What is the RTS index? Concept, types, calculation procedure, dynamics of change

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The Russian Trading System (RTS) is one of the two largest stock exchanges for trading Russian securities. It was organized in 1995 as an alternative to the MICEX that already existed at that time. After almost 20 years, the RTS has transformed into a large-scale structure that not only provides access to exchange trading to private investors and professional participants in the securities market, but also provides a range of additional services, including clearing, settlement and depository.

The concept of the RTS index

What is the RTS index? This is an indicator of the state of the Russian securities market, which is calculated on the basis of transactions with securities concluded on the RTS trading floor. Its value reflects the total market capitalization of shares traded on the Russian stock market. In turn, the capitalization of each individual company is the market value of one share, multiplied by the total number of shares in circulation, and reflects the real marketcompany value.

The RTS index, along with the MICEX index, is the main indicator of the state of the domestic stock market. However, after the merger of the MICEX and RTS trading floors, the calculation of both indicators is actually carried out by the same united MICEX-RTS stock exchange. The main difference between these two indicators is that the MICEX index is calculated in rubles, while the RTS is calculated in dollars. Therefore, its change is influenced not only by the dynamics of prices for shares of Russian companies, but also by the change in the exchange rate of the ruble against the dollar. In the context of the constant growth of the US dollar, the RTS index shows a more positive trend compared to the MICEX index. That is, its value grows faster and decreases slower compared to its "competitor".

Types of RTS indices

RTS stock indexes include a whole family of various calculated indicators. These include: RTS Standard Index, RTS-2 Index, Volatility Index (RTSVX), RTS Siberia Index (RTSSIB) and a number of sectoral indices.

The main RTS index (RTSI) is calculated on the basis of information on trading in shares of 50 largest Russian companies. These include Gazprom, Lukoil, Sberbank, Surgutneftegaz and a number of shares of other companies. To be included in the RTS index, a company's shares must meet two criteria. First, the shares must be admitted to trading on the RTS exchange. Secondly, the capitalization of the company must be at least0.5% of the total capitalization of all shares included in the index. The list of companies is reviewed quarterly.

Calculation algorithm

The RTSI index is calculated starting from September 1, 1995. It was then that securities trading began on the RTS trading floor. Its value is reflected in relative units. On the date of the first day of trading, the RTSI index was conditionally taken equal to 100 points.

In order to understand what the RTS index is, let's give a conditional example of calculating its value. Let's assume that as of September 1, 1995, the total capitalization of companies whose shares were included in the RTSI index was $500,000. On the conditional date of the next calculation, it rose to, say, $850,000. The conditional value of the index in this case will be:

850,000/500,000100 points1, 0752559=183 points (1.0752559 is the correction factor used in the calculations).

In other words, the capitalization of the stock market increased by 1.83 times.

Calculation procedure

The calculation of the RTS index is based on the data on the purchase and sale prices of shares included in the index. This is done every 15 seconds, that is, in real time. But for traders and stock market analysts, the most important information is data on the value of the indices as of the opening and closing of trading, as well as the maximum and minimum values at the end of the trading session. It is these data that they use to analyze the dynamics and trends in prices for shares of Russian issuers.

Now it has become clear what the RTS index is and what is the algorithm for its calculation. It's time to evaluate the change in its value during the trading on the RTS stock exchange. Index values are constantly changing. This complex process is influenced by a whole range of different factors, which include the state of the world economy as a whole, the macroeconomic situation in the country, the state of a particular industry, and, of course, the state of affairs in each individual company. Russia today in the world classification belongs to the emerging markets. Therefore, the values of domestic stock indices are very sensitive to fluctuations in indices of developed markets, including NASDAQ and DowJones.

History of changes in the RTS index

1260 points - this is exactly the value of the RTS index today. The dynamics shows that over the past 19 years, the capitalization of the Russian share market has increased by more than 12 times. At first glance, everything looks very optimistic. But is it really?

The index reached its maximum value in May 2008. At that time it was 2498.10 points. However, the 2008 crisis led to a serious decline in the capitalization of Russian companies. As a result of this fall, the value of the index fell to the level of 80 points. Despite the recovery of the Russian economy, the domestic stock market still cannot fully recover from its serious losses. As a result, today the leading companies in the Russianeconomies are worth almost twice as much as they were in mid-2008. And this is taking into account the growth of the dollar against the ruble by more than 10 rubles. (from the level of 23-25 rubles to today's 35 rubles per dollar).

What is the RTS index? This is a kind of litmus test of the state of the Russian stock market, and, consequently, of the entire economy as a whole. It is on the basis of its dynamics that one can conclude how successfully the largest domestic companies are developing. The analysis of index changes allows drawing a conclusion about the current state of the securities market and is one of the main criteria for making decisions on buying or selling shares of Russian issuers.