Catherine Belton and Charles Clover

Financial Times

September 18, 2008

The Russian government was facing one of the biggest tests of its market economy after it was forced to close its two main stock exchanges to halt a market rout that has led to the steepest declines since the August 1998 crisis.

The two main bourses, the MICEX and RTS, said on Wednesday they were suspending stock trading until further notice from the state’s main financial regulator. On Thursday MICEX said it had restarted repo trading from 0700 GMT, while the RTS exchange was trading futures contracts for goods, currency, and interest rates.

The move came after shares began to tumble again on Wednesday as investors faced a new wave of forced equity sales on margin calls and a dearth of cash.

Government and central bank officials were locked in talks with the chief executives of Russia’s biggest investment banks throughout most of the day on ways to halt the market collapse, which has wiped nearly $800bn (£440bn) off the country’s stock exchanges in a matter of months and sent stocks spinning down to levels last seen in 2005.

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