St. Petersburg Commodity Exchange (CJSC SPIMEX)

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

St. Petersburg International Commodity and Raw Materials Exchange (SPIMEX) is the largest physical trading platform in Russia. Basically, its turnover is formed by contracts for oil products and natural gas. There are Irkutsk and Moscow branches of the St. Petersburg International Mercantile Exchange. Marketplaces where transactions for the purchase and sale of strategically important raw materials are concluded are of great economic importance.

They not only create favorable conditions for transactions with supply contracts in the markets of energy, metals, timber and agricultural products, but also take part in the pricing process. The strategic goal of the St. Petersburg Mercantile 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 for foreign partners. Vladimir Putin called for the organization of full-fledged exchange trading in oil and natural gas in Russia. The fundamental condition for putting this idea into practice is the 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 in the country, the official opening of the St. Petersburg Commodity and Raw Materials Exchange took place. Despite the subsequent economic and political crises, the announced plans were partially implemented.

Founding History

The decision to establish CJSC "St. Petersburg International Commodity Exchange" was taken by the Russian government and actively supported by the largest companies in the oil and gas sector. In 2008, she received a license to organize trading. A few months later, the first deals for the supply of automotive and aviation fuel were concluded. The Petroleum Products Section has become a pilot project for the St. Petersburg Commodity and Raw Materials Exchange. Subsequently, the number of available tools has expanded significantly.

Working mechanism

St. Petersburg Commodity Exchange operates on the principle of a public anonymous auction and supports the mode of automatic information of counter quotes. This means that buyers and sellers place unaddressed orders in the electronic system. If the proposed price and volume match, the deal is automatically registered. The latest quotes reflect the current consensus among bidders on the value of the item. 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 intentions behind each application sent to the electronic system is confirmed by the obligation to pay and deliver the physical asset. The St. Petersburg Commodity and Raw Materials 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 administration of the exchange on trading accounts and guarantees the fulfillment by counterparties of their obligations. The amount of the deposit is usually a few percent of the contract amount. Such a risk control system meets world standards.

Tradingoil products

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. Almost ten years later, the success of this project is beyond doubt. During this time, the annual trading volume increased from 26,000 to 17 million tons. The petroleum products section provides access to contracts for the supply of diesel fuel, fuel oil, aviation kerosene and various grades of gasoline. Goods are shipped by rail from processing plants 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 benefits 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 conclude transactions regardless of their geographical location. In accordance with the original intention, the exchange ensures the functioning of a mechanism for the fair and transparent formation of prices for refined products and contributes to the creation of conditions for the development of natural competition.

Natural gas

In 2014, the opening of a newsection intended for the conclusion of contracts for "blue fuel". Such a giant of the domestic economy as the Gazprom company 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. Unlike the export of crude oil, which can be delivered to any part of the world using tankers, the sale of natural gas has serious restrictions associated with 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, where this energy carrier is 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 cost of contracts for petroleum products. The indices reflect the dynamics of price changes for the most liquid types of fuel. The information broadcast by the exchange helps the general public to get a realistic picture of the situation on the Russian oil market.

Reference grades

The process of price formation for "black gold" in the world is ambiguous. Many grades of crude oil are not available on global trading floors and are notare directly involved in the pricing process. Suppliers and consumers of hydrocarbons in all countries use the so-called reference grades as a guide. These include West Texas-sourced WTI and North Sea European Brent blend. Based on their current quotations, the prices of other varieties are calculated. Such a mechanism for determining the value creates ample opportunities for manipulation.

The price of the most famous domestic variety Urals is pegged 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 delivery of Urals was put into circulation. This instrument could become an alternative benchmark for hydrocarbon prices if its liquidity reaches a significant level.