Sovereignty of supply and demand – Newspaper Kommersant No. 242 (7443) of 12/28/2022

The White House over the next three years will develop commodity exchange trading – in this way, the authorities expect to achieve a transparent pricing system in the domestic market in the absence of the ability to use international price indicators. To create a complete and reliable picture of prices, data exchange will be established between the exchange and departments – for these purposes, the government will expand the system of accounting and over-the-counter contracts. In the future, exchange and over-the-counter price indicators may become a tool for budgetary and tax control – the government will consider the possibility of their use in this capacity in 2024. Experts and the market support the development of exchange trading, however, practical implementation raises questions – the most problematic is the filling of exchange trading with liquidity and the development of derivative financial instruments necessary for this.

According to Kommersant, the government approved by Decree No. 4140-r dated December 23 a roadmap for the development of exchange trading in selected markets for 2023-2025. Recall that due to the partial isolation of the Russian Federation from foreign markets and the incomplete convertibility of the ruble, market participants lost the opportunity to use international price indicators against the backdrop of multiple exchange rates. To make up for the lack of data, the Ministry of Finance already proposed in May to expand exchange trading and oblige manufacturers to sell up to a quarter of their products on the exchange “in case of a significant change in market conditions” – from industrial and construction raw materials to agricultural products. It was assumed that the government would determine the standards and conditions for the output of products to organized auctions, but in the end the document was never adopted.

The roadmap approved by the White House was developed by the FAS as part of the national plan for the development of competition for 2021-2025 and is a tool for “landing” the new pro-competitive policy of the service after the change of its leadership (in November 2020, the former head of the FAS, Igor Artemiev, was replaced by Maxim Shaskolsky – then it was assumed that that its main task will be to support the pro-competitive investment spurt being prepared by the White House, but de facto, after February 24, the policy had to be adapted to solve the new problems of an isolated economy). Kommersant’s department explains that the measures proposed by the card will make it possible to create a market-based pricing system in the domestic market, form domestic indicators and reduce dependence on foreign suppliers of price information. According to the FAS, the development of a system of national indicators will also be a positive thing for Russian investors – the transparency of internal pricing should make it possible to work out strategies more clearly and hedge risks.

The document contains 38 measures in seven areas, among the performers are the FAS, the Ministry of Economy, the Ministry of Finance, the Ministry of Energy, the Ministry of Agriculture, the Federal Tax Service, the Federal Customs Service, as well as the Bank of Russia and market representatives. The first block involves the systematic development of exchange trading, the second – the development of the market for derivative financial instruments, another five blocks relate to the transfer of industries to exchange pricing (oil and oil products, gas, green energy and carbon, chemical and petrochemical industries, timber complex). In particular, the government will have the right to determine the list of goods for which national price indicators will be formed based on exchange and over-the-counter price indices – thereby, the authorities expect to ensure liquidity of exchange trading in goods. In addition, there will be a list of key products for which such indices are required to ensure economic security.

In order to form liquid prices, the government will expand the list of goods for which over-the-counter contracts will also be registered – the collection of such information will be unified, including through automated data exchange between the FAS, the Federal Tax Service and commodity exchanges. In the future, this data will become a control tool. Thus, in the second quarter of 2023, the FCS will be able to use information about exchange transactions and price indicators when controlling the customs value of goods – after concluding agreements on the exchange of data with the FAS and the exchange. In 2024, the government will explore the possibilities of using approved exchange and over-the-counter price indicators for the purposes of tax and budgetary regulation.

In general, experts support the development of exchange mechanisms in the Russian Federation, but they have questions about the specific implementation of these intentions in practice. Thus, Tatyana Basova, head of economic research at Kulik & Partners Law.Economics, believes that national price indicators perform a navigational function for businesses in the current economic situation and in the long term: they determine transparent and objective parameters of prices (transactions) in the domestic market of the Russian Federation, are subject to application in pricing and sales policies of companies, as well as reduce the dependence of domestic business processes on the volatility of world indicators and external factors. “Manufacturers will be able to choose reasonable indicators for themselves and use them in formula agreements with consumers, which in turn will lead to a decrease in the number of violations associated with non-transparent pricing,” she said.

Alexander Daniltsev, Director of the Trade Policy Institute at the Higher School of Economics, recalls that a modern stock exchange is still more of a financial institution than a commodity distribution one. “It is necessary to create liquidity and a lot of speculative capital is needed, including for the full implementation of the hedging function, which is important for entrepreneurs, but the document does not mention the development of the institution of speculation. It is not clear how the work will be linked to foreign markets, although the role of the Russian Federation in many markets deserves a major international exchange: we need the openness of the exchange and the participation of all players in it, but taking into account the sanctions, now, unfortunately, is not the best time for the development of such trade, ” – says the expert.

Sergey Pukhov, a leading expert at the Institute for Development at the Higher School of Economics, recalls that a market of buyers and sellers has developed in the West, there is a settlement liquid currency, financial instruments have been developed – hedging currency risks. “Attempts to create our own market inevitably run into the absence of these components in the Russian Federation: there is no market itself in the required volumes – only a tenth of the volumes of the domestic or foreign market are traded on the stock exchange, there are no non-residents due to sanctions restrictions and the lack of a liquid settlement currency due to incomplete convertibility and ruble volatility,” he explains.

Alexander Belozertsev, president of the Alexandra consulting company, is skeptical about the government’s ideas for the development of modern exchange trading. “The formation of globally recognized price benchmarks for energy, grain, metals, timber, fertilizers and other products takes place mainly on the largest exchanges of derivatives (derivatives) — futures & options exchanges. Only through the development of this kind of modern trading mechanism is it possible to develop a domestic system of representative benchmarks for commodity assets and actively compete with the largest commodity exchanges in the world (CME Group, ICE, Euronext, etc.). Unfortunately, it is in this direction that domestic stock exchanges (Moscow Exchange, SPIMEX, etc.) are disastrously behind not only the largest commodity exchanges in the world, but also the largest commodity exchanges of the BRICS countries,” he states.

Diana Galieva, Oleg Sapozhkov