New AIFC project will not be back door for sanctions-busting activities

According to people familiar with the matter, Russian public companies aren’t going to be listed on the new exchange or put money into it. However, SBP Exchange can provide the new project with technological support.

Earlier this week Frank Media reported that AIFC is going to establish a new stock exchange in order to facilitate Russia to get foreign investments. Also, such a new exchange would have been useful for retail investors as they can no longer trade with securities because of Western sanctions. According to the news agency, the idea had been discussed by the Bank of Russia, SPB Exchange and big brokerage companies. SPB Exchange and Freedom Holding were called shareholders of the project.

However, a person familiar with the situation said that the project doesn’t imply any participation of Russian brokerage companies or trading with Russian securities to bypass the sanctions and attract foreign investments.

«The project doesn’t involve any Russian money, including Russian equity,» a source familiar with the issue told Kursiv.

SPB Exchange provides a wide range of tools for the market participants including foreign securities, Russian securities, bonds and securities of CIS countries. Since May 31 the exchange has limited trading with some foreign securities because Western sanctions were applied against the National Settlement Depository in Russia. As the exchange reported, transactions are impossible for about 14% of the securities available for trading. At the same time, there are no trades on the SPB Exchange with stocks or bonds of companies under the sanctions. Moreover, VTB (the second-biggest state-run bank in Russia) is no longer a stakeholder in the exchange.

In 2021, foreign securities accounted for $393.4 billion in the entire amount of trading on the SPB Exchange. This is 135% more than in 2020. The average monthly volume of trading on the exchange has reached $32.8 billion; the average daily volume is $1.6 billion (+134%). Several times the SBP Exchange reported a bigger volume of trade than MOEX, the biggest stock exchange in Russia.

As of December 2021, the number of active investor accounts on the SPB Exchange was 811,000 (+33.2%). In November 2021, the exchange reported 909,600 active accounts. The number of client accounts rose by 114% in 2021, reaching 1.6 million. As of December 31, 2021, the SPB Exchange had 18.4 million client accounts (+143%). The number of unique clients has risen by 141% to 12.4 million.

At the beginning of June, Freedom Holding announced the intention to sell its business in Russia and rename the company. As of March, the Russian subsidiary of Freedom had 163,000 clients.

Timur Turlov, the founder of Freedom Holding refused to comment on the situation. However, he noted that the holding is not going to build infrastructure for the Russian stock market or brokerage companies from Russia. «We consider only international projects with structure clear and transparent for all its participants and regulators. We are ready to take part only within the rules of the game articulated by the international community,» he said.