Russian RUB FX spot & derivatives markets in 2014 Dmitry Piskulov, Ph. D. (econ. ) Chairman of NFEA Board; Member of Monetary Policy Council of Association of regional banks ”Russia” Moscow, 20 November 2014 Moscow Conference 1
Current trends in RUB markets 1. Continued RUB depreciation against USD 2. CBR monetary policy: inflation targeting is fully in force by 2015. BKT-RUB corridor abandoned 3. CBR increased Key rate from 5. 5 to 9. 5% - higher RUB %% 4. High capital outflow in the country: $120 bln. est. in 2014 5. RUB FX market volumes generally in decline 6. Declining RUB liquidity and volumes in domestic MM 7. Looming Banking crisis (capital adequacy down) 8. New refinancing from the CB: ccy repo, reverse FX swap 9. RUB increased use in CIS (prospects in BRICS) Moscow, 20 November 2014 Moscow Conference 2
Positive trends • Improved current trade& C/A balance (reduction of import) • Government budget fulfilled because of increased energy export revenues in Ruble terms • Sanctions bad = sanctions good : create incentives for replacing import with local productions • Facing eastwards: stronger ties with Asian partners (China, Vietnam, Hong Kong, North Korea) – may use Ruble as foreign trade payment currency Moscow, 20 November 2014 Moscow Conference 3
RUB FX trading volumes • Key features: • On-shore: Declining volumes of RUB on-shore FX due to lower interbank trading, lower energy prices • Off-shore (London) RUB volumes fluctuate: – Increased in April 2014 – But may go down again in Oct 2014 • Increased volatility looming after 2015 • Draft Federal Law on regulation of retail Forex dealers (brokers) should pass second reading at State Duma – may potentially result in increased client FX flows to banks, require banks to create FX dealer subs Moscow, 20 November 2014 Moscow Conference 4
Average Daily Turnover of global FX market in 1986 -2013 U$ Bln. 1986 1992 1998 Net turnover $355 $820 $1, 527 $1, 934 $3, 971 $5, 345 FX spot 212 394 568 631 1, 488 2, 046 58 128 209 475 680 324 734 954 1, 759 2, 228 FX options n. a. 87 119 207 337 CCY swaps n. a. 10 21 43 54 Forwards FX swaps 143 Moscow, 20 November 2014 2004 Moscow Conference 2010 2013 5
CCYshares in global FX 2007 -2013 Rank Currency Share % 2007 Share % 2010 Share % 2013 1 USD (US Dollar) 86. 3 84. 9 87. 0 2 EUR (Euro) 37. 0 39. 1 33. 4 3 JPY (Japanese yen) 16. 5 19. 0 23. 0 4 GBP (Pound sterling) 15. 0 12. 9 11. 8 5 AUD (Australian dollar) 6. 7 7. 6 8. 6 6 CHF (Swiss frank) 6. 8 6. 4 5. 2 7 CAD (Canadian dollar) 4. 2 5. 3 4. 6 8 MXN (Mexican peso) 1. 3 2. 5 9 CNY, CNH 0. 5 (22 -th) 0. 9 (17 -th) 2. 2 … …………… 12 RUB (Russian Ruble) 0. 8 (17 -th) 0. 9 (16 -th) 1. 6 19 BRL (Braz. real) 0. 5 0. 7 1. 1 20 INR (Indian rupee) Moscow 0. 7 Conference 0. 9 1. 0 Moscow, 20 November 2014 6
Largest on-shore FX mkt 2007, 2013 Ra nk Country 2007 ADT, $ bln. 2007 Share global % 2013 ADT, $ bln. 2013 Share global % 1, 359 34. 1 % 2, 726 40. 9% 1 UK 2 USA 664 16. 6 % 1, 263 18. 2% 3 Singapore 231 5. 8 % 383 5. 7% 4 Japan 238 6. 0 % 374 5. 6% 5 Hong Kong 175 4. 4 % 274 4. 1% 6 Switzerland 242 6. 1 % 216 3. 2% 7 France 120 3. 0 % 190 2. 8% 8 Australia 170 4. 2 % 182 2. 7% 9 Netherlands! 25 0. 6 % 112 1. 7% 10 Germany 99 2. 5 % 111 1. 7% 11 Denmark 86 2. 2 % 103 1. 5% 12 Canada 60 1. 5 % 65 1. 0% 13 Russia 50 1. 3 % 61 0. 9% 7
Largest USD/CCY pairs in global FX EUR/USD USD/JPY GBP/USD USD/AUD USD/others USD/CAD USD/CHF USD/RUB Moscow, 20 November 2014 2010 28% 14% 9% 2013 24. 1% 18. 3% 8. 8% 6% 11. 2% 5% 4% … 6. 8% 4. 0% 3. 7% 3. 4% 1. 5% (11 -th) Moscow Conference 8
Global derivatives amounts • Notional principal amounts outstanding, trln. US$ By underlying asset June 2012 OTC Exchanges* June 2014 OTC Exchanges* Foreign exchange 66. 7 0. 33 74. 8 + 0. 38 + Interest rate contracts 496. 2 48. 5 563. 2 + 65. 6 + Equity linked contracts 5. 3 5. 2 6. 9+ 7. 5 + Commodity contracts 3. 0 2. 2 - n. a Credit default swap 26. 9 n. a. 19. 5 - n. a Other 42. 2 n. a. 24. 8 n. a Total contracts 641. 3 691. 5+ *Data for Exchange traded derivatives (futures&options) on Dec 2012 and Jun 2014 respectively Moscow, 20 Nov 2014 9
Russian domestic cash & derivatives markets 2014 • In 2013 CBR stopped provision of monthly statistics of volumes of FX and IR instruments, resumed in 2014 on short-tailed basis US$ bln. (ADT) FX instruments Cash (underlying) Derivatives OTC Exchange $50 -68 bln. $2 -3 bln. $10 -11 bln. (IBL) $10. 5 (Repo) $0. 3 -0. 6 $0. 06 $15 -18 bln. $0. 1 -0. 2 $3 -4 bln. Commodity n. a. $0. 2 -0. 5 bln Credit derivatives n. a. 0. 01 - Interest Rate instruments Equity Moscow, 20 Nov 2014 10
Domestic FX market volumes 2003 -2014 (all ccy vs USD/RUB) Moscow, 20 November 2014 Moscow Conference 11
Russian domestic FX spot market volumes (ADT) 2008 -2014 Month FX market ADT(hi, low), all currencies MOEX Jul 2008 Oct 2009 Oct 2010 Oct 2011 Jan-Dec 2012 Jan-Dec 2013 Jan-Oct 2014 $ 104. 2 bln. $ 54. 2 bln. $ 66. 7 bln. $ 74. 8 bln $ 56 -74 bln $ 57 -72 bln. $ 49 -68 bln. $10. 5 bln. $10. 6 bln $11. 3 bln $13. 9 bln. $16. 6 bln. $17. 8 bln. $25. 7 bn ! Source: CBR, Moscow Exchange, NFEA Moscow, 20 November 2014 Moscow Conference 12
On-shore OTC FX volumes 2014 ADT bln. US$ FX spot* FX derivatives 2014 Q 1 $66. 2 bln. $2. 8 bn. 2014 Q 2 $57. 4 bln $2. 4 bln. 2014 Q 3 $53. 8 bln $2. 3 bln. 2014 Q 4 (October) $51. 2 bln. $3. 9 bln. Moscow, 20 Nov 2014 13
On-shore vs Off shore FX market 2008 -13 Moscow, 20 November 2014 Moscow Conference 14
RUB markets outside Russia • • Trading volumes(ADT) reported off-shore: FX instruments: $ 28 -30 bln. Money market instruments: $ 1. 0 -2. 0 bln. Interest rate derivatives: $ 0. 3 -0. 5 bln. RUB bonds trading: $ 1 -2 bln. Total (FX, MM, Derivat. ): $30 - 35 bln. daily Moscow, 20 Nov 2014 15
Volumes of USD/RUB FX in London Bank of England UK FXJSC: ADT in 2009 -14 Instrument Oct 2009 Apr 13 Oct 13 Apr 14 FX spot $1. 9 bln $14. 3 $10. 7 $13. 9 NDF $1. 2 bln $4. 2 $2. 3 $2. 1 Outrights $0. 3 bln. $5. 1 $1. 3 $2. 4 FX swaps $4. 3 bln $8. 7 $7. 9 $8. 0 Ccy swaps $0. 1 bln $0. 4 $0. 2 FX options $1. 2 bln $1. 7 $0. 9 $1. 9 Total: $9. 0 bln Moscow, 20 November 2014 $34. 4 bln. $23. 3 bln. $28. 5 bln. Moscow Conference 16
Russian initiatives to promote Ruble settlements for export • 24 April: meeting at First Vice-premier I. Shuvalov: Min. Fin and Min. Economy were tasked to elaborate measures to increase Ruble payments avoid use of USD in export • May: V. Putin adopted legislation enabling Russian exporters receive Rubles as export proceeds. • August: Gazpromneft pioneer contract in Rub • September: I. Shuvalov “We need to reduce USD payments with Asia. New export contracts should be in Rubles” • THIS MAY INCREASE FX MARKET TURNOVER in long-run Moscow, 20 November 2014 Moscow Conference 17
RUB prospects as reserve CCY Rank by share Currency Share % 2013 Global GDP % In 2013 Rank by GDP Share in COFFER (IMF) Q 4 -13 1 USD (US Dollar) 87. 0 22, 7% (0) 61. 2% (1) 2 EUR (Euro) 33. 4 23, 5% (1) 24, 5% (2) 3 JPY (Japanese yen) 23. 0 6. 6% (3) 3, 9% (4) 4 GBP (Pound sterling) 11. 8 3. 4% (6) 4. 0% (3) 5 AUD (Australian dollar) 8. 6 2, 0% (12) 1, 6% (6) 6 CHF (Swiss frank) 5. 2 0. 9% (20) 0, 2% 7 CAD (Canadian dollar) 4. 6 2, 5% (11) 1, 7% (5) 8 MXN (Mexican peso) 2. 5 1, 8% (14) …. 9 CNY, CNH 2. 2 12, 4% (2) … …………… 12 RUB (Russian Ruble) 1. 6 2, 9% (8 -th) 19 BRL 1. 1 3. 0% Others 2. 9% 18
About NFEA • • Established: October 1999 in Moscow Membership: institutional (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 derivative transactions (Russian ISDA Agreement) – completed in 2009, new version in 2011 (approved FFMS) - RUONIA – Russian analogue of EONIA, SONIA (since Sept 2010) - ROISFIX – OIS interest rates index (since April 2012) - CLS Bank: inclusion of Rub into CLS clearable currencies (since end 2011) NFEA will merge with NSMA by end of 2015 Moscow, 20 November 2014 Moscow Conference 19
Contact Details 12 Bolshaya Nikitskaya st, Moscow, 125009, Russia, Tel. +7 (495) 629 -9510, 629 -9709 www. nva. ru, www. nfea. ru; www. ruonia. ru @ The Copyright National Foreign Exchange Association, 2012 All rights reserved. Any reproduction is only permitted with prior consent of NFEA. Moscow, 20 November 2014 Moscow Conference 20
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