The largest trading platform in Russia providing for physical deliveries is the St. Petersburg International Commodity and Raw Materials Exchange (SPIMEX). Basically, its turnover is formed by contracts for oil products and natural gas. There are Irkutsk and Moscow branches of the St. Petersburg International Commodity Exchange. Trading platforms where transactions for the purchase and sale of strategically important types of raw materials are concluded are of great economic importance.
They not only create convenient conditions for operations with delivery contracts in the markets of energy carriers, metals, wood and agricultural products, but also take part in the pricing process. The strategic goal of the St. Petersburg Commodity Exchange is to create a domestic alternative to the world-renowned oil benchmarks Brent and WTI, futures for which are traded on the largest trading floors in the UK and the United States.
Background
The President of the country in one of his speeches in 2006 emphasized the importance of efforts to turn the ruble into a universal means of payment in international trade. According to the head of state, the real convertibility of the national currency is determined by its attractiveness to foreign partners. Vladimir Putin called for the organization in Russia of full-fledged exchange trading in oil and natural gas. The fundamental condition for putting this idea into practice is settlements in rubles, which contribute to the expansion of the zone of influence of the national currency.
Just two years after the president’s address, which touched upon the organization of centralized energy trading on the territory of the country, the St. Petersburg Commodity Exchange was officially opened. Despite the subsequent economic and political crises, the announced plans were partially implemented.
Foundation History
The decision to establish CJSC St. Petersburg International Commodity and Raw Materials Exchange was made by the Russian government and was actively supported by major oil and gas companies. In 2008, she received a license to organize tenders. A few months later, the first deals on the supply of automotive and aviation fuel were concluded . The petroleum products section has become a pilot project of the St. Petersburg Commodity Exchange. Subsequently, the number of available tools has expanded significantly.
Work mechanism
The St. Petersburg Commodity and Raw Materials Exchange operates on the principle of a public anonymous auction and supports the automatic reduction of counter quotes. This means that buyers and sellers submit unaddressed orders in the electronic system. If the proposed price and volume match, the transaction is registered automatically. Recent quotes reflect the current consensus between bidders on the value of the goods. This is considered the most fair and transparent way to determine the market price. Equal access for traders to the site ensures the formation of a real balance of supply and demand.
Guarantees
The seriousness of intent behind each application sent to the electronic system is confirmed by obligations to pay for and supply a physical asset. The St. Petersburg Commodity Exchange has a carefully developed mechanism for monitoring the execution of contracts. At the time of the transaction, both the seller and the buyer pay a fixed amount of money as collateral. It is blocked by the exchange administration on trading accounts and guarantees the performance by counterparties of their obligations. The amount of collateral is usually a few percent of the contract amount. Such a risk control system complies with international standards.
Trading in petroleum products
The St. Petersburg International Commodity and Raw Materials Exchange at an early stage of its formation concentrated its efforts on the development and popularization of organized trade in various types of fuel. After almost ten years, the success of this project is beyond doubt. The annual trading volume during this time increased from 26 thousand to 17 million tons. The petroleum products section provides access to the conclusion of contracts for the supply of diesel fuel, fuel oil, aviation kerosene and various grades of gasoline. Shipment of goods is carried out by rail from processing enterprises located in the cities of the Central Federal District. The minimum lot is 60 tons.
The main operators of the Russian oil products market appreciated the convenience and advantages that the St. Petersburg International Commodity Exchange creates. The trading platform assumes responsibility for clearing and settlement activities, and provides participants with guarantees of delivery and payment. In addition, a fully electronic system allows traders to enter into transactions regardless of their geographical location. In accordance with the initial plan, the exchange ensures the functioning of a fair and transparent pricing mechanism for oil products and contributes to the creation of conditions for the development of natural competition.
Natural gas
In 2014, the opening of a new section designed to conclude contracts for "blue fuel" took place. Such a giant of the domestic economy as Gazprom took an active part in creating a trading platform for suppliers and consumers of natural gas. This project also received support from the Department of Energy. In contrast to the export of crude oil, which with the help of tankers can be delivered anywhere in the world, the sale of natural gas has serious restrictions related to the geographical location of hubs (distribution centers). For this reason, prices for "blue fuel" are formed locally, and not at the global level. This circumstance makes the existence of a centralized domestic market, in which this energy carrier freely bought and sold, especially important.
Indices
The exchange uses trading results to create convenient price monitoring tools. The results of transactions become the basis of indices, which are calculated and published daily. Today, they represent the average value of contracts for petroleum products. Indices reflect the dynamics of changes in prices for the most liquid fuels. The information broadcast by the exchange helps the general public get a realistic picture of the situation in the Russian oil products market.
Reference marks
The process of pricing for "black gold" in the world is ambiguous. Many sorts of crude oil are not available on global trading floors and are not directly involved in the pricing process. Suppliers and consumers of hydrocarbons in all countries use the so-called reference grades as a guideline. These include the WTI brand, mined in West Texas, and the North Sea European blend Brent. Based on their current quotes, the prices of the remaining varieties are calculated. Such a mechanism for determining value creates ample opportunity for manipulation.
The price of the most famous domestic Urals variety is tied to the European reference brand. To meet the long-overdue need for an independent Russian indicator of the cost of "black gold" at the auction in St. Petersburg, a fixed-term contract for the physical supply of Urals was put into circulation. This tool can become an alternative benchmark for hydrocarbon prices if its liquidity reaches a significant level.