Moscow Exchange announces results for the first quarter 2017

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q1 2017.

KEY FINANCIAL HIGHLIGHTS FOR Q1 2017

• Fee and commission income from the Fixed Income Market increased 12.8% YoY thanks to strong primary placements, both in government and corporate bonds.
• Fee and commission income from the Money Market grew 5.9% YoY driven by continued growth in trading volumes of repo with CCP.
• Fee and commission income from the Equities Market remained flat YoY (-0.3% YoY) despite a modest decline in trading volumes (-3.2% YoY).
• FX trading volumes grew slightly (+0.5% YoY); however, fee and commission income from the market decreased 24.8% YoY as the proportion of more profitable spot volumes vs swap declined to 23% from 40% a year ago.
• Despite a 37.5% decline in trading volumes on the Derivatives Market, fee and commission income was down only 3.2% YoY, thanks to an increase in more profitable commodities futures trading.
• Fee and commission income from depository and settlement services grew considerably (+18.2% YoY) mainly due to growth of assets under custody.
• Expenses increased modestly (+6.7% YoY), which contributed to a strong EBITDA margin of 72.9%.

KEY CORPORATE HIGHLIGHTS FOR Q1 2017

• MOEX launched a new commodity market, sugar (deliverable forward and swap contracts).
• MOEX began to offer swap contracts on grain in addition to deliverable forward contracts, which were launched at the end of 2015.
• MOEX"s Derivatives Market added weekly options on the RTS Index, in addition to monthly and quarterly RTS Index options. The new maturity of option contracts will allow investors to implement a wide array of short-term strategies.

EVENTS OCCURRING AFTER THE REPORTING DATE

• MOEX offered Russian corporates direct market access to its FX Market. Alrosa, Rosneft and insurance company AlfaStrakhovanie were the first companies to trade FX directly.
• MOEX"s AGM voted to pay a dividend for 2016 of RUB 7.68 per share (69.4% of 2016 IFRS net profit).
• The number of Individual Investments Accounts held by private investors reached 220,500 as of 15 May 2017, as compared to 191,000 at the beginning of the year.
• MOEX held the Exchange Forum – Russia's largest conference for the professional financial markets community – which attracted more than 2,000 Russian and international investors, financial market professionals and senior policymakers.

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

"Our strategy to grow our markets is delivering real results. The simplified procedure to issue bonds, introduction of new fixed income instruments and our marketing efforts drove significant growth in the number of new offerings and as a result the Fixed Income Market delivered higher fee and commission income. Another important positive development is growing interest among domestic retail investors, as can be seen from the growth in Individual Investments Accounts and the success of Russian federal government bonds (OFZs) sold directly to retail investors. Strong growth of trading volumes continued across the Money Market, and in options and commodities futures. We also report a strong increase in income from depository and settlement services. At the same time, we posted significantly lower FX spot and FX futures volumes, which had a negative effect on our total fee and commission income in the quarter.

"For a market to grow it is important to expand the number of participants. A major event this year was the launch of direct access for corporates to the FX Market. We believe that the number of companies trading FX directly on the Exchange will continue to grow, and that they will add new liquidity to the market.

"Another source of growth for the Exchange is to continually develop trading in new asset classes. Thus, in the first quarter we launched trading in sugar as well as in grain swaps in addition to the previously available deliverable contracts."

Evgeniya Abrukina, Deputy Chief Financial Officer of Moscow Exchange, said:

"In the reporting quarter Moscow Exchange achieved strong fee growth from the Fixed Income Market (+12.8% YoY) and the Money Market (+5.9% YoY) as well as a significant increase in fee income from Depository and Settlement Services (+18.2% YoY). Average volatility of the ruble-dollar currency pair declined nearly three times, which resulted in a 42% YoY decrease in FX spot trading volumes, a 52% YoY decrease in FX derivatives volumes and as a consequence lower fee and commission income on the FX and Derivatives Markets (-24.8% YoY and -3.2% YoY, respectively). As expected the proportion of interest income in total income declined (to 48%), as a result of lower interest rates, some decline in client balances and a change in the structure of balances with increased collateral in euros. Strict control over costs allowed us to maintain a strong EBITDA margin of 72.9%."

FINANCIAL HIGHLIGHTS

Total operating income. Operating income amounted to RUB 9.47 bln, down by 19.3% YoY. Fee and commission income totalled RUB 4.88 bln. The growth of commissions from depository and settlement services (+18.2% YoY), the Money Market (+5.9% YoY) and the Fixed Income Market (+12.8%) partially offset lower fee and commission income in the FX and Derivatives Markets (down 24.8% and 3.2%, respectively). Net interest income and other finance income totalled RUB 4.58 bln, a decline of 31.8% YoY mostly due to lower RUB interest rates and lower client balances available for investment.

Fee and Commission Income

Securities (Equities & Fixed Income) Market. Fee and commission income from the Equities Market was almost flat YoY (-0.3%) and amounted to RUB 396.8 mln. Equities trading volumes were RUB 2.25 trln, down 3.2% YoY. The total capitalization of the Equities Market was RUB 35.01 trln (USD 623 bln) as of 31 March 2017.

Fee and commission income from the Fixed Income Market increased by 12.8% YoY to RUB 316.9 mln on the back of the strong primary market. Government bond placements increased by 62.5% YoY to RUB 394.75 bln; placements of corporate bonds, including overnight bonds, grew 10.6 times YoY and reached RUB 2.54 trln. Overnight corporate bonds accounted for 86.9% of total new corporate bond placements. Secondary trading volumes in the Fixed Income Market were almost unchanged year-on-year.

Listing and other service fees were RUB 78.9 mln.

FX Market. Fee and commission income was down 24.8% YoY to RUB 957.0 mln despite some growth in volumes (+0.5% YoY to RUB 89.47 trln) due to the change in the volumes mix towards more FX swap transactions vs. FX spot trading. Trading in the spot segment declined by 42.2% YoY, while the swap segment posted an increase of 28.5% as market participants continued to use FX swaps as an instrument of liquidity management.

Money Market. Money Market fee and commission income grew 5.9% YoY to RUB 1.28 bln. Total trading volumes, including both repo and the deposit and credit market, posted 20.6% YoY growth and reached RUB 82.71 trln. Repo with the central counterparty accounted for 62% of the total Money Market versus 46% a year ago.

Derivatives Market. Derivatives Market fees and commissions amounted to RUB 497.0 mln, down 3.2% YoY. Total trading volume was RUB 22.16 trln, down 37.5%, due to less trading in FX futures and equity index futures. At the same time, trading in commodities futures continued to grow with 16.1% YoY growth.

Depository and Settlement Services. Fee and commission income from depository and settlement services grew by 18.2% to RUB 991 mln. Assets on deposit held at the National Settlement Depository increased to RUB 35.24 trln as of 31 March 2017 (+11.1% YoY), and averaged RUB 35.67 trln in Q1 2017.

Other fee and commission income. Other fees and commissions decreased by 8.4% YoY to RUB 361.8 mln. Sales of software and technical services rose by 2.5% YoY and contributed RUB 156.5 mln of other fee income. Sales of market data and information services decreased by 12.9% YoY to RUB 176.5 mln.

Interest & other finance income. Interest and other finance income declined 31.8% YoY to RUB 4.58 bln due to lower interest rates in Russia, a decrease in client deposits and a higher share of euros in client deposits. The daily average of funds available for investment was RUB 904.32 bln in Q1 2017 compared to RUB 1.15 trln in Q1 2016.

Expenses. Operating expenses grew by 6.7% YoY to RUB 3.28 bln in Q1 2017. Administrative and other expenses grew in line with expectations by 16.8% YoY to RUB 1.68 bln, mostly due to growth in depreciation of property and equipment and maintenance of equipment & intangible assets. Personnel expenses declined by 2.1% YoY to RUB 1.60 bln.

Cash and cash equivalents. Moscow Exchange's cash position[1] at the end of Q1 2017 amounted to RUB 89.71 bln. The Exchange had no debt as of 31 March 2017.

Capital expenditures. Capital expenditures amounted to RUB 323.6 mln, almost all of which was spent on equipment and software purchases and development.

Moscow Exchange"s consolidated IFRS financial statements for Q1 2017 are available on the Investor Relations section of the company's website.

A webcast to discuss Q1 2017 IFRS Financial Results is scheduled for May 18th at 5pm (Moscow 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 securities 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 offer its clients the full spectrum of trading and post-trading services.

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 named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

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