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The First Stock Exchange for Small Companies Opens in Russia
January 31, 2007 16:36

Small turnover companies or just new ones, which couldn’t operate at the exchange, have recently been given such an opportunity. RTS START, a new market, has been established especially for them. There is an indispensable condition for issuers willing to participate: presence of financial advisers and market makers. This is done in order to reduce risks. Issuers appropriate for a new floor, which started at the RTS stock exchange on Monday, are the companies, capitalization of which doesn’t exceed 3bn rubles. The total volume of company’s bonds placed shouldn’t exceed 500mn rubles in face value. If the capitalization of the company trading at RTS START goes beyond the limit, the company will be considered big and listed by RTS Board. Character of new-created or unknown (in view of small turnover) companies doesn’t let them enter a usual stock market – volume of bonds placed is often too small, besides, securities of an unknown issuer are not popular enough to maintain required sales volume.

Frequently portfolio investors don’t want to deal with small companies with turnover of $10-30mn. Such companies are welcome at RTS START. Certainly, their security papers are high-risk investments, but if an investor manages to find the right company, profitability can be of hundreds or even thousands of percents at this market. Investors dissatisfied with dropping profitability of big companies’ securities are likely to turn to this sector of the stock exchange. Surely, this trading floor will be regarded as a risky one, but this is the place, where investment returns may be incredible.

Trading floors making small issuers’ papers their specialty exist already abroad. One of the most famous and popular among Russians is AIM in London – the alternate investments market. Russian company Rambler Media chose this floor for initial placement. According to organizers of RTS START, introduction on the exchange will take small companies much less than, for instance, introduction on AIM. To get introduced to the AIM a company has to pay 100 thousand pounds.

To reduce risks to the maximum RTS START market has established some rules. Particularly, all companies willing to trade at this sector will have to cooperate with a market-maker and an authorized financial adviser. The market-maker can help to start trade in securities and to keep demand growing. The financial adviser is in charge of the issuer, who must answer demands of the stock exchange and report about essential facts along with giving detailed account. The consultant’s duty is to observe the company’s stock cost and inform the exchange in case of decrease in value of shares.

Market participants believe that the trading floor despite its risk will become very popular. About 50 issuers will leave RTS Board for RTS START. Besides, the management of the exchange expect up to 10 initial placements in the next 12 months. However, some experts think that the number of issuers at RTS START will make up at least 30-40 within the same periods of time, and in several years it will come to hundreds.


Olga Pletneva

Tags: Russian finance Russian economy Russian companies   

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