MSCI Bara Introduces New Indexes to Counter Russian Trading Stoppages

MSCI Barra (MXB) has created two new Russia indexes to mitigate the problems recently exposed with the frequent suspension of trading on the Russian stock markets during the global market unrest.

The new MSCI Barra indexes will capture the performance of Russian stocks that are traded outside Russia, during trading halts in Moscow.

The MICEX Stock Exchange and Russia Trading System (RTS) have halted trading for more than a full day twice since September.

What's more, new trading halt rules have been put in place at a furious pace, adding to jittery investors' lack of comfort with Russian equities trading.

Most recently, the Russian regulatory authority on Tuesday implemented a one-hour trading halt in the event that the MICEX or RTS technical indexes rise by more than 10% or fall by more than 5%. In the event of a 20% rise or 10% drop, the suspension would last until the end of the following trading day.

The new MSCI Russia ADR/GDR Index will include most liquid American or Global Depository Receipts, where available, for companies included in MSCI's existing Russia Index.

ADRs and GDRs have continued trading normally through the trading suspensions in Russia.

Pricing Disparities 

This has caused disparities between the pricing of Russian stocks listed locally, and as ADRs or GDRs.

The second new index, the MSCI Russia Alternative Listings Index, will track ruble-denominated securities on the MICEX, plus the ADRs and GDRs. The main idea is to allow investors to reconcile the various ways of accessing Russians stocks, and any short-term pricing variation due to trading halts within Russia.

In the ETF market, Market Vectors offers the only Russia fund, Market Vectors Russia ETF (NYSE Arca: RSX), and it does not use an underlying MSCI Barra index.

The ETF tracks the DAXglobal Russia+ Index.

Van Eck officials have said that short-term trading halts, while of concern, have always been a part of trading in Russia and would have to persist for months to become a serious issue for the manager.

Year-to-date, the ETF is down 67% through Oct. 15, according to Morningstar data—a plummet in value of more than two-thirds, which is consistent with the nose dive taken by the MSCI Russia.  

In index developments related to another beaten-down investment area, Dow Jones Indexes has inked a deal with Eurex to list derivatives on its Dow Jones-AIG Commodity Indexes.

The indexes will serve as the basis for exchange-traded futures and options, and are expected to launch in the first quarter 2009. The deal covers the flagship Dow Jones-AIG Commodity Index, and nine subsector indexes. Eurex expects the deal to make it the first European exchange to provide trading in commodity index derivatives.

Eurex is one of the largest derivatives exchanges in Europe, and acquired the International Securities Exchange last year, creating the largest trans-Atlantic derivatives market.

-- This report was submitted by Eric Rosenbaum.