The Russian Exchange (MOEX)

Paul Goncharoff

Since the turn of the last century Russia has not been known for its dynamic equity or commodity exchanges. As a matter of historic curiosity a comparison was made on the total return to shareholders in the United States and in Russia between 1870 and 1914. Previous comparisons showed that the Russian index had outperformed the American index, but this only compared the prices of the stocks and excluded the dividends that were paid. Russian stocks advanced more in price than American stocks between 1864 and 1914, but American companies did pay greater dividends. Price and dividends offset each other and during that 45-year period, the two stock markets afforded pretty much equal returns.

The St. Petersburg Stock Exchange shut down in August 1914 when World War I began, briefly reopened in 1917, then shut down for the next 75 years when the Russian Revolution began. It was only during the Perestroika and post perestroika times did the Moscow Exchange  or  MOEX begin its steady and strong path onto the world investing stage.

Still, very few Russian citizens during the years from 1986 through 2010 were involved in the Russian equity markets through an exchange. There were many reasons, trust being one of them until the MOEX developed into a strong and transparently governed institution. I would venture to say that prior to 2010, there were quite a bit less than 50,000 players in total utilizing the Russian exchange mechanism. Today, it is held up as an example by many trading professionals of how trading should be run and managed worldwide.

This outgoing 2020 year, despite the pandemic and other geopolitical gyrations the MOEX has established itself as a leading world-class exchange, at every level, from governance to product spectrum. This not only encompasses equities, but indexes and commodities as well, truly a one stop trading experience.

It looks like 2020 should be considered the year of the Russian private investor as over 4 million people have opened brokerage accounts with the Moscow Exchange , which is more than in all previous years combined.

This past year saw the MOEX offer a raft of new securities of both Russian and foreign companies traded, as well as exchange-traded funds with strategies for every taste and risk. To enable investors from different time zones to transact in stocks and shares MOEX has expanded their trading hours from the standard 9, to 14 a day.

I do not know of a more user-friendly exchange, which admittedly blurs the barrier between an exchange and a retail brokerage. Moex has succeeded in doing this by launching the first in Russia personal finance platform called “Finuslugi” (meaning financial services), which allows anyone to choose and buy products and services of the exchange, banks and insurance companies online in one personal account.

In sum, it is well worth the time and effort for any person seriously interested in what is popularly called “Emerging Markets” to look into the MOEX. I am certain that you will come away with a question “if this well honed MOEX exchange is an ’emerging market’, then what are the New York, London or Tokyo exchanges…. bazaars”?

Wishing all a very healthy, prosperous and sane 2021!

Paul Goncharoff, Moscow December 30, 2020