1. Moscow, 20 Sep 2013Marcus Evans ALM Conference1 Global and Russian Derivatives market regulation 2009-13 Dmitry Piskulov, Ph.D. (econ.) Chairman of NFEA Management Board, Chairman of Committee for Professionalism

2. What is a Derivative Financial Instruments Derivatives (according to FFMS definition) –Forwards (outright) –Swaps (all regardless the maturity. Are short- dated FX swaps – O/N, T/N, S/N derivatives?) –Options –Futures OTC or Exchange traded Moscow, 20.09.2013National Foreign Exchange Association, Russia2

3. Regulatory reform 2009-201…? G20 meeting in Pittsburgh, September 2009 All standardized OTC derivative contracts should be: traded on exchanges or electronic trading platforms, where appropriate, cleared through central counterparties (CCPs) by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories (TR). Non-centrally cleared contracts should be subject to higher capital requirements.” Moscow, 20 Sep 2013Marcus Evans ALM Conference

4. Key elements of reform Moscow, 20 Sep 2013Marcus Evans ALM Conference4 Mandatory clearing of eligible OTC derivatives using central counterparties (CCP) Clearing Mandatory execution of sufficiently liquid OTC derivatives on trading platforms Trading Reporting of all OTC derivatives to trade repositories, Regulators access to data Reporting Minimum requirements for margining of uncleared OTC derivatives Margining Timely confirmation, portfolio reconciliation, portfolio compression, dispute resolution for uncleared OTC derivatives Risk mitigation Pre- and post-trade access to individual quote and trade data Transparency

5. New regulations and regulators USA: Dodd-Frank Act (introduced SEF – swap execution facility) Europe: EMIR – European Markets Infrastructure Regulation 2010-2016 ESMA (European Securities and Market Authority) from 01.01.2011 BCBS + IOSCO (margining for non-centrally cleared derivatives Basel 3: CVA adjustment FSB – Financial Stability Board (Report on OTC Derivatives Reform to G20) Moscow, 20 Sep 2013Marcus Evans ALM Conference5

6. EMIR - Europe EMIR - European Market Infrastructure Regulation Started 15/09/2010 European Commission proposal a reporting obligation for OTC derivatives, a clearing obligation for eligible OTC derivatives, measures to reduce counterparty credit risk and operational risk for bilaterally cleared OTC derivatives, common rules for central counterparties (CCPs) and for trade repositories, and rules on the establishment of interoperability between CCPs. Last adopted document 12.07/2013 Moscow, 20 Sep 2013Marcus Evans ALM Conference6

7. CCPs & Trade repositores Central Counterparties (CCPs):19 in Europe LCH.Clearnet (UK) EuroCCP (UK) Eurex Clearing AG (Germany) European Multilateral Clearing Facility (NL) CME Clearing House (US) NCC – National Clearing Center (Russia) Trade repositories (or Swap data repository): -DTCC (USA) -Regis-TR (European Trade Repository), Luxemburg -NSD (National Settlement Depository), Moscow -NEW: Trade Repository Group (London) of CME, ICX 7

8. Moscow, 01 Nov 2012"Russian money market" Conference RIAN 8 Derivative markets statistics Central Bank of Russia (monthly Survey of Foreign Exchange and Derivatives Market Activity) UK Bank of England FX Joint Standing Committee (Semi-annual FX turnover surveys) Bank for International Settlements (BIS), Basel ISDA – International Swaps and Derivatives Association NFEA Annual Surveys of Bank Derivatives (2008-2012)

9. Derivative regulation in Russia Feb 2008 – Article 1062 of Civil Code (Enforceability) 2009-2010 – Changes to FZ “On Securities Market” and “On Bankruptcy” introducing Close-out netting 2009, 2011 – Standard documentation for Russian Derivatives Market (Russian ISDA) by NFEA, ARB, NAUFOR 2011 – definition of derivatives by FFMS 2011 - Introductions of Trade repository (NSD) and CCP as National Clearing Center (NCC) Dec 2012 – start of Trade repository (NSD) to receive reports/ Full regime only by middle 2014 Jun 2012 - clearing of OTC derivatives by Moscow Exch Moscow, 20 Sep 2013Marcus Evans ALM Conference9

10. Global derivatives amounts Notional principal amounts outstanding, trln.US$ By underlying assetJune 2011 OTC Exchanges* December 2012 OTC Exchanges* Foreign exchange64.70.3167.0 +0.34 + Interest rate contracts553.253.3490.0 -62.2 + Equity linked contracts6.84.76.3 -5.7 +5.7 + Commodity contracts3.22.6 -n.a Credit default swap32.4n.a.25.0 -n.a Other46.5n.a.42.1n.a Total contracts706.9633.0 * Data for Exchange traded derivatives on Dec 2011 and Jun 2013 respectively Moscow, 20 Sep 2013Marcus Evans ALM Conference10

11. Russian OTC FX&IR derivatives ADT bln.US$FX derivativesIR derivatives April 2012$4.8 bln.$270 mln. July 2012$4.8 bln$96 mln. Oct 2012$4.8 bln$186 mln. Jan 2013$4.1 bln.$231 mln. Apr 2013$6.1 bln.$250 mln. July 2013$4.4 bln.$207 mln. Aug 2013$5.0 bln.n.a FX derivatives: FX swaps(longer than spot), Forward outrights + NDF, FX options IR derivatives: Cross currency swaps, Interest rate swaps, OIS Moscow, 20 Sep 2013Marcus Evans ALM Conference 11

12. Russia on-shore IR derivatives Very small Daily volumes (ADT), tend to rise in 2013, bln.$ Moscow, 20 Sep 2013Marcus Evans ALM Conference12

13. Russian IRD features Very small volumes of IRD in comparison to FX derivatives (1000 times lower) RUB IRD market is in London OIS – still underdeveloped, ADT in range from $3 to $50 mln. Moscow Exchange interest rate futures – low volumes FRA almost disappeared in 2013 No available statistics on international use of Interest rate futures and options Moscow, 20 Sep 2013Marcus Evans ALM Conference13

14. Russian FX market 2008-13 Moscow, 20 Sep 2013Marcus Evans ALM Conference14

15. Volumes of USD/RUB FX derivatives in London InstrumentOct 2009Apr 2011Oct 2012Apr 13 FX spot$1.9 bln$5.5 bln$8.5 bln$14.3 NDF$1.2 bln$2.2 bln$3.4 bln$4.2 Outrights$0.3 bln.$0.4 bln.$2.4 bln$5.1 FX swaps$4.3 bln$4.6 bln$5.4 bln$8.7 Ccy swaps$0.1 bln$0.4 bln$0.3 bln$0.4 FX options$1.2 bln$0.8 bln$2.0 bln$1.7 Total:$9.0 bln$13.9 bln$22.0 bln$34.4 bln. Moscow, 20 Sep 2013Marcus Evans ALM Conference15 Bank of England UK FXJSC: ADT in 2008-13

16. Exchange traded derivatives (Russia) ADT, US$ bln. Jan 2013Apr 2013Jun 2013 Equity futures 2,754,304,57 FX futures 2,062,762,83 Interest rate futures 0,0080,0220,066 -on short term rates 0,0000040,0000330,00077 - on long term (OFZ) 0,0080,0220,065 Options 0,350,540,62 Commodity futures 0,130,220,20 TOTAL 5,307,858,29 Source: Moscow Exchange, St.Petersburg Exchange Moscow, 20 Sep 2013Marcus Evans ALM Conference16

17. Today NFEA indices family Since May 2005, 9 contributor banks Since Jan 2010, 8 contributor banks Since Sep 2010, together with CBR 29 contributor banks Since April 2011, 9 contributor banks Since Jan 2013, 9 contributor banks Moscow, 19 Sep 2013Marcus Ewans Conference17

18. Moscow, 20 Sep 2013 Marcus Evans ALM Conference18 About NFEA Established: October 1999 in Moscow Membership: institutional (local and global banks and brokers) operating in Russian spot/forward foreign exchange, money markets and derivatives; 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: MosPrime Rate (2005, RUB money market reference rate), NFEA FX SWAP RATE – new index for USD/RUB and EUR/RUB forwards -Standard Documentation for Russian OTC derivative transactions (Russian ISDA Agreement) – completed in 2009, new version in 2011 (approved FFMS) -RUONIA – Russian analogue of EONIA, SONIA (since Sept 2010) -ROISFIX – OIS interest rates index (since April 2011) -CLS Bank: inclusion of Rub into CLS clearable currencies (since end 2011) International cooperation, partners and working contacts: -EBRD (MosPrime rate, joint conferences) -ISDA (inclusion of MosPrime rate into ISDA definitions 2006) -ACI-The Financial Markets Association

19. Moscow, 20 Sep 2013Marcus Evans ALM Conference19 Contact Details 12 Bolshaya Nikitskaya st, Moscow, 125009, Russia, Tel.+7 (495) 629-9510, 629-9709 www.nva.ruwww.nva.ru, www.nfea.ru; www.ruonia.ruwww.nfea.ruwww.ruonia.ru @ The Copyright National Foreign Exchange Association, 2012 All rights reserved. Any reproduction is only permitted with prior consent of NFEA.