on social taxes.

Cash and Cash Equivalents. Moscow Exchange's cash position[1] at the end of the quarter stood at RUB 87.7 bln. The Exchange had no debt as of 31 March 2016.

Capital Expenditures amounted to RUB 278.2 mln, of which RUB 101.4 mln was spent on equipment and software purchases & development.

Moscow Exchange consolidated IFRS financial statements for 1Q 2016 are available on the Investor Relations section of the company's web site.

A webcast for the 1Q 2016 IFRS Financial Results is scheduled on May 17th at 5 pm Moscow time (3pm London time / 10 am New York time).

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NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages the sole multifunctional exchange platform in Russia for equities, bonds, derivative instruments, currencies, money market instruments and commodities. The Group includes the central depository (National Settlement Depository), and a clearing centre (National Clearing Centre), performing the functions of central counterparty on the markets, which allows Moscow Exchange to render the full spectrum of trading and post-trading services to its clients.

Moscow Exchange ranks among the world's top 25 exchanges by total volume of equities traded, and also among the 5 largest exchange platforms by bonds and top-5 by derivatives trading. As of 1 March 2016 securities of 713 issuers are admitted to trading on the securities market of Moscow Exchange, including securities of the largest Russian companies by market capitalization.

Moscow Exchange was formed in December 2011 as a result of a merger between Russia's two main exchange groups - MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia; and RTS Group, at the time the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes, which was reorganized into an open joint stock company (OJSC) and was named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

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