Moscow Exchange Announces 3Q 2016 Results

Moscow Exchange (MOEX) today announces its financial results under International Financial Reporting Standards (IFRS) for the third quarter of 2016. Increases in fee and commission income from the Money Market, Fixed Income Market and Depository & Settlement Services partially offset lower interest income and allowed the company to maintain its best-in-class EBITDA margin.

KEY FINANCIAL HIGHLIGHTS FOR 3Q 2016

• Operating income decreased by 3.5% YoY to RUB 10.78 bln
• Fee and commission income increased by 4.2% YoY and reached RUB 4.75 bln
• EBITDA declined by 8.1% YoY to RUB 8.40 bln with the EBITDA margin equal to 77.9%
• Operating expenses grew by 19.8% YoY to RUB 2.98 bln
• Net profit decreased by 9.9% YoY to RUB 6.29 bln; basic EPS decreased by 10.5% to RUB 2.80

KEY CORPORATE HIGHLIGHTS FOR 3Q 2016

• MOEX launched new deliverable futures contracts on USD/RUB, EUR/RUB and CNY/RUB, as well as a new currency pair, CHF/RUB.
• The Emerging Markets Trading Association (EMTA) and CME Group began using Moscow Exchange's USD/RUB FX fixing as the major settlement rate for rouble derivatives. This fixing complies with IOSCO principles and was approved by the Central Bank of Russia.
• NSD launched the Corporate Information Center, a single source for corporate data in Russia.
• MOEX EGM voted for consolidation of MOEX"s 100%-owned subsidiaries CJSC MICEX Stock Exchange and MB Technologies. The restructuring will optimise the Group"s corporate structure, streamline customer relationships with Group companies and reduce costs both for customers and for the Exchange.

EVENTS OCCURRING AFTER THE REPORTING DATE

• The DataSpace1 became the Exchange's primary data center. The M1 data center is now operating as a disaster recovery site. Migration to the reliable cutting-edge data center will ensure better quality of services and connectivity to MOEX markets.
• Trading in new futures contracts on Rouble Overnight Index Average (RUONIA) rate began. New futures will allow market participants to hedge their short-term interest rate risks.
• MOEX began formation of an Expert Council on Listing. The principle goal of the Council is to improve the quality of on-exchange traded assets and ensure the rights of investors.
• MOEX expanded its fixed income offering by launching an overnight exchange-traded bond program.

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

"Moscow Exchange is continuing to execute successfully on its strategy, improving services, introducing new instruments and attracting new investors to trade on the Russian market. In an environment of sharply lower volatility and reduced investor activity across most emerging markets, Moscow Exchange posted growth in trading volumes on the bond market, money market and in commodity futures. Market participants appreciate the reliability of trading via the central counterparty and the transparency offered by on-exchange pricing, and are executing an increasing share of their trades through the Exchange. During the quarter we have seen 11 percent growth in total trading volumes and an increase in fee and commission income. As expected, reductions to interest rates have resulted in a normalization of interest income as a share of total income.

We are confident that Moscow Exchange has the required infrastructure in place as and when trading volumes and capital raisings on the Russian market accelerate."

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

"We continued to operate in a low volatility environment in 3Q 2016. Despite calmer markets, we managed to grow our fees and commissions by 4.2% YoY. We are pleased to see healthy growth of non-trading fees, including information sales, sale of software and technical services, as well as depositary services, which comprised 26.6% of total fee income in 3Q. Thanks to well-run treasury operations, net interest and other finance income was quite resilient (-8.3% YoY) despite lower client balances (-31.0% YoY) and declining interest rates.

"We put into operation a significant amount of new hardware as we prepared the switch to Dataspace1 as our main data center, and continued work on new IT architecture. This led to higher depreciation and amortisation as well as maintenance costs. As a result, operating expenses grew by 19.8% YoY, bringing the 9M growth rate to 11.1%, slightly below the FY guidance. Our EBITDA margin remained at a solid 77.9%."

FINANCIAL HIGHLIGHTS

ANALYSIS OF 3Q 2016 FINANCIALS

Total Operating Income. Operating income in 3Q amounted to 10.78 bln, down 3.5% YoY. Fee and commission income increased by 4.2% YoY, driven by growth of trading volumes in the Money Market (+78.1% YoY) and the Fixed Income Market (+16.8% YoY), a shift of trading to higher yielding instruments in the Derivatives Market and increased non-trading fees and commissions. Net interest income declined by 8.3% YoY to RUB 6.03 bln due to lower average client balances and lower interest rate environment.

Securities (Equities & Bond) Market. Fees and commissions from the Securities Market grew by 7.7% YoY and reached RUB 806.4 mln due to strong secondary trading volumes (+10.7%) in the Fixed Income Market and healthy primary placements from both the government and corporates (+38.1% YoY). Fee and commission income from the Fixed Income market rose by 21.9% YoY to RUB 363.4 mln. Fee and commission income from the Equities Market declined by 12.5% YoY to RUB 341.0 mln due to lower trading volumes, down 9.7% to RUB 2.01 trln. The total capitalization of the Equities Market was RUB 33.78 trln (USD 535.36 bln) as of 30 September 2016. Listing and other services fees grew 67.3% YoY, reaching RUB 102.0 mln.

FX Market. Fee and commission income from the FX Market amounted to RUB 1,016.7 mln, down 18.6% YoY. Trading volumes declined by 16.9% on the back of lower volatility of FX rates, with the spot and swap trading volumes contracting by 22.7% and 14.1% YoY, respectively.

Money Market. Fees and commissions from the Money Market increased by 22.1% YoY to RUB 1,192.4 mln. Trading volumes in the Money Market increased by 78.1% YoY to RUB 88.10 trln. The repo segment grew by 85.2% YoY, with most of the growth attributable to repo with the CCP (+158% YoY), which comprised 61.9% of all on-exchange repo volumes in 3Q 2016. The average maturity of on-exchange repo transactions contracted from 3.80  days in 3Q 2016 to 3.21 days in the reporting period. The credit and deposit segment of the Money Market posted 39.4% YoY growth of trading volumes to RUB 10.64 trln.

Derivatives Market. Fee and commission income from the Derivatives Market was RUB 472.8 mln in 3Q 2016, up 8.2% YoY, while overall trading volumes declined by 11.1% YoY to RUB 26.61 trln (-4.8% YoY in contract terms). A continued shift towards trading of higher yielding instruments more than offset the decline in trading volumes. Commodity futures trading volumes grew by 245.6% YoY (in contract terms), comprising 28.9% of total futures trading volumes versus 7.9% to in 3Q 2015. The share of options in the Derivatives Market"s trading volumes continued to grow and accounted for 3.3% vs. 2.7% in 3Q 2015.  Options trading volumes grew by 15.5% YoY (in contract terms).

Depository and Settlement Services. Fee and commission income from depository and settlement services grew by 7.8% YoY to RUB 895.0 mln. Assets on deposit at the National Settlement Depository (NSD) amounted to RUB 33.55 trln as of 30 September 2016, up 4.1% from RUB 32.22 trln as of 30 June 2016. Assets on deposit averaged RUB 33.10 trln in 3Q 2016.

Other Fee and Commission Income. Other fees and commissions increased to RUB 366.1 mln (+15.8% YoY). The growth was driven by higher sales of information services (RUB 181.3 mln, up 6.3% YoY) and sales of software and technical services (RUB 160.9 mln, up 20.1% YoY).

Net Interest & Other Finance Income. Net interest and other finance income amounted to RUB 6.03 bln, down 8.3% YoY, driven by both lower client funds and lower interest rates. Funds available for investment averaged RUB 779 bln, down 28.4% YoY.

Expenses. Operating expenses grew by 19.8% YoY and amounted to RUB 2.98 bln. Administrative and other expenses increased by 32.6% YoY to RUB 1.55 bln, primarily due to increased depreciation and amortisation thanks to commissioning of new hardware and higher spending on maintenance of equipment and software. Personnel expenses increased by 8.4% and reached RUB 1.43 bln, comprising 48% of total cost.

Cash and Cash Equivalents. Moscow Exchange's cash position[1] at the end of 3Q 2016 amounted to RUB 78.67 bln, up 14.3% YoY. The Exchange had no debt as of 30 September 2016.

Capital Expenditures for 3Q 2016 totalled RUB 1.01 bln (RUB 2.62 bln total for 9M 2016), RUB 433.7 mln of which was spent on IT and software development.

Moscow Exchange"s consolidated IFRS financial statements for 3Q 2016 are available in the Investor Relations section of the company's website.

A conference call and webcast covering the 3Q 2016 IFRS financial results is scheduled on 9 November at 5 pm Moscow time (2 pm London / 9 am New York).

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages Russia's main exchange platform for equities, bonds, derivatives, currencies, money market instruments and commodities. The Group includes Russia's central securities depository (National Settlement Depository) and a clearing centre (National Clearing Centre) that performs the functions of central counterparty on all markets, allowing Moscow Exchange to offer its customers the full spectrum of trading and post-trade services.

Moscow Exchange ranks among the world's top 25 exchanges by total volume of equities traded, and among the five largest exchange platforms for bond trading and for derivative trading. As of 1 November 2016 securities of 692 issuers were admitted to trading on Moscow Exchange"s Equities & Bonds Market.

Moscow Exchange was formed in December 2011 from the merger of 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, the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes. Moscow Exchange held an initial public offering in February 2013 and trades under the ticker symbol MOEX.

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