1. 6-th IRSF,Moscow,10Nov09National Foreign Exchange Association, Russia 1 RUSSIAN ROUBLE INTERBANK MARKETS IN 2009 Dmitry Piskulov, Ph.D. (Econ.) Chairman of the Committee for Professionalism; ICAP, Senior Adviser

2. What RUB markets? Mainly OTC markets: interbank, less between Investment firms On-shore (within Russia) + off-shore (outside Russia) = Global RUB markets RUB Instruments: Foreign exchange (cash TOD,TOM) swaps + outright forwards Interbank deposits Derivatives (NDFs, IRS, CCS, FRA) OTC Equities (potentially for non-residents) 6-th IRSF, Moscow,10Nov09National Foreign Exchange Association, Russia 2

3. Where RUB markets? Main locations: Russia (Moscow, St.Petersburg): cash (spot) FX UK (London) + Europe: RUB derivatives USA (NY) Asia (Tokyo, HK, Dubai) Main participants: -Banks -Investment companies -Institutional investors (hedge funds) 6-th IRSF, Moscow,10Nov09National Foreign Exchange Association, Russia 3

4. 6-th IRSF, Moscow,10Nov09 National Foreign Exchange Association, Russia 4 Why RUB markets important Plans of Russian political and economic authorities: Concept of Moscow as International Financial Center (adopted) to compete with Dubai, Shanghai, Mumbai; Strategy of development of Russian financial market till 2020 – focus on securities, forwards and derivatives instruments, clearing infrastructure: RUB to become international (regional) reserve currency Shortcomings of above programs: Focus on the securities markets Negligence of RUB settlements Access for foreigners?

5. Russian on-shore FX mkt 2007 RankCountry2007 ADT, $ bln.Share of global % 1United Kingdom1,35934.1 % 2USA66416.6 % 3Switzerland2426.1 % 4Japan2386.0 % 5Singapore2315.8 % 6Hong Kong SAR1754.4 % 7Australia1704.2 % 8France1203.0 % 9Germany992.5 % 10Denmark862.2 % 11Canada601.5 % 12Russia501.3 % 13Belgium481.2 % 6-th IRSF,Moscow, 10Nov09 National Foreign Exchange Association, Russia 5

6. 6-th IRSF,Moscow,10Nov09National Foreign Exchange Association, Russia 6 Domestic FX market in Sep 09 Domestic OTC market average daily turnover (ADT) in bln. US$ by BIS methodology (Bank of Russia) Total ADT, US$ bln. of them: CCY /RUB Cross-border of CCY/RUB FX spot$27.8$ 22.0$11.6 Outright forwards $0.66$ 0.49$0.28 FX swaps$19.7$ 14.3$5.3 Total:$48.3$31.6$13.0 FX options$0.09$0.07$0.04

7. 6-th IRSF, Moscow, 10Nov09National Foreign Exchange Association, Russia 7 Crisis effect on Russian market Russian vs UK on-shore interbank FX markets average daily turnover (ADT): both dropped * both Interbank OTC & in MICEX;source: CBR MonthUK marketRussian market* Apr 08$ 1,696 bln. Jul 08$119 bln. Apr 09$ 1,269 bln.$53.7 bln. Sep 09n.a.$ 52.1 bln. Change %-25%-56%

8. 6-th IRSF,Moscow,10Nov09National Foreign Exchange Association, Russia 8 Non-residents in Russian FX Share of non-resident (global) participants in Russian FX market stable at 37-42% Periodnon-residents in USD/RUB Non-residents EUR/RUB Q4 200737.0%31.7% Q2 200838.9%25.3% Q4 200841.5%20.7% Q2 200939%22%

9. 6-th IRSF, Moscow, 10Nov09National Foreign Exchange Association, Russia 9 RUB markets outside Russia Turnover: $10-12 bln. daily (FX, IRD) Link Moscow-London (transactions done in Moscow in the name of London HO) Number of banks (dealing codes) (according to ICAP EBS data on banks that entered RUB SSI) Active: 50 (already dealt in EBS) Potential: 140 (entered RUB SSI in EBS) Increase in participants and thus global volumes subject to settlements solution!

10. RUB FX in London Source: UK FXJSC semi-annual survey, April 2009 6-th IRSF,Moscow,10Nov09 National Foreign Exchange Association, Russia 10 Oct 08Apr 09 Percentage of RUB in total UK FX 0.7% USD/RUB turnover$10.9 bln.$8.6 bln. Rank of RUB (~ same as MXN PLN, KRW, TRL) 1517 Total ADT of UK market, $bln. $1699 bln.$1356 bln.

11. Global banks RUB trading Global banks – main promoters of RUB instruments RUB FX pricing and execution hub location: struggle between Moscow and Head office:  in London: 30%  in Moscow: 60%  other (Tokyo, Vienna, Helsinki, Dubai, Hong Kong): 10% 6-th IRSF,Moscow,10Nov09 National Foreign Exchange Association, Russia 11

12. 6-th IRSF,Moscow,10Nov09National Foreign Exchange Association, Russia 12 Prospects of RUB as international currency Infrastructural prerequisites for global RUB trading (tasks for Russian authorities, CBR): 1.Change CBR concept of internal FX market to recognize global RUB FX market; 2.Promotion of RUB instruments in global electronic trading platforms (such as EBS or Reuters) 3.To remove obstacles in RUB clearing and settlements for international participants: - RTGS (BESP of CBR) - CLS Bank clearing currency (next ZAR, MXN) 4. Monitor RUB global trading volumes

13. 6-th IRSF,Moscow,10Nov09 National Foreign Exchange Association, Russia 13 About NFEA Established: October 1999 in Moscow as non-commercial organization; Membership: legal entities (local and global banks and brokers) working on/related to Russian spot/forward foreign exchange and money markets. 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: MosIBOR (2001, RUR interbank % rates), RIBER (2004, USD/RUB), MosPrime Rate (2005, RUB money market reference rate) Projects in progress: -NFEA FX SWAP RATE – new index for USD/RUB and EUR/RUB forwards -Standard Documentation on Russian OTC derivatives transactions (Russian analogue of ISDA Agreement) – completed in 2009 -Legal documentation on syndicated loans; International cooperation and working contacts: -ACI-The Financial Markets Association -ISDA (inclusion of MosPrime rate into ISDA definitions 2006)

14. 6-th IRSF,Moscow,10Nov09 National Foreign Exchange Association, Russia 14 Contact Details 13 Bolshoy Kislovskiy Per., Moscow, 125009, Russia, Tel.+7 (495) 705-9693, Fax: +7(495) 705-9675. www.nva.ruwww.nva.ru, www.nfea.ruwww.nfea.ru @ The Copyright National Foreign Exchange Association, 2008. All rights reserved. Any reproduction is only permitted with prior consent of NFEA.