We are ready to register structured notes, Moscow Exchange

Over the past year, Russian investors have started to seek investment alternatives amid declining deposit rates, which has created new opportunities for issuers of structured products, according to Svetlana Lyudinovskova (pictured), head of new products, derivatives markets, Moscow Exchange, speaking at the second Russian Structured Products Conference in Moscow on May 24.

"We are optimistic about the future of the market," said Lyudinovskova, reporting a 20% growth in sales of structured opportunities year-on-year. "Top underlyings choices for local investors are US-based single shares, share baskets and indices, especially from the high-tech sector," said Lyudinovskova.

According to Lyudinovskova, products linked to Russian equity and the USD/RUB exchange rate are also in demand. Autocallables are reported to be the most common choice among retail investors, while the institutional segments is mainly driven by credit-linked notes (CLNs).

"Despite a smaller variety of product structures and underlyings, the absence of multi-dealer trading platforms and an established network of financial advisers, the Russian market for structured products shares some key characteristics with more developed markets," said Lyudinovskova. "These include ongoing process automatisations, minimising the costs of issuance and distribution, and lowering the minimum investment requirements."

According to Alexey Rudenko, chief executive officer at Sberbank Life Insurance, the segment of the Russian financial market that marks the highest growth over the last five years is the voluntary savings segment which includes pension, investment, savings, risk, and credit life insurance products. "The investment life insurance alone saw over 130% annual growth since 2011and made up more than 56% of all investment and savings programs as of end-2016," said Rudenko.

One of the central topics of the conference was the role played by the exchange in Russia in the development of the local structured products market. Franz Hep, head of private banking at Gazprombank Switzerland, said the issuance of exchange-traded structured notes (ETNs) in Poland and the Czech Republic helped to increase awareness around structured notes of various kinds and capital protection levels among different investor types. "Sales volume across all product segments increased substantially because even small investors preferred to trade notes through the exchange rather than through private banking or retail services because commissions were much lower," said Hep.

Tatiana Medvedeva, principal legal advisor at the Securities Market Development Center, noted that qualified investors can already trade securities on the Moscow Exchange. "The question is if the exchange is supposed to register these securities on the market," said Medvedeva.

The Moscow Exchange understands the importance of timing during the issuance process, according to Lyudinovskova. "Since we already have the experience in registering programs for exchange-traded bonds, we are ready to register structured notes or any other securitized structured products as soon as the regulator allows us to do it," said Lyudinovskova.

"Our role is to protect the weak, which is always the client", said Elvira Borzunova, head of financial market infrastructure organisations development at Bank of Russia. "Indeed, not all courts act in favour of our financial system, but on the other hand, banks are always found to allow for shortcomings in their operations through mistakes or by consciously deciding not to share the entire information and that gives courts reason to regard some investment deals unethical."

Borzunova urged present market participants to "work step by step with the regulator on every instrument and explain how the respective product works [...] as breaking stereotypes is always complicated".

Sberbank preparing structured product platform for Russia's retail investors