The Moscow Exchange (MOEX) operates Russia’s largest public trading markets for equities, bonds, derivatives, foreign exchange and money market products. It also incorporates the National Settlement Depository (NSD), which is the country’s central securities depository, and the National Clearing Centre (NCC), which acts as central counterparty. NCC is the largest of the Russian central counterparties by a wide margin. It covers all on-exchange stocks traded in Russia, 97% of other on-exchange securities transactions, 50% of repo market trades and 60% of the FX market. MOEX/NCC is regulated and controlled by the Central Bank of Russia.
By Adam Skoczylas, FX Emerging Markets Trading, Bank of America Merrill Lynch
The rouble under pressure
Over the last few years, the FX rouble market has shifted from bilateral electronic brokerage trading to MOEX, Russia’s biggest trading market. This is largely due to significant pressures on the currency since late 2014, caused by declining oil prices, conflict in Ukraine and the effects of sanctions. These concerns greatly reduced trading in the offshore markets, with much of the activity migrating onshore.
By May 2015, available U.S. dollar/rouble liquidity in the offshore markets had fallen to a fraction of what it had been the previous year, with a similar decline for euro/rouble. This drop presented two primary challenges for clients:
• Concentration risk as a result of being a larger part of a small pool
• Pricing as spreads became wider due to challenging offshore liquidity conditions
More liquidity and tighter spreads
To help clients overcome these challenges, we needed to provide onshore access to euro and U.S. dollar/rouble liquidity. So in January 2016, Bank of America, National Association became a clearing member of MOEX. With Merrill Lynch Securities LLC being a trading member of MOEX, this allows us to access around $5 billion to $7 billion of roubles per day, even in tough conditions, with T+1 liquidity. That’s higher liquidity than offshore platforms, and with tighter spreads.
Better scale, pricing and other client benefits of MOEX:
• A higher clearing line: By accessing the MOEX market through Bank of America, National Association, clients gain access to more efficient clearing connectivity, allowing them to transact higher volumes
• Better pricing: Clients benefit from savings made from the absence of local entity and operational support charges
• More competitive spreads in deliverable and non-deliverable forwards in Greenwich Mean Time
• Less slippage on large market orders
• Increased auto-pricing size on our Instinct® FX strategies*
Meeting changing FX needs globally
Successful traders are continually adapting to changing environments. Our job is to help clients pursue their objectives through venues, markets and strategies that will help them optimise their trading.