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Moscow, 20 November 2014 Moscow Conference 1
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”
Current trends in RUB markets1. 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: $120 bln. est. in 2014
5. RUB FX market volumes generally in decline
6. Declining RUB liquidity and volumes in domestic MM
7. Looming Banking crisis (capital adequacy down)
8. New refinancing from the CB: ccy repo,reverse FX swap
9. RUB increased use in CIS (prospects in BRICS)
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Positive trends• Improved current trade& C/A balance (reduction of
import)
• Government budget fulfilled because of increased energy export revenues in Ruble terms
• Sanctions bad = sanctions good : create incentives for replacing import with local productions
• Facing eastwards: stronger ties with Asian partners (China, Vietnam, Hong Kong, North Korea) – may use Ruble as foreign trade payment currency
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RUB FX trading volumes• Key features:• On-shore: Declining volumes of RUB on-shore FX due to
lower interbank trading, lower energy prices• Off-shore (London) RUB volumes fluctuate:
– Increased in April 2014– But may go down again in Oct 2014
• Increased volatility looming after 2015
• Draft Federal Law on regulation of retail Forex dealers (brokers) should pass second reading at State Duma – may potentially result in increased client FX flows to banks, require banks to create FX dealer subsMoscow, 20 November 2014 Moscow Conference 4
Average Daily Turnover of global FX market in 1986-2013
U$ Bln. 1986 1992 1998 2004 2010 2013
Net turnover
$355 $820 $1,527 $1,934 $3,971 $5,345
FX spot 212 394 568 631 1,488 2,046
Forwards143
58 128 209 475 680
FX swaps 324 734 954 1,759 2,228
FX options
CCY swaps
n.a.
n.a.
87
10
119
21
207
43
337
54
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CCYshares in global FX 2007-2013Rank 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 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) 0.7 0.9 1.0 6Moscow, 20 November 2014
Moscow Conference
Largest on-shore FX mkt 2007,2013Rank
Country 2007 ADT, $ bln.
2007 Share global %
2013 ADT, $ bln.
2013 Share global %
1 UK 1,359 34.1 % 2,726 40.9%
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
2010 2013
EUR/USD 28% 24.1%
USD/JPY 14% 18.3%
GBP/USD 9% 8.8%
USD/AUD 6% 6.8%
USD/others 11.2% 4.0%
USD/CAD 5% 3.7%
USD/CHF 4% 3.4%
USD/RUB … 1.5% (11-th)Moscow Conference 8Moscow, 20 November 2014
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) Cash (underlying) DerivativesOTC Exchange
FX instruments $50-68 bln. $2-3 $2-3 bln.
Interest Rate instruments
$10-11 bln.(IBL)
$10.5 (Repo)
$0.3-0.6 $0.06
Equity $15-18 bln. $0.1-0.2 $3-4 bln.
Commodity n.a. n.a. $0.2-0.5 bln
Credit derivatives n.a. 0.01 -
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Domestic FX market volumes 2003-2014 (all ccy vs USD/RUB)
0
10
20
30
40
50
60
70
80
90
100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
all CCY
USD/RUB2
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Russian domestic FX spot market volumes (ADT) 2008-2014
Source: CBR, Moscow Exchange, NFEA
Month FX market ADT(hi,low),all currencies
MOEX
Jul 2008 $ 104.2 bln. $10.5 bln.
Oct 2009 $ 54.2 bln. $10.6 bln
Oct 2010 $ 66.7 bln. $11.3 bln
Oct 2011 $ 74.8 bln $13.9 bln.
Jan-Dec 2012 $ 56-74 bln $16.6 bln.
Jan-Dec 2013 $ 57-72 bln. $17.8 bln.
Jan-Oct 2014 $ 49-68 bln. $25.7 bn !
On-shore OTC FX volumes 2014
ADT bln.US$
FX spot* FX derivatives
2014 Q1 $66.2 bln. $2.8 bn.
2014 Q2 $57.4 bln $2.4 bln.
2014 Q3 $53.8 bln $2.3 bln.
2014 Q4
(October)
$51.2 bln. $3.9 bln.
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On-shore vs Off shore FX market 2008-13
0
20
40
60
80
100
120
Apr 08 Oct 08 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14
Total FX on-shore
London RUB FX
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RUB markets outside RussiaTrading 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
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Volumes of USD/RUB FX in London
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 $0.2
FX options $1.2 bln $1.7 $0.9 $1.9
Total: $9.0 bln $34.4 bln. $23.3 bln. $28.5 bln.Moscow, 20 November 2014 Moscow Conference 16
Bank of England UK FXJSC: ADT in 2009-14
Russian initiatives to promote
Ruble settlements for export• 24 April: meeting at First Vice-premier I.Shuvalov: MinFin
and MinEconomy 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
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RUB prospects as reserve CCY Rank
byshare
Currency CurrencyShare % 2013
Global GDP %In 2013
Rank by GDP
Share in COFFER (IMF)
Q4-13
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)
… ……………………… Others 2.9%
12 RUB (Russian Ruble) 1.6 2,9% (8-th)
19 BRL 1.1 3.0%
20 INR 1.0 2.5%
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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 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
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Contact Details
12 Bolshaya Nikitskaya st, Moscow, 125009, Russia, Tel.+7 (495) 629-9510, 629-9709www.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.