Latest overview of RUB FX MM

Latest overview of RUB FX & MM & Derivative Markets Dmitry Piskulov, Ph. D. (Econ. ) Member of NFEA Management Board, Chairman of the Committee for Professionalism; ICAP , Senior Adviser Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 1

Where RUB markets? Markets in Russian Ruble denominated instruments • ON SHORE: only domestic (residents) • OFF-SHORE: only non-residents • ON-SHORE deals with OFF-SHORE: cross-border RUB transactions HOW GLOBAL IS RUB? Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 2

What RUB instruments • • • FX spot FX outright and FX swaps FX derivatives (NDFs, Options) Cash MM deposits REPOs Interest rate derivatives: (IRS, FRA, CCS, IRO) Statistics on average daily turnover (ADT) from BIS, Basel; Central Bank of Russia – CBR; UK FXJSC of Bank of England Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 3

Russia on-shore FX mkt 2007 vs 2010 Country RANK 2010 April 2007 ADT, $bln. Share of global % April 2010 ADT, $bln. Share of global % 1 United Kingdom 1, 453 34. 6 % 1, 854 36. 7% 2 USA 745 17. 4 % 904 17. 9% 3 Japan 250 5. 8 % 312 6. 2% 4 Singapore 242 5. 6 % 266 5. 3% 5 Switzerland 254 5. 9 % 263 5. 2% 6 Hong Kong SAR 181 4. 2 % 238 4. 7% 7 Australia 176 4. 1 % 192 3. 8% 8 France 127 3. 0 % 152 3. 0% 9 Denmark 88 2. 4% 121 2. 4% 10 Germany 101 2. 4 % 109 2. 1% 11 Canada 64 1. 5 % 62 1. 2% 12 Sweden 44 1. 0% 45 0. 9% 13 Korea 35 0. 8% 44 0. 9% 14 Russia 50 1. 3 % 42 0. 8% 4

RUB share in global FX 2007 vs 2010 Rank Currency Share % 2007 Share % 2010 1 USD (US Dollar) 86. 3 84. 9 2 EUR (Euro) 37. 0 39. 1 3 JPY (Japanese yen) 16. 5 19. 0 4 GBP (Pound sterling) 15. 0 12. 9 5 AUD (Australian dollar) 6. 7 7. 6 6 CHF (Swiss frank) 6. 8 6. 4 7 CAD (Canadian dollar) 4. 2 5. 3 … …. . … 15 INR (Indian rupee) 0. 7 0. 9 16 RUB (Russian Ruble) 0. 8 (17 -th) 0. 9 20 BRL (Brazilian real) 0. 5 0. 7 30 CNY (Chinese renminbi) 0. 4 (22 -th) 0. 1 Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 5

RUB money market 2010 • Domestic RUB interbank market smaller than FX market: average daily turnover (ADT), bln. $ Interbank deposits REPOs Cross. Domestic Cross. O/N, 1 wk Domestic border Jan 10 $7. 5 bln $2. 7 bln $2. 2 bln 0 July 10 $6. 4 bln $1. 6 bln $3. 9 bln 0 Oct 10 $6. 5 bln $1. 6 bln $5. 6 bln 0 Source: CBR, October 2010 • Off-shore RUB MM: no data Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 6

Domestic FX market in July 10 Domestic OTC market average daily turnover (ADT) in bln. US$ by BIS methodology (Bank of Russia) Total ADT, US$ bln. of them: CCY /RUB Cross-border of CCY/RUB FX spot $24. 5 $ 18. 4 $8. 2 Outright forwards FX swaps $1. 45 $ 0. 5 $0. 3 $21. 5 $ 14. 1 $6. 3 $47. 5 $31. 6 $14. 8 Total: Moscow, 26 Nov 2010 $1. 44 NDF National Foreign Exchange Association, Russia 7

FX on-shore interbank market in 2008 -10 Russian on-shore OTC FX average daily turnovers dropped in 2008 but stabilized in 2009 -2010 Month FX market volume MICEX Jul 2008 Apr 2009 Oct 2009 Feb 2010 Aug 2010 $ 119. 2 bln. $ 46. 2 bln. $ 54. 2 bln. $ 53. 4 bln $ 53. 8 bln $ 10. 5 bln. $ 9. 8 bln $10. 6 bln $10. 0 bln. $8. 8 bln. Oct 2010 $ 66. 7 bln. $11. 3 bln Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 8

RUB markets outside Russia • • Trading volumes(ADT) reported off-shore: FX instruments: $12 -13 bln. Money market instruments: $ 0. 5 -1 bln. Interest rate derivatives: $ 1 -2 bln. RUB bonds trading: $ 1 bln. Total (FX, MM, Der. ): $ 13. 5 -15 bln. Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 9

RUB markets outside Russia Main features: • More derivatives than cash products: on-shore cash pricing versus off-shore derivatives pricing • BUT: Cash products tend to rise quicker • Link Moscow-London (transactions done in Moscow in the name of London HO) • Number of banks (dealing codes): banks that entered RUB SSI and ready to deal): – Active: 60 (already dealt) – Potential: 181 (entered RUB SSI) Moscow, 26 Nov 2010 - National Foreign Exchange Association, Russia 10

RUB instruments outside Russia More RUB derivatives than cash products but cash products are rising • Cash: FX swaps, FX spot, cash deposits, RUB bonds (NEW) • Derivatives and CFDs: • NDFs & Outright forwards • FX options • Interest rate and XCY swaps • Forward rate agreement (FRA) • Overnight indexed swaps - OIS (NEW) – from 08/09/10 Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 11

Geography of RUB FX Overseas counterparties of Russian banks, July 10 Region Western Europe Northern Europe CIS countries FX spot 66. 4% 16. 0% 9. 7% FX swaps 89. 9% 2. 0% 1. 6% South America 5. 5% 2. 9% Cyprus 1. 3% 1. 0% North America 0. 4% 0. 8% Other 0. 7% 1. 8% Source: CBR Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 12

RUB FX in London Source: UK FXJSC semi-annual survey, June 2010 Oct 08 Oct 09 Apr 10 Percentage of RUB in total UK FX 0. 7% 0. 8% 0. 7% USD/RUB turnover $10. 8 bln. $10. 9 bln. $11. 5 bln. Rank of RUB (same as ZAR) Total ADT of UK market, $bln. 15 16 16 Moscow, 26 Nov 2010 $1699 bln. $1521 bln National Foreign Exchange Association, Russia $1747 bln 13

Volumes of RUB FX instruments in London UK FXJSC: Average daily volumes in 2009 -10 Instruments FX swaps FX spot: NDF FX options Outright forward Ccy swaps Total: Moscow, 26 Nov 2010 Apr 2009 $4. 0 bln $1. 8 bln $1. 2 bln. $0. 5 bln $0. 9 bln $0. 14 bln $8. 6 bln National Foreign Exchange Association, Russia Apr 2010 $5. 8 bln $2. 6 bln $1. 4 bln. $0. 7 bln $0. 9 bln $0. 13 bln $11. 5 bln 14

Challenges for authorities 1. Monitoring of round-the clock RUB FX quotes (also at night time in Moscow) 2. Support of RUB instruments in global electronic trading platforms (such as EBS, Reuters, Bloomberg etc. ) – possibility to establish the band 3. Direct access to RUB FOREX and RUB bonds in MICEX foreigners 4. Removal of obstacles in RUB clearing and settlements – - RTGS (BESP of CBR) - CLS Bank clearing currency(next to ZAR, MXN): Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 15

About NFEA • • • Established: October 1999 in Moscow as non-commercial organization; Membership: legal entities (local and global banks and brokers) operating in Russian spot/forward foreign exchange , money markets and derivatives; Management: the Board (28 market practitioners), 4 co-chairmen, 3 Committees (on Market Indices; for Professionalism, Ethics & Education; on Legal Affairs) Projects up to date: – 1999 -2001, 2006: Elaboration of Standards (Code of Conduct and Rules to Conduct Operations (Committee for Professionalism, Ethics & Education), – Market indices: Mos. Prime Rate (2005, RUB money market reference rate), NFEA FX SWAP RATE – new index for USD/RUB and EUR/RUB forwards - Standard Documentation for Russian OTC derivatives transactions (Russian analogue of ISDA Agreement) – completed in 2009 - RUONIA – Russian analogue of EONIA (since Sept 2010) International cooperation and working contacts: - ACI-The Financial Markets Association - ISDA (inclusion of Mos. Prime rate into ISDA definitions 2006) Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 16

Contact Details 13 Bolshoy Kislovskiy Per. , Moscow, 125009, Russia, Tel. +7 (495) 705 -9693, Fax: +7(495) 705 -9675. www. nva. ru, www. nfea. ru @ The Copyright National Foreign Exchange Association, 2008. All rights reserved. Any reproduction is only permitted with prior consent of NFEA. Moscow, 26 Nov 2010 National Foreign Exchange Association, Russia 17