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από dna replication » 13 Ιουν 2024, 22:32
Russian Market Faces New Currency Realities Amid Expanded U.S. Sanctions
The Russian stock market is bracing for a significant downturn as it opens on Thursday, June 13, following the announcement of expanded U.S. sanctions. These sanctions target key financial institutions such as the Moscow Exchange, the National Clearing Center (NCC), and the National Settlement Depository (NSD). As a result, exchange trading of the dollar and euro has been halted, with the Central Bank of Russia now determining their exchange rates based on over-the-counter (OTC) transactions.
Market Sentiment and Indices Performance:
On Tuesday, the MOEX Russia Index and the RTS Index fell by 0.3% and 1%, respectively. The MOEX index remained below the resistance level of 3,190 points, suggesting potential tests of the 3,100-point mark and, considering the expanded sanctions, the psychologically significant 3,000-point level. The RTS Index ended the session just below 1,120 points, nearing the crucial 1,000-point threshold.
Currency Market Dynamics:
The ruble closed Tuesday's session at this year's highs: 87.37 rubles per dollar, 94.60 rubles per euro, and 12.09 rubles per yuan. With trading in the dollar, euro, and Hong Kong dollar suspended on the Moscow Exchange due to the sanctions, the main trading session for currencies will start at 10:00 AM Moscow time. Going forward, the exchange rates for the dollar and euro, including for derivative instruments, will be determined by OTC transactions and published by the Central Bank of Russia. The yuan-ruble exchange rate will now serve as the primary benchmark for market participants.
Global Currency Trading Practices and Russia’s Unique Approach:
Globally, currencies are predominantly traded over-the-counter (OTC). Major exchanges like the NYSE, Nasdaq, LSE, and Deutsche Börse do not engage in currency trading. These leading global platforms focus on indices, futures, stocks, and other financial instruments, but not currencies. This stands in contrast to the Russian practice, where currency trading has traditionally occurred on the Moscow Exchange, which is also the principal exchange in Russia. However, in the rest of the world, currency trading has always taken place on large OTC platforms rather than exchanges. Historically, Russia has deviated from this norm—starting with the Moscow Interbank Currency Exchange (MICEX), which later became the Moscow Exchange, monopolizing the currency trading market within the country.
Adapting to New Currency Trading Practices in Russia:
However, Russia has also had and still maintains over-the-counter (OTC) platforms operated by major banks, which traded large currency lots between banks. Despite this, the Moscow Exchange, with its aggressive pricing and monopoly on liquidity, dominated the entire market. Could Russia have been trading currencies without an exchange all along? Absolutely, and there were attempts to do so.
What will happen now?
Banks will be able to trade currency pairs without the exchange, as is done worldwide. There is nothing inherently problematic about this shift. Initially, today, there may be confusion, disarray, and even alarm due to unfamiliarity. However, large and medium-sized banks, along with OTC platforms, are expected to quickly adapt and establish the necessary technology. Once this is accomplished, trading will return to its usual routine. The primary difference will be that the Moscow Exchange will no longer collect commissions from the currency market.
Impact of Sanctions on the Market:
The sanctions have wide-reaching implications beyond currency trading. They affect various LNG transport vessels and projects such as Novatek's "Arctic LNG 1", "Arctic LNG 3", and "Murmansk LNG", as well as companies like Seligdar and Rusolovo. Additionally, offices of Sberbank, VTB, and several other banks in Beijing and Hong Kong have been impacted. The U.S. has also banned providing Russian enterprises with IT and cloud services and expanded restrictions on the sale of semiconductors, chips, and other goods to Russia. These measures could potentially support the business of the new issuer "Element".
Having lost the European gas market and not waiting for a new contract for supplies to China, Gazprom continues to reduce production and freeze wells in fields from Yamal to Siberia.
