Sergey Maslov, Saint-Petersburg International Mercantile Exchange(SPIMEX)
Release Date: 2009-06-11
As you’ve been involved in the project from its inception, could you tell us how the St. Petersburg International Mercantile Exchange (SPIMEX) was born, and what is its philosophy and mission?SPIMEX was an initiative of the Russian State, which we were given a mandate to execute. The objective was to create trading mechanisms to work in Russia, to increase volumes of commodity trading here and involve CIS countries in the process. In the longer term the goal is to enter the international markets. Any market needs clear trading mechanisms to develop normally. An exchange is one of such instruments. This is why we have invited Russian and international specialists to our project and consult with Western experts. Many trading mechanisms, especially for commodity exchanges, were not applied in Russia; in the past there were some 60 commodity exchanges all over Russia, but now there are only 40.
We have created a financial clearing centre, RDC (Settlement and Deposit Centre), for the SPIMEX commodity exchange, which is in charge of financial clearing and facilitates online settlements and payments. We started trading in a few basic products; petroleum, diesel fuel, jet fuel, and Transnefteproduct acts as the delivery company. In cases when Transnefteproduct is not present in the seller’s region - for example, at remote refineries of Rosneft - Rosneft controls the supplies. We have developed all the necessary documents for all these issues, in cooperation with Rosneft. As a result, remote refineries can also participate and trade their products in the commodity exchange. We even created a legal department at SPIMEX to handle all possible disputes but, luckily, they have not had a single one yet!
Why was St. Petersburg chosen to house the SPIMEX, being so far from the oil and gas producing regions of Russia?
The first exchange in Russia was founded in Saint-Petersburg by Peter the Great, and we took his effigy as the symbol on our seal with an added digit “2”. We though it would clearly show that we are the legitimate successors of Peter the Great’s initiative. Saint-Petersburg is also one of the largest commercial ports in Russia. Saint-Petersburg, Ustluga and Primorsk have the largest shipping harbors in the country. When it comes to the domestic commodity market, obviously all activities are concentrated in Moscow, but Saint-Petersburg is more convenient for export because all shipments leave from there: metals, coal, timber, oil etc.
The vocation of SPIMEX is clearly international - to export, to attract international buyers to buy Russian products. How important is it to trade in rubles? This was a very important point at the beginning of negotiations, wasn’t it?
The decision to trade in rubles was taken so that Russia’s economic security would be guaranteed, enhanced, and it is a measure that any state would welcome. The ruble will acquire real value when it is secured with real commodities.
Are you working only with Russian companies and commodities?
At the moment, yes. As you know, other exchanges have over 100 years of history and we started operating not quite one year ago. Like a small child, we’re learning to walk.
What are your first impressions? How has the market evolved so far?
My impressions are that it is evolving as expected, naturally, because we did not merely open the exchange for trading; we are trying to change the old mentality and ideology of conducting business here. For many years private arrangements were the traditional Russian way of entering contractual relations. But a commodity exchange breaks the practice of such arrangements and the obscurity of the transactions and brings the turnovers out of the shadows. Trading becomes impersonal; participants can trade here directly or through remote access as well.
Initially, how did companies react to the initiative? Were they happy about it or regarded it as something compulsory? Will SPIMEX cut the intermediaries?
There were no attempts to force the companies to join in, quite the opposite, but I would have been surprised if they had shown eagerness from the very beginning, and begun to sell their commodities through the exchange straight away. For the management of any oil company, the existing schemes have to be dismantled gradually, because a failure in the system can lead to market bottlenecks, which can in turn stop the operation of the fields and inflict losses in the company. The process is progressing logically: oil companies placed a small amount of their commodity in the exchange, saw that the mechanism functioned well, and are now smoothly increasing their volumes of trading there. There has been a domino effect. Now we have almost all Russian oil companies trading with us, like TNK-BP, Rosneft, Gazpromneft, Surgutneftegaz…
That’s very quick! How many barrels per day are being traded at present?
About 4,320 t per day. This gives us an opportunity to trace certain market indicators in terms of the price of basic supplies. For example, oil products in Moscow are more expensive than in Bashkortostan. You can compare the price of diesel fuel in each region.
One of the goals of SPIMEX was to help set a firm pricing mechanism. Is it helping to do that? What has been the recent trend and how is it evolving? The launch of the exchange coincided with the drastic drop of oil prices last year…
Indeed, prices plunged after the launch of the exchange and it was a bad moment, because the crisis damaged everyone and we were not spared. Oil companies always want to get more and more money, and when all buyers were hit by the crisis, the financing of commercial deals was stopped and the market was dead. In spite of this, the exchange was launched and we are developing positively.
When are you planning to integrate other types of commodities?
The problem is not to integrate them in SPIMEX, but to make sure that all the mechanisms and infrastructure for their successful trading are there. For instance, if we speak about metals, you know perfectly well that one of the main trading platforms for metals is Rotterdam. The Rotterdam port is a huge stock of commodities where ships discharge the metals and they get traded. We expect to have that kind of scenario after the inauguration of Primorsk port - with a large shipping capacity for coal, timber and metal. It will serve as the platform for proper exchange trading with available real commodities. An exchange should trade both real commodities and futures contracts. Currently, futures contracts exceed the amount of spot contracts. But there is no trading if the commodity is not there. Our task is not to make mistakes, because mistakes always damage reputations.
There are great success stories in Russia when it comes to trading platforms- like MICEX and RTS, with very good performance in just 10 years of existence. If we get back to you in 10-15 years, how will SPIMEX look like?
Well, what I can say for sure is that SPIMEX won’t look like NYMEX with its traditional pit. Trading at NYMEX is done more ritually; we took a different path and computerized all processes. We are here to train young traders and explain them how to use the system. Then they get electronic keys and signatures and can stay to work here or work from their offices….
So, no opening bell for the SPYMEX then…
If you want, we can put a bell here so that there is at least something traditional!
How much do you want SPIMEX to grow in the next 10 years?
It will grow; every month we’re gaining more and more experience. I travel a lot and see how other exchanges operate and we try to implement the best practices so that it is easier for us. We are open to other exchanges, and we cooperate with European exchanges, with the Shanghai exchange, with the South Korean exchange…
How about your initial cooperation with NYMEX?
As I have said, we cooperate with all exchanges and we’re open to everyone. But, the central idea of SPIMEX was to have Russian companies at the core of the charter capital. NYMEX offered to apply their clearing system but that does not correspond to the norms and regulations of the Russian law. Our exchange would have then been governed by the American CFTC. Therefore it would not be possible for the Russian Government to control the exchange activity and would lead to all payments made in foreign currency.
It will be the first case of a producing country with its own commodity exchange. OPEC members will be very jealous!
The Arab Emirates took a huge step forward when they made a joint venture with NYMEX, and directly implemented all legal documents of NYMEX. But other participants needed normal exchange mechanisms to function. Imagine that the whole Arab world decides to sell oil and oil products through the Dubai exchange - what is NYMEX going to trade then?
Your last message to readers of Russianenergy.com about SPIMEX?
I would like to assure everyone that we attract the best specialists, implement all the best trading mechanisms and practices, and try to foresee and eliminate all possible risks from the operation. Our main principle is reliability.
We’ll watch closely how you’ll develop!
We’ll try not to disappoint you.
Thank you Mr. Maslov for talking to us!
| Company: | Saint-Petersburg International Mercantile Exchange(SPIMEX) |
| Position: | President |
| Country: | Russian Federation |