Russia’s central bank will enforce derivatives transactions through a central clearer

Bank Of Russia will introduce G-20 regulations regarding derivatives contracts in about 18 months.

Starting today, the Moscow exchange has a central clearing mechanism for derivatives contracts, and there is wide speculation that it will become mandatory in 18 months. According to newly installed regulatory head Sergey Shvetsov, it will bring additional transparency to the Russian financial markets and secure the counterparties’ interests.

He was quoted saying that the country has agreed to G-20 regulations regarding derivatives and Russia has to comply since the start of 2013, yet apparently the process has proved to be more difficult to introduce. He stated that the regulator expects the transition to end in about a year and a half. Central clearing is currently provided for FX swap agreements, interest rates swaps and overnight indexed swaps, as well as cross currency swaps.

Mr. Shvetsov also communicated that the Central Bank is in the process of fully switching its policy of targeting the exchange rate towards inflation targeting through short term interest rates setting. In his opinion a very big part of the lack of availability of long term loans is due to the focus of the central bank on the exchange rate of the Ruble.

It appears as if Russia is the country next to China to start a long awaited transition process towards liberalization of it currency market. It is widely known that it is an active participant in the market and few brokerages are offering the USDRUB for trading. This is about to change as the Chinese are taking initial steps towards an exchange rate reform as well.

As reported by Reuters, China launched a new benchmark lending rate on Friday – the “loan prime rate”, which is targeted to guide the commercial banks in setting interest rates for their most creditworthy customers.

All in all, in the next months the forex industry should be preparing for a full offering of BRICS currencies, it is imperative for their economies to reduce their reliance on the US Dollar as a reserve currency in time. While this being a very slow process it has to start at some point and it certainly will be a welcome transition for forex market participants, especially in the countries in question.

To see the Moscow Exchange press release on clearing of OTC derivatives click here.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.


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