Stock market sell off turns attention to system framework
The scale of the stock market selloff is worrying the country’s stock-market regulators – who are turning their attention to trading rules and market infrastructure.
As the selloff gathered pace on the Russian stock markets on Tuesday, Vladimir Milovidov, Head of the Financial Markets Services said it was time to look at deeper issues dogging Russia’s traders
“What has always been considered the main problem of the Russian stock market is the lack of insider-trading laws. When the capital markets are falling, when the traders are nervous, we have to really make sure nobody is manipulating the market.”
Adopting an insider trading law, currently in the Duma, is just one of the measures the market is desperate for, according to Erik DePoy, Equity Strategist at Alfa Bank
“The insider trading is just one piece of the puzzle, in the overall regulatory framework, that really needs a good look at right now. Again you have to ask questions about what is happening with the margin calls, the forced selling. Was there some sort of lack of oversight of it.”
Vladimir Milovidov adds that paying attention to stock-market infrastructure is also essential as the trade volumes peak during a selloff.
“When the markets are falling hard, it puts additional pressure on the infrastructure. Namely, on clearing houses, depositaries and the bourses themselves. It becomes essential at times like these.”
After commodity prices saw the biggest drop in almost 3 decades, and the U.S. house prices collapsed by the most since the Great Depression, the bear is likely to strengthen its grip on the Russian markets.
If the current selloff provides the impetus to strengthen Russia’s trading infrastructure and laws – it could give a longterm boost to Russias plans to become a global financial powerhouse.