MOSCOW - Russia's market regulator has sketched out new regulations on stock floats which would effectively limit initial public offerings on foreign markets to 5 percent of the company, a draft order on the new rules showed.
The new regulations, published on the Federal Financial Markets Service website on Wednesday, are part of a drive by the regulator to channel investment in Russian securities away from foreign markets and onto domestic exchanges, where low liquidity can cause extreme volatility.
High volatility increases risk to investors and complicates efforts to bring long-term investors such as domestic pension funds into the market.
Such measures have backfired in the past, however, by causing concern about restrictions on foreign investment in Russia.
Many international funds lack permission to trade on Russian exchanges and can hold only Russian shares traded on international exchanges.
Under current regulations, the only companies limited to a maximum foreign float of 5 percent are oil and mining companies. Companies deemed strategic by the government are limited to 25 percent; the rest can float up to 30 percent abroad.
Under the new rules, the maximum is 25 percent for companies with a top tier listing at home in Russia. Companies with a lower level listing -- where new stock floats always start out -- can only place 5 percent abroad.
Russian exchanges have four listing levels. The higher the listing, the higher the demands of the issuer in terms of disclosure and free float size. The new regulations effectively force issuers to ensure domestic liquidity first of all.
A copy of the draft is on the regulator's website at http://www.fcsm.ru/eng
(Reporting by Olga Popova; writing by Melissa Akin; editing by Simon Jessop)