David Lennon in London -

Ruben Aganbegyan head of MICEX

Ruben Aganbegyan, head of the Moscow Interbank Currency Exchange (Micex), believes he is "surfing the wave" of reform of Russia's financial markets. If the momentum can be maintained, he believes the dream of an international financial centre (IFC) based in Moscow is attainable.

Less than a year after being appointed president of Micex, Aganbegyan brought about the long-sought after merger with the RTS to finally create a unified stock exchange in Moscow. "There are many economists in the Russian administration, but nobody from the financial world. The financial markets were stagnating. My appointment was a first and it shook up the market," he tells bne. "I am an insider, I know the shareholders of RTS and I knew they were thinking about a merger. It was like a coup d'etat to appoint someone from the financial markets, an outsider, into an organisation like Micex, which is dominated by the central bank. That appointment reset the agenda."

"You have to understand there is now a new generation pushing for achievements, to go into history," explains the 39-year-old with a law degree and 15 years experience in investment banking

The key, he says, "was persuasion plus money," with the latter being the decisive factor. "It wasn't cheap, but we did not overpay for RTS," he says of the merger worth $4.8bn. "I think it also helped that the transaction was done at market price, rather than the merger being forced."

Changing attitudes

Aganbegyan - though everyone seems to call him Ruben rather than Mr Aganbegyan - is ambitious. He really believes that this merger is the first step towards revolutionising the Russian financial market, towards creating the dreamed of IFC.

Aganbegyan recognises that this also means changing the investment climate - no easy task in a country where the system is permission-based rather than the western model, where the regulators say what you can't do and let you get on with your business. "We cannot change this attitude overnight. Russia has always lived that way. People need to get comfortable with letting go of the micro-management mentality."

At the same time, he recognises that the Russian system has its plusses and is not always a brake on progress. "For example, RTS managed to create derivatives without any problems."

Aganbegyan doesn't flinch from questions about investors' concern over Russia's reputation for insider trading, corruption and political interference. "It's a big exercise to improve the investment climate. Everything in Russia is unique in itself. We need to bring it into line with world standards. We need clear laws. People need to have trust in the legal framework."

Avoiding specifics, he quickly says it is not just a question of changing or implementing new laws and regulations. "There is also the technical implementation side, having the right people with the right skills and motivation to believe that they can achieve change and development."

To the region and beyond

Aganbegyan is quite reserved about the idea of forming an alliance or association with one of the big global bourses. "I need to understand why we need to do it. The impetus for such mergers is generally to save costs, but I think we have a huge opportunity on the revenue side. So we should concentrate on this first."

He talks confidently about unifying the infrastructure of the two exchanges, "creating a single platform for issuers, traders and investors," which would provide the opportunity to develop new products and services such as interest-rate derivatives.

More importantly he expresses his belief that a central securities depository (CSD), under discussion for more than a decade, will become a reality in 2012, and that compliance with US overseas investment regulation will follow, opening the way for US institutional investors.

But he does not rest his vision on the narrow achievement of creating a unified exchange, but rather is thinking beyond Russia's borders and into the region. "I see Russia as part of the global system. Remember we are the 10th largest by GDP, we have a strong currency. We will also have a presence in the Ukraine and Kazakhstan, and Moscow will be a place people will go to invest in these markets as well. We will be a big player."

This is one of the reasons that he is being cautious about the name of the new entity; the combined exchange is currently studying the rebranding question. "Calling it the Russian exchange is limiting if we hope to operate in Ukraine and Kazakhstan as well. A Moscow Stock Exchange already exists, though it is hardly functioning. Perhaps we will buy it," he says with a mischievous smile.

And the future? "The international financial centre project has been moving okay so far, but we need to look at the movement and make sure it is in a positive direction. If we fail to follow through, if we stop at this point, then nothing will happen."