London, 12 Apr 2011National Foreign Exchange Association, Russia1 2011 Overview of RUB FX & MM & Derivative Market Recent Developments Dmitry Piskulov,

London, 12 Apr 2011 National Foreign Exchange Association, Russia 1

2011 Overview of RUB2011 Overview of RUB

FX & MM & Derivative Market FX & MM & Derivative Market Recent DevelopmentsRecent Developments

Dmitry Piskulov, Ph.D. (econ.)

Member of NFEA Management Board,

Chairman of the Committee for

Professionalism;

ICAP , Senior Adviser

RUB mkt recent developments• Moscow as International Financial Center (MIFC) plans

accelerated, joint UK-Russia groups created• New trend: RUB denominated Eurobonds issues• Merger of MICEX and RTS under way• Increasing interest rates/RUB appreciation: capital inflow• Law on Clearing (adopted in Feb 2011) introduces close-

out netting (CON) by Aug 2011: expected rise in domestic derivatives volumes

• New version of Russian ISDA 2011 to be completed• New Ruble indices: RUOISfix (15 Apr11), RUONIA

(08Sep10), NFEA FX SWAP• CNY/RUB new cross rate to develop direct tradingLondon, 12 Apr 2011 National Foreign Exchange Association, Russia 2

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?


How Global the RUB is

• Still predominantly local or regional (CIS) currency• Slow but gradual globalization:

• Small share of global FX turnover (0.8-0.9%)• Limited number of Rub denominated securities

traded internationally (some Government bonds, EBRD bonds)

• Limited access of foreigners to Russian financial market

• Increasing interest to RUB instruments from global players (NY, HK, Tokyo, Singapore)


What RUB instruments• FX spot +forwards (inc.FX swaps)• FX derivatives (NDFs, Options)• Cash MM deposits• REPOs• Interest rate derivatives: (IRS, OIS, FRA, CCS,

IRO)• Domestic RUB bonds (OFZ, corpor.)• RUB denominated Eurobonds (new)

London, 12 Apr 2011 National Foreign Exchange Association, Russia

5

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%6

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


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

• Off-shore RUB MM: no data


Interbank deposits REPOs

O/N, 1wk Domestic Cross-border

Domestic Cross-border

Jan10 $7.5 bln $2.7 bln $2.2 bln 0

Oct 10 $6.5 bln $1.6 bln $5.6 bln 0

Feb 11 $6.2 bln $2.1 bln $5.1 bln 0

Source: CBR, February 2011

RUB money market 2010-11


FX spot on-shore interbank market in 2008-2011

Russian on-shore FX spot ADT: highest mid 2008; dropped in crisis; stable in 2009-10; decline in 11

Month FX spot market ADT 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.

Oct 2010 $ 66.7 bln. $11.3 bln

Feb 2011 $ 39.5 bln $ 9.1 bln.

Domestic Gov-t bond market

Government OFZ monthly volumes, bln. RUB (CBR data)

j


Domestic corporate bond market

Corporate bonds secondary market in Feb 2011: volumes, bln. RUB (left axis), YTM (right axis)


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, Derivat.): $ 13.5-15 bln.

London, 12 Apr 2011 12

RUB instruments outside Russia

More RUB derivatives than cash products but cash products are rising

• Cash: FX spot, 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


Geography of RUB FXOverseas counterparties of Russian banks, Feb 11


Region FX spot FX swaps

Western Europe 78.9% 90.1%

Northern Europe 7.6% 2.2%

South America 5.7% 3.7%

CIS countries 5.3% 1.5%

Cyprus 2.0% 0.5%

North America 0.2% 0.2%

Other 0.3 % 1.8%

Source: CBR

RUB FX in LondonSource: UK FXJSC semi-annual survey, January 2011


Oct 08 Oct 09 Oct 10

Percentage of RUB in total UK FX

0.7% 0.8% 0.7%

USD/RUB turnover $10.8 bln. $10.9 bln. $11.3 bln.

Rank of RUB (same as MXN, KRW)

15 16 16

Total ADT of UK market, $bln.

$1699 bln. $1521 bln $1821 bln

Volumes of RUB FX instruments in London

Instrument Apr 2009 Apr 2010 Oct 2010

FX swaps $4.0 bln $5.8 bln $4.0 bln

FX spot: $1.8 bln $2.6 bln $3.7 bln

NDF $1.2 bln. $1.4 bln. $1.6 bln.

FX options $0.5 bln $0.7 bln $1.1 bln

Outrights $0.9 bln $0.9 bln $0.7 bln

Ccy swaps $0.14 bln $0.13 bln $0.28 bln

Total: $8.6 bln $11.5 bln $11.4 blnLondon, 12 Apr 2011 National Foreign Exchange Association, Russia 16

UK FXJSC: ADT in 2009-10

RUB denominated EurobondsNew instrument aimed to promote MIFC and RUB

Issuer Amount, R. Month

RusHydro Finance (LPNs) 20 bln. Oct 2010

Russian Federation (MoF) 40 bln. Feb 2011

Rosselkhozbank (Russian Agricultural bank)

20 bln. Mar 2011

Planned

Federal Grid 50-70 bln. H2 2011

Gazprom 2011

Probusinessbank 2011



Moscow IFC:what’s important

Infrastructural prerequisites fro Moscow to become IFC:

1. To develop bilateral, multilateral clearing on CCP basis (incl. international clearing houses)

2. Promote RUB as reserve currency (invoicing of commodity export in Rubles, CNY/RUB other crosses)

3. Removal of obstacles in RUB clearing and settlements:

- mandatory use of RTGS (BESP of CBR)

- CLS Bank clearing currency(next to ZAR, MXN)

4. Enhance domestic derivatives trading

5. Develop liquid RUB bonds market for

overseas investments


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: 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 ISDA Agreement) – completed in 2009

- RUONIA – Russian analogue of EONIA (since Sept 2010)• International cooperation, partners and working contacts:

- EBRD- ISDA (inclusion of MosPrime rate into ISDA definitions 2006)- ACI-The Financial Markets Association - WMBA

http://fotocomp.chat.ru/img/008kremll.jpg


Contact Details

12 Bolshaya Nikitskaya st, Moscow, 125009, Russia, Tel.+7 (495) 629-9510, www.nva.ru, www.nfea.ru; www.ruonia.ru

@ The Copyright National Foreign Exchange Association, 2011 All rights reserved. Any reproduction is only permitted with prior consent of NFEA.

http://www.nva.ru/

http://www.nfea.ru/

http://www.ruonia.ru/

Documents

London, 12 Apr 2011National Foreign Exchange Association, Russia1 2011 Overview of RUB FX & MM & Derivative Market Recent Developments Dmitry Piskulov,