The announcement on February 12 by Icap that its spot foreign exchange platform, EBS, had launched rouble trading appears to have been warmly received by most market participants. A day later, Euroclear, the pan-European central securities depositary, said that it would now accept the rouble as a settlement currency.
Asked for his view on EBS’s decision, a senior figure at a major emerging markets player says: "It looks good to me. It should really compress brokerage as the currency makes the shift from NDF (non-deliverable forward) to deliverable."
Igor Souzdaltsev, president of ACI Russia, the FX industry’s trade body, and head of financial institutions at Investsberbank Moscow, adds: "I see it as a very good thing that will strongly support our move for strengthening of the rouble to the level of world’s reserve currency." While Souzdaltsev’s view may be overly optimistic, there is no doubt that FX turnover in Russia is expanding. According to ACI Russia, annual turnover grew from $7.3 trillion in 2005 to $9.5 trillion in 2006.
EBS has made the rouble available for trading against the US dollar with a one-day value date. In a press release, Darryl Hooker, EBS’s emerging markets, developing currencies and precious metals manager, says: "Rouble traders have told us they need access to the electronic global book on one dealing screen and for price, depth and liquidity and for access to trading on the G7 currencies. Our position as the global provider for the major traded currencies, particularly the US dollar, euro and yen pairs, make us an obvious choice for these traders. EBS is ideally suited for e-trading in emerging market currencies like the rouble."
Darren Barker, head of foreign exchange at RZB in London, agrees. "Electronic trading in the rouble is a natural progression and will benefit liquidity and the global FX market as a whole," he says. "Visibility is key and this move will get the rouble in front of many more spot traders who can view and trade it alongside the other major currencies on EBS."
A week after the rouble was made available, prices on EBS’s screens were said to be relatively wide and not particularly liquid. A London-based trader says that the existing market was efficient. "The rouble really trades on a basket basis; it’s a managed currency. To trade it requires relatively complex programmes. It is traded in the market against the dollar, but in practice positions are run against the euro," he adds. "EBS hasn’t really brought about an increase in transparency, but it will put pressure on brokerage."
A spokesman for EBS says that the brokerage for rouble trading will be the same as for other currencies on the platform, with the headline rate starting at $25 per ticket. With most banks getting substantial discounts, this is substantially cheaper than the level charged by voice brokers. Whether this will prove enough of an attraction to attract liquidity remains to be seen.
Euroclear’s decision to accept the rouble as a settlement currency was reported by the Russian media as approval by the international financial community of the country’s currency law liberalization. "This announcement is of great importance," says Souzdaltsev. "Settlements in rouble gives us new opportunities to promote Russian financial instruments abroad."