moscow, 23nov09national foreign exchange association, russia 1 rub on global markets & in russia...
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Moscow, 23Nov09 National Foreign Exchange Association, Russia
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RUB on global markets & in Russia in 2009: crisis effect
Dmitry Piskulov, Ph.D. (Econ.)
Chairman of the Committee for
Professionalism;
ICAP , Senior Adviser
What RUB markets?• Mainly OTC markets: interbank, less
between Investment firms
• On-shore (within Russia) + off-shore (outside Russia) = Global RUB markets
• RUB Instruments:• Foreign exchange (cash TOD,TOM)• swaps + outright forwards• Interbank deposits• Derivatives (NDFs, IRS, CCS, FRA)• OTC Equities (potentially for non-residents)Moscow, 23Nov09 National Foreign Exchange
Association, Russia2
Where RUB markets?
• Main locations: • Russia (Moscow, St.Petersburg): cash (spot) FX• UK (London) + Europe: RUB derivatives• USA (NY) • Asia (Tokyo, HK, Dubai)
• Main participants:- Banks- Investment companies- Institutional investors (hedge funds)
Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Moscow, 23Nov09National Foreign Exchange
Association, Russia4
Why RUB markets important
Plans of Russian political and economic authorities: • Concept of Moscow as International Financial Center
(adopted) to compete with Dubai, Shanghai, Mumbai; • Strategy of development of Russian financial market till
2020 – focus on securities, forwards and derivatives instruments, clearing infrastructure:
• RUB to become international (regional) reserve currency
Shortcomings of above programs:• Focus on the securities markets• Negligence of RUB settlements • Access for foreigners?
Russian on-shore FX mkt 2007Rank Country 2007 ADT, $ bln. Share of global %
1 United Kingdom 1,359 34.1 %
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 %Moscow, 23Nov09 National Foreign Exchange
Association, Russia5
Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Domestic FX market in Sep 09Domestic OTC market average daily turnover (ADT) in bln. US$ by BIS methodology (Bank of Russia)
Total ADT,US$ bln.
of them: CCY /RUB
Cross-borderof CCY/RUB
FX spot $27.8 $ 22.0 $11.6
Outright forwards
$0.66 $ 0.49 $0.28
FX swaps $19.7 $ 14.3 $5.3
Total: $48.3 $31.6 $13.0FX options $0.09 $0.07 $0.04
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Crisis on FX interbank markets• FX turnovers dropped globally and in Russia (UK data,
Russia data)
*both Interbank OTC & in MICEX; source: CBR
Month UK market Russian market*
Apr 08 $ 1,696 bln.
Jul 08 $119 bln.
Apr 09 $ 1,269 bln. $53.7 bln.
Sep 09 n.a. $ 52.1 bln.
Change % -25% -56%
Crisis in interbank money market
• Unsecured RUB cash MM deposits volumes dropped 3-4 times to ADT $5-6 bln.
• Average size of single deal dropped
• Rise in secured lending (Repo) between banks in major financial centers
Crisis of confidence is still in place BUT: bilateral limits to re-establish in Q3 2009
Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Non-residents in Russian FX
Share of non-resident (global) participants in Russian FX market stable at 37-42%
Period non-residents in USD/RUB
Non-residents EUR/RUB
Q4 2007 37.0% 31.7%
Q2 2008 38.9% 25.3%
Q4 2008 41.5% 20.7%
Q2 2009 39% 22%
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RUB markets outside Russia
• Turnover: $10-11 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 data on banks that entered RUB SSI)
• Active: 50 (already dealt in EBS)• Potential: 140 (entered RUB SSI in EBS)
Increase in participants and thus global
volumes subject to settlements solution!
RUB instruments outside Russia
More RUB derivatives than cash products• FX swaps• FX spot• NDFs• Outright forwards• Interest rate swaps (IRS)• FX options• Cash deposits • Currency swaps• Forward rate agreement (FRA)Moscow, 23Nov09 National Foreign Exchange
Association, Russia11
RUB FX in London
Source: UK FXJSC semi-annual survey, September 2009
Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Oct 08 Apr 09Percentage of RUB in total UK FX
0.7% 0.7%
USD/RUB turnover $10.9 bln. $8.6 bln.
Rank of RUB (~ same as MXN PLN, KRW, TRL)
15 17
Total ADT of UK market, $bln.
$1699 bln. $1356 bln.
Volumes of RUB FX instruments in London
UK FXJSC: Average daily volumes in Apr09
• FX swaps: $4.0 bln
• FX spot: $1.8 bln.
• NDF $1.2 bln.
• Outright fwd $0.9 bln.
• FX options $0.5 bln.
• Ccy swap $0.14 bln
Total $8.6 bln.Moscow, 23Nov09 National Foreign Exchange
Association, Russia13
Global banks RUB trading
• Global banks – main promoters of RUB instruments
• RUB FX pricing and execution hub location: struggle between Moscow and Head office:
in London: 30%in Moscow: 60% other (Tokyo, Vienna,
Helsinki, Dubai, Hong Kong): 10%
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Moscow, 23Nov09 National Foreign Exchange Association, Russia
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Prospects of RUB as international currencyInfrastructural prerequisites for global RUB
trading (tasks for Russian authorities, CBR):
1. Promotion of RUB instruments in global electronic trading platforms (such as EBS, Reuters, Bloomberg etc.)
2. To remove obstacles in RUB clearing and settlements for international participants:- RTGS (BESP of CBR)
- CLS Bank clearing currency (next ZAR, MXN)
3. Monitor RUB global trading volumes
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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: MosIBOR (2001, RUR interbank % rates), RIBER (2004, USD/RUB), MosPrime Rate (2005, RUB money market reference rate)
• Projects in progress:- 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- Legal documentation on syndicated loans;
• International cooperation and working contacts: - ACI-The Financial Markets Association - ISDA (inclusion of MosPrime rate into ISDA definitions 2006)
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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.