Program for ranking Market Makers in long-tenor FX swaps with maturity in 1W-1Y currency pair USDRUB, EURRUB

May 2014, Moscow

Viktoriya GulavskayaHead of trading technologies and Market Making

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Goals of the program

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Boosting liquidity for long-tenor swaps with 1W-1Y maturity;

Creating the competitive environment and effective incentive system for Market Makers with optimal allocation of Exchange’s expenses for liquidity support.

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Program novations

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All Market Makers are eligible to participate by using their current Market Maker agreements;

By the end of the calendar month Market Makers are ranked by the quality factors determining their position (N) in the overall rating and remuneration.

Quality factors

Trading volume

Spread maintenance time, %

Quoting terms of swap deals

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Terms

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1. Place of a Market Maker in the ranking (N) is determined by its rating value (R) assuming that N = 1 for maximum value of.

2. Market Makers’ ratings are calculated with the quality factors applied:

- the trading volume quality factor of the Market Maker’s obligation with regard to the i-th Trading day;

- the quality factor of the Market Maker’s obligation regarding spread maintenance time on the i-th Trading day;

- the quality factor of the Market Maker’s obligation regarding swap transactions on the i-th Trading day.

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Calculation of Market Makers ratings per day

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= where: – 1,2,3 … ordinal number of the Trading day during the Accounting period;= (7*+14*+30*+60*+90*+180*+ +270*+360*)/(1011*5MM)• , = ()/ • - the overall spread maintenance time on the corresponding swap

transactions;• - the period of time during the main session when Market Maker has to

perform its obligations regarding swap transactions; =+14*+30*+60*+90*+180* + +270* +360* ) / 1011 • - coefficients witch possess the value 1 or 0 in case of

performing/non-performing the obligations regarding the corresponding swap transaction.

6Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Calculation of Market Makers ratings per month R = k * ,R – Market Maker’s rating for the complete calendar month

– the coefficient with values determined by the minimum number of the month’s Trading days on which the Market Maker performs its obligations:

0.5, if the minimum number of such days accounts for 40-80 percent of the total number of Trading days;

1.0, if the minimum number of such days accounts for 80 and more percent of the total number of Trading days.

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Calculation of Market Makers remunerations

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= РВ , where: РВ – Market Maker’s remuneration in rubles;– the fixed remuneration, determined by the ranking place number N in the overall Market Maker rating, assuming that N=1 if

= RUB 600,000 (six hundred thousand) rubles, if N=1 = RUB 300,000 (three hundred thousand) rubles, if N=2 = RUB 150,000 (one hundred fifty thousand) rubles, if N=3 0, otherwise

   

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Outcomes expected from the program

1. Boosting liquidity for long-tenor swaps with maturity on 1W-1Y;

2. Reaching the principle “high efficiency is the best result”;

3. Openness of the program to all market participants;

4. Flexibility of the remuneration formula with the quality criteria determined.

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Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

Appendix No 1Market Makers obligations

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Market Maker is considered to fulfil it’s obligations during the Trading day only if the following conditions are performed: Obligations parameters in points 1 and 2 of the Table are fulfilled for at least

3 swap deals during the period stated in the third line of the Table

* - calendar day on witch trades are conducted on the Exchange

№ Parameters 1W 2W 1M 2M 3M 6M 9M 1Y

1. Two-sided quote spread calculated by yield in % per annum

0,5 0,5 0,5 0,35 0,25 0,25 0,2 0,2

2. Minimum order size (in $ for currency pair USDRUB, in EURO for currency pair EURRUB)

5mio

5mio

5mio

5mio

5mio

5mio

5mio

5mio

3. Period during the Main session of every Trading day* of the Accounting period when the Market Maker has to fulfil it’s obligations towards the instrument

65%

Program for ranking market makers in long-tenor swaps with maturity in 1W-1Y

DISCLAIMER

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