Overview of RUB markets in 2010 Dmitry Piskulov, Ph. D. (Econ. ) Member of NFEA Management Board, Chairman of the Committee for Professionalism; ICAP , Senior Adviser London, 14 Apr 10 National Foreign Exchange Association, Russia 1
What’s new in RUB markets • Stability is achieved: RUB appreciates against Basket; CBR reserves up to $436 bln. • Spot/cash RUB markets: interbank limits almost back to normal. Rise in direct OTC interbank • New enhanced derivatives legislation: changes in Tax, Securities and Banking laws – aimed at development of domestic derivatives market • Law on close-out netting (CON) is being reviewed by Parliament, expected by end of 2010 • Russian ISDA (Standard documentation) with FX, IR, Equities and FI annexes is in place • New market indices: NFEA FX SWAP rate, RUONIA London, 14 Apr 10 National Foreign Exchange Association, Russia 2
Where RUB markets? • ON SHORE: only domestic (residents) • OFF-SHORE: only non-residents • ON-SHORE deals with OFF-SHORE: cross-border RUB transactions London, 14 Apr 10 National Foreign Exchange Association, Russia 3
What RUB products • • FX spot FX forwards and FX swaps Cash MM deposits RUB bonds (government + corporate) REPOs Interest rate derivatives Equity cash London, 14 Apr 10 National Foreign Exchange Association, Russia 4
Russian on-shore FX mkt 2007 Rank Country 2007 ADT, $ bln. Share of global % 1, 359 34. 1 % 1 United Kingdom 2 USA 664 16. 6 % 3 Switzerland 242 6. 1 % 4 Japan 238 6. 0 % 5 Singapore 231 5. 8 % 6 Hong Kong SAR 175 4. 4 % 7 Australia 170 4. 2 % 8 France 120 3. 0 % 9 Germany 99 2. 5 % 10 Denmark 86 2. 2 % 11 Canada 60 1. 5 % 12 Russia 50 1. 3 % 13 Belgium 48 1. 2 % London, 14 Apr 10 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 O/N Domestic Crossborder Jan 10 $4. 0 bln $1. 5 bln $1. 6 bln 0 Feb 10 $7. 6 bln $2. 0 bln 0 Source: CBR, April 2010 London, 14 Apr 10 National Foreign Exchange Association, Russia 6
Domestic FX market in Feb 10 Domestic OTC market average daily turnover (ADT) in bln. US$ by BIS methodology (Bank of Russia) Total ADT, US$ bln. of them: CCY /RUB Cross-border of CCY/RUB FX spot $26. 8 $ 18. 5 $11. 6 Outright forwards FX swaps $0. 48 $ 0. 36 $0. 28 $21. 1 $ 13. 4 $5. 3 Total: $48. 4 $31. 6 $13. 0 London, 14 Apr 10 National Foreign Exchange Association, Russia 7
Crisis on FX interbank markets Russian FX average daily turnovers dropped in 2008 but stabilized in 2009 -2010 Month Overall MICEX FX market volume Volume Jul 2008 $ 119. 2 bln. $ 10. 5 bln. Apr 2009 $ 46. 2 bln. $ 9. 8 bln Oct 2009 $ 54. 2 bln. $10. 6 bln Feb 2010 $ 53. 4 bln $10. 0 bln. London, 14 Apr 10 National Foreign Exchange Association, Russia 8
RUB markets outside Russia • Turnover: $11 -12 bln. daily (FX, MM, IRD) • Link Moscow-London (transactions done in Moscow in the name of London HO) • Number of banks (dealing codes) (according to ICAP EBS: banks that entered RUB SSI) in March 2010 • Active: 60 (already dealt in EBS) • Potential: 181 (entered RUB SSI in EBS) Increase in participants and thus global volumes subject to settlements solution! London, 14 Apr 10 National Foreign Exchange Association, Russia 9
RUB instruments outside Russia More RUB derivatives than cash products • • • FX spot Cash deposits FX swaps NDFs Outright forwards FX options Interest rate swaps (IRS) Currency swaps (incl. CCS) Forward rate agreement (FRA) London, 14 Apr 10 National Foreign Exchange Association, Russia 10
Geography of RUB FX Overseas counterparties of Russian banks (CBR): Region Western Europe Northern Europe C I S countries South America FX spot 64. 0% 18. 7% 10. 0% 4. 2% FX swaps 89. 9% 3. 1% 1. 6% 2. 6% Cyprus 2. 3% - North America 0. 3% London, 14 Apr 10 National Foreign Exchange Association, Russia 11
RUB FX in London Source: UK FXJSC semi-annual survey, January 2010 Oct 08 Apr 09 Oct 09 Percentage of RUB in total UK FX 0. 7% USD/RUB turnover $10. 9 bln. $8. 6 bln. $10. 8 bln. 15 17 16 Rank of RUB Total ADT of UK market, $bln. London, 14 Apr 10 $1699 bln. $1356 bln. National Foreign Exchange Association, Russia $1549 bln 12
Volumes of RUB FX instruments in London UK FXJSC: Average daily volumes in 2009 Instruments FX swaps FX spot: NDF FX options Outright forward Ccy swaps Total: London, 14 Apr 10 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 Oct 2009 $6. 1 bln $1. 8 bln $1. 3 bln. $1. 2 bln $0. 3 bln $0. 1 bln $10. 8 bln 13
Global banks RUB trading • Global banks – main promoters of RUB instruments • RUB FX pricing and execution hub location: struggle between Moscow and Head office: qin London: 30% qin Moscow: 60% q other (Helsinki, NY, Tokyo, Vienna, Hong Kong): 10% London, 14 Apr 10 National Foreign Exchange Association, Russia 14
Challenges for authorities 1. Monitoring of round-the clock RUB 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. Access to RUB FOREX in MICEX foreigners 4. Removal of obstacles in RUB clearing and settlements – - RTGS (BESP of CBR) - CLS Bank clearing currency (next ZAR, MXN): CBR Chairman S. Ignatiev approved beginning Of cooperation with CLS Bank International London, 14 Apr 10 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) working on/related to Russian spot/forward foreign exchange and money markets. 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 on Russian OTC derivatives transactions (Russian analogue of ISDA Agreement) – completed in 2009 Projects in progress: - RUONIA – Russian analogue of EONIA International cooperation and working contacts: - ACI-The Financial Markets Association - ISDA (inclusion of Mos. Prime rate into ISDA definitions 2006) London, 14 Apr 10 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. London, 14 Apr 10 National Foreign Exchange Association, Russia 17
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