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Latest overview of RUB

FX & MM & Derivative MarketsDmitry Piskulov, Ph.D. (Econ.)

Member of NFEA Management Board,

Chairman of the Committee for

Professionalism;

ICAP , Senior Adviser

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?

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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

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Russia on-shore FX mkt 2007 vs 2010 Country RANK

2010April 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 2010Rank 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

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• Domestic RUB interbank market smaller than FX market: average daily turnover (ADT), bln.$

• Off-shore RUB MM: no data

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Interbank deposits REPOs

O/N, 1wk Domestic Cross-border

Domestic Cross-border

Jan10 $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 0Source: CBR, October 2010

RUB money market 2010

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Domestic FX market in July 10Domestic 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 $24.5 $ 18.4 $8.2

Outright forwards

$1.45$1.44 NDF

$ 0.5 $0.3

FX swaps $21.5 $ 14.1 $6.3

Total: $47.5 $31.6 $14.8

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FX on-shore interbank market in 2008-10

Russian on-shore OTC FX average daily turnovers dropped in 2008 but stabilized in 2009-2010Month FX market volume MICEX

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.

Aug 2010 $ 53.8 bln $8.8 bln.

Oct 2010 $ 66.7 bln. $11.3 bln

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.

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RUB markets outside RussiaMain 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)

-

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

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Geography of RUB FXOverseas counterparties of Russian banks, July 10

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Region FX spot FX swaps

Western Europe 66.4% 89.9%

Northern Europe 16.0% 2.0%

CIS countries 9.7% 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

RUB FX in LondonSource: UK FXJSC semi-annual survey, June 2010

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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)

15 16 16

Total ADT of UK market, $bln.

$1699 bln. $1521 bln $1747 bln

Volumes of RUB FX instruments in London

Instruments Apr 2009 Apr 2010

FX swaps $4.0 bln $5.8 bln

FX spot: $1.8 bln $2.6 bln

NDF $1.2 bln. $1.4 bln.

FX options $0.5 bln $0.7 bln

Outright forward $0.9 bln $0.9 bln

Ccy swaps $0.14 bln $0.13 bln

Total: $8.6 bln $11.5 blnMoscow, 26 Nov 2010 National Foreign Exchange Association, Russia 14

UK FXJSC: Average daily volumes in 2009-10

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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 for foreigners

4. Removal of obstacles in RUB clearing and settlements –

- RTGS (BESP of CBR)

- CLS Bank clearing currency(next to

ZAR, MXN):

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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: MosPrime 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 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.