Strategy update

In 2014, Moscow Exchange launched a major initiative to segregate clearing and trading participants. As a part of this process, a new “general clearing firm” category was created with higher capital requirements. This is in line with best practice in developed markets, highly capitalised market participants accept the clearing and settlement risks of smaller players. This the overall risk of centralised settlement systems. Companies with ‘general clearing firm’ status are eligible to provide clearing services to other categories of FX Market customers, both Russian and foreign legal entities. Market participants operating via general clearing firms will be able to reduce costs of trading on the FX Market.

Moscow Exchange continued to develop its FX offering in 2014. On 1 December, it started trading in GBP and HKD in TOM and TOD instruments, and overnight swaps without full pre-funding, with settlement in RUB. Trading in the currency pair BYR/RUB was facilitated as the requirement of the full pre-funding was removed, new were instruments offered — namely with TOM settlement and overnight swaps — and trading hours were extended.

As of 24 February, the Exchange launched new FX indicators such as USD/RUB swap fixings calculated for swaps with maturity from 1W to 1Y. These indicative rates are set daily at 12:30 p.m. MSK based on aggregated deal and price data for anonymous orders.

Trading volumes on FX Market, RUB trln
Trading volumes on FX Market, RUB trln

Reduced fees for large block trades improved FX Market liquidity and decreased costs for brokers. Fees for spot trade orders of 10 000 lots (one lot equalling USD 1 000 or EUR 1 000) or more were reduced by 13% to 25% depending on the fee schedule.

CNY was one of the currencies traded on the Exchange in 2014. The boost was driven by the enhancement of trading opportunities for CNY/RUB in 2013 (with an increase in the range of available instruments, trading hours extended and full pre-funding cancelled) and through cooperation arrangements being reached with the largest Chinese banks acting as market makers for the Exchange’s major denominated instruments.

FX trading volume breakdown by clients
FX trading volume breakdown by clients

The CNY trading volume grew from RUB 37 bln to RUB 305 bln in 2014. This liquidity boost in the segment prompted the Exchange to offer CNY/RUB futures contracts.

The Exchange continued to enhance its international partnerships as part of its objective to establish an integrated currency market. In 2013, resident banks from countries of the Eurasian Economic Community (EurAsEC) were admitted to the Exchange’s FX Market with a license from their national regulators i.e., without the need to obtain a Russian FX license. Four banks from Belarus and Tajikistan began trading on Moscow Exchange in the same year. In 2014, the National Bank of Tajikistan became the first EurAsEC national bank to join the Exchange; AsiaCredit Bank was the first bank from Kazakhstan and Belagroprombank came from Belarus. The trading volume of non-resident member banks of EurAsEC grew to RUB 330 bln in 2014.

The Exchange will continue to develop its Direct Market Access (DMA) and Sponsored Market Access (SMA) technologies. The SMA service, which provides clients with full access to the Exchange’s software and hardware suite, will be updated to meet global standards to appeal to new international institutional investors.

The Exchange will work to attract retail customers by carrying out awareness campaigns regarding the benefits of on-exchange currency conversion transactions against cash operations.

In addition, a new clearing arrangement — payment-versus-payment (PVP) — will be offered to settle OTC trades via the NCC Clearing Bank.

The Exchange will continue to develop the integrated FX Market as part of the EurAsEC in order to activate trading in national currencies. In particular, the product offering and number of non-resident member firms from the EurAsEC will be expanded, which will stimulate trading in both major currency pairs and national currencies.

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