1. London, 12 Apr 2011National Foreign Exchange Association, Russia1 2011 Overview of RUB FX & MM & Derivative Market Recent Developments Dmitry Piskulov, Ph.D. (econ.) Member of NFEA Management Board, Chairman of the Committee for Professionalism; ICAP, Senior Adviser

2. RUB mkt recent developments Moscow as International Financial Center (MIFC) plans accelerated, joint UK-Russia groups created New trend: RUB denominated Eurobonds issues Merger of MICEX and RTS under way Increasing interest rates/RUB appreciation: capital inflow Law on Clearing (adopted in Feb 2011) introduces close- out netting (CON) by Aug 2011: expected rise in domestic derivatives volumes New version of Russian ISDA 2011 to be completed New Ruble indices: RUOISfix (15 Apr11), RUONIA (08Sep10), NFEA FX SWAP CNY/RUB new cross rate to develop direct trading London, 12 Apr 2011National Foreign Exchange Association, Russia2

3. Where RUB markets? Markets in Russian Ruble denominated instruments ON SHORE: only domestic (residents) OFF-SHORE: only non-residents ON-SHORE deals with OFF-SHORE: cross-border RUB transactions HOW GLOBAL IS RUB? London, 12 Apr 2011National Foreign Exchange Association, Russia3

4. How Global the RUB is Still predominantly local or regional (CIS) currency Slow but gradual globalization: Small share of global FX turnover (0.8-0.9%) Limited number of Rub denominated securities traded internationally (some Government bonds, EBRD bonds) Limited access of foreigners to Russian financial market Increasing interest to RUB instruments from global players (NY, HK, Tokyo, Singapore) London, 12 Apr 2011National Foreign Exchange Association, Russia4

5. What RUB instruments FX spot +forwards (inc.FX swaps) FX derivatives (NDFs, Options) Cash MM deposits REPOs Interest rate derivatives: (IRS, OIS, FRA, CCS, IRO) Domestic RUB bonds (OFZ, corpor.) RUB denominated Eurobonds (new) London, 12 Apr 2011National Foreign Exchange Association, Russia5

6. Russia on-shore FX mkt 2007 vs 2010 Country RANK 2010 April 2007 ADT, $bln. Share of global % April 2010 ADT, $bln. Share of global % 1 United Kingdom1,45334.6 %1,85436.7% 2 USA74517.4 %90417.9% 3 Japan2505.8 %3126.2% 4 Singapore2425.6 %2665.3% 5 Switzerland2545.9 %2635.2% 6 Hong Kong SAR1814.2 %2384.7% 7 Australia1764.1 %1923.8% 8 France1273.0 %1523.0% 9 Denmark882.4%1212.4% 10 Germany1012.4 %1092.1% 11 Canada64641.5 %621.2% 12 Sweden441.0%450.9% 13 Korea350.8%440.9% 14 Russia501.3 %420.8% 6

7. RUB share in global FX 2007 vs 2010 RankCurrencyShare % 2007Share % 2010 1USD (US Dollar)86.384.9 2EUR (Euro)37.039.1 3JPY (Japanese yen)16.519.0 4GBP (Pound sterling)15.012.9 5AUD (Australian dollar)6.77.6 6CHF (Swiss frank)6.86.4 7CAD (Canadian dollar)4.25.3 ……..….… 15INR (Indian rupee)0.70.9 16RUB (Russian Ruble)0.8 (17-th)0.9 20BRL (Brazilian real)0.50.7 30CNY (Chinese renminbi)0.4 (22-th)0.1 London, 12 Apr 2011National Foreign Exchange Association, Russia7

8. Domestic RUB interbank market smaller than FX market: average daily turnover (ADT), bln.$ Off-shore RUB MM: no data London, 12 Apr 2011National Foreign Exchange Association, Russia8 Interbank depositsREPOs O/N, 1wk DomesticCross- border DomesticCross- border Jan10$7.5 bln$2.7 bln$2.2 bln0 Oct 10$6.5 bln$1.6 bln$5.6 bln0 Feb 11$6.2 bln$2.1 bln$5.1 bln0 Source: CBR, February 2011 RUB money market 2010-11

9. London, 12 Apr 2011National Foreign Exchange Association, Russia9 FX spot on-shore interbank market in 2008-2011 Russian on-shore FX spot ADT: highest mid 2008; dropped in crisis; stable in 2009-10; decline in 11 MonthFX spot market ADTMICEX Jul 2008$ 119.2 bln.$10.5 bln. Apr 2009$ 46.2 bln.$ 9.8 bln Oct 2009$ 54.2 bln.$10.6 bln Feb 2010$ 53.4 bln $10.0 bln. Oct 2010$ 66.7 bln.$11.3 bln Feb 2011$ 39.5 bln $ 9.1 bln.

10. Domestic Gov-t bond market Government OFZ monthly volumes, bln. RUB (CBR data) j London, 12 Apr 2011National Foreign Exchange Association, Russia10

11. Domestic corporate bond market Corporate bonds secondary market in Feb 2011: volumes, bln. RUB (left axis), YTM (right axis) London, 12 Apr 2011National Foreign Exchange Association, Russia11

12. RUB markets outside Russia Trading volumes(ADT) reported off-shore: FX instruments: $ 12-13 bln. Money market instruments: $ 0.5-1 bln. Interest rate derivatives: $ 1-2 bln. RUB bonds trading: $ 1 bln. Total (FX,MM, Derivat.): $ 13.5-15 bln. London, 12 Apr 201112

13. RUB instruments outside Russia More RUB derivatives than cash products but cash products are rising Cash: FX spot, FX spot, cash deposits, RUB bonds (NEW) Derivatives and CFDs: NDFs & Outright forwards FX options Interest rate and XCY swaps Forward rate agreement (FRA) Overnight indexed swaps - OIS (NEW) – from 08/09/10 London, 12 Apr 2011National Foreign Exchange Association, Russia13

14. Geography of RUB FX Overseas counterparties of Russian banks, Feb 11 London, 12 Apr 2011 National Foreign Exchange Association, Russia 14 RegionFX spotFX swaps Western Europe78.9%90.1% Northern Europe7.6%2.2% South America5.7%3.7% CIS countries5.3%1.5% Cyprus2.0%0.5% North America0.2% Other0.3 %1.8% Source: CBR

15. RUB FX in London Source: UK FXJSC semi-annual survey, January 2011 London, 12 Apr 2011National Foreign Exchange Association, Russia15 Oct 08Oct 09Oct 10 Percentage of RUB in total UK FX 0.7%0.8%0.7% USD/RUB turnover$10.8 bln.$10.9 bln.$11.3 bln. Rank of RUB (same as MXN, KRW) 1516 Total ADT of UK market, $bln. $1699 bln.$1521 bln$1821 bln

16. Volumes of RUB FX instruments in London InstrumentApr 2009Apr 2010Oct 2010 FX swaps$4.0 bln$5.8 bln$4.0 bln FX spot:$1.8 bln$2.6 bln$3.7 bln NDF$1.2 bln.$1.4 bln.$1.6 bln. FX options$0.5 bln$0.7 bln$1.1 bln Outrights$0.9 bln $0.7 bln Ccy swaps$0.14 bln$0.13 bln$0.28 bln Total:$8.6 bln$11.5 bln$11.4 bln London, 12 Apr 2011National Foreign Exchange Association, Russia16 UK FXJSC: ADT in 2009-10

17. RUB denominated Eurobonds New instrument aimed to promote MIFC and RUB IssuerAmount, R.Month RusHydro Finance (LPNs)20 bln.Oct 2010 Russian Federation (MoF)40 bln.Feb 2011 Rosselkhozbank (Russian Agricultural bank) 20 bln.Mar 2011 Planned Federal Grid50-70 bln.H2 2011 Gazprom2011 Probusinessbank2011 London, 12 Apr 2011National Foreign Exchange Association, Russia17

18. London, 12 Apr 2011National Foreign Exchange Association, Russia18 Moscow IFC:what’s important Infrastructural prerequisites fro Moscow to become IFC: 1.To develop bilateral, multilateral clearing on CCP basis (incl. international clearing houses) 2.Promote RUB as reserve currency (invoicing of commodity export in Rubles, CNY/RUB other crosses) 3.Removal of obstacles in RUB clearing and settlements: - mandatory use of RTGS (BESP of CBR) - CLS Bank clearing currency(next to ZAR, MXN) 4. Enhance domestic derivatives trading 5.Develop liquid RUB bonds market for overseas investments

19. London, 12 Apr 2011 National Foreign Exchange Association, Russia19 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 derivatives transactions (Russian ISDA Agreement) – completed in 2009 -RUONIA – Russian analogue of EONIA (since Sept 2010) International cooperation, partners and working contacts: -EBRD -ISDA (inclusion of MosPrime rate into ISDA definitions 2006) -ACI-The Financial Markets Association -WMBA

20. London, 12 Apr 2011National Foreign Exchange Association, Russia20 Contact Details 12 Bolshaya Nikitskaya st, Moscow, 125009, Russia, Tel.+7 (495) 629-9510, www.nva.ruwww.nva.ru, www.nfea.ru; www.ruonia.ruwww.nfea.ruwww.ruonia.ru @ The Copyright National Foreign Exchange Association, 2011 All rights reserved. Any reproduction is only permitted with prior consent of NFEA.