1. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia1 Overview of RUB Domestic and Global Markets 2011 New trends 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 Merger of MICEX and RTS completed Market volatility: capital outflow + increased trading volumes of main Ruble instruments Derivatives legislation (adopted in Feb 2011) introduces close-out netting (CON), Trade repository, CCP New version of Russian ISDA 2011 to be completed New Ruble indices: RuOISfix (15 Apr11), RUONIA (08Sep10), NFEA FX SWAP (Jan 2010) New RUB denominated Eurobonds issues Moscow, 01 Nov 2011National Foreign Exchange Association, Russia2

3. New trends Steady increase in ADT of domestic FX market: from $53 bln. (Feb 2010) to $74 bln. (Sep11): +40% Rise in Ruble cash MM (depo+repo): from $13 to $16.7bln Increase in number of institutions trading Ruble Long-expected rise in domestic Interest rate derivatives trading Rise in RUB FX daily trading in London: from $8.6 bln (Apr09) to $13.9 (Apr11) New RUB FI instruments with floating rate (planned EBRD Rub eurobond issue) IS THE CRISIS OVER? Moscow, 01 Nov 2011National Foreign Exchange Association, Russia3

4. 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 – GLOBAL Ruble market HOW GLOBAL IS RUB? Moscow, 01 Nov 2011National Foreign Exchange Association, Russia4

5. How Global the RUB is Still predominantly local or regional (CIS) currency Still low but gradually rising 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 (London,NY, HK, Tokyo, S-pore) Moscow, 01 Nov 2011National Foreign Exchange Association, Russia5

6. 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) Moscow, 01 Nov 2011National Foreign Exchange Association, Russia6

7. 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% 7

8. 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 Moscow, 01 Nov 2011National Foreign Exchange Association, Russia8

9. Domestic RUB interbank market smaller than FX market: average daily turnover (ADT), bln.$ Off-shore RUB MM (non-resident to non resident): no data Moscow, 01 Nov 2011National Foreign Exchange Association, Russia9 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 Sep 11$8.3 bln$2.8 bln$5.6 bln0 RUB money market 2010-11

10. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia10 FX spot on-shore interbank market in 2008-2011 Russian on-shore FX spot ADT: highest mid 2008; dropped in crisis (end 2008); stable in 2009-10; began to rise in 2011 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.$10.6 bln Oct 2010$ 66.7 bln.$11.3 bln Sep 2011$ 74.4 bln $ 13.9 bln.

11. Moscow, 22 Oct 2010National Foreign Exchange Association, Russia11 Domestic FX market in Sep 10 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$ 41.2$ 23.9$9.5 Outright forwards $1.23$ 0.95$0.3 FX swaps$ 32.0$ 23.9$9.3 Total:$74.4$48.8 (66%) $19.5 (26%)

12. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia12 2008-2011 Russian derivatives by underlying assets (domestic) 20112008 Growth or Decline % Total (all instruments): 100% FX derivatives 78.6%89.1% - 10.3 pp Interest rate derivatives 18.1%2.8% +15.3 pp Equity derivatives 0.9%5.8% -4.9 pp Commodity derivatives 1.7%0.5% +1.1 pp Fixed income derivatives 0.1%1.8% -1.7 pp Credit derivatives 0.6%0.07% +3.93 pp

13. RUB markets outside Russia Trading volumes(ADT) reported off-shore: FX instruments: $ 15-16 bln. Money market instruments: $ 1.0-1.5 bln. Interest rate derivatives: $ 1-2 bln. RUB bonds trading: $ 1 bln. Total (FX,MM,Derivat.): $ 18-19 bln. Moscow, 01 Nov 201113National Foreign Exchange Association, Russia

14. RUB instruments outside Russia More RUB derivatives than cash products but cash products are rising in 2011 Cash: FX spot, FX swaps (short dated), cash deposits, RUB bonds (NEW) Derivatives and CFDs: NDFs & Outright forwards FX futures & options (CME) Interest rate and XCY swaps Forward rate agreement (FRA) Overnight indexed swaps - OIS (NEW) – from 08Sep10 Moscow, 01 Nov 2011National Foreign Exchange Association, Russia14

15. Geography of USD/RUB FX Overseas counterparties of Russian banks, Feb-Sep 2011 Moscow, 01 Nov 2011 National Foreign Exchange Association, Russia 15 RegionFeb 2011Sep 2011 FX spotFX swapFX spotFX swap Western Europe78.9%90.1%86.4%90.6% Northern Europe7.6%2.2%6.8%2.8% South America5.7%3.7%3.8%2.3% CIS countries5.3%1.5%1.4%2.4% Cyprus2.0%0.5% 0.3% North America0.2% 0.8%0.3% Other0.3 %1.8%0.3 %1.3%

16. RUB FX in London Source: UK BOE FXJSC semi-annual survey, July 2011 Moscow, 01 Nov 2011National Foreign Exchange Association, Russia16 Apr 08Oct 09Apr 11 USD/RUB turnover (all instruments) $10.1 bln.$9.0 bln.$13.9 bln. Rank of RUB (, KRW)15 SEK, NOK 16 MXN, KRW 16 SGD, SEK Total ADT of UK market, $bln.$1820 bln.$1549 bln$2191 bln Percentage of RUB in total UK FX0.55%0.58%0.63%

17. Volumes of USD/RUB FX instruments in London InstrumentApr 2008Oct 2009Apr 2010 FX spot$2.5 bln$1.9 bln$5.5 bln NDF:$3.5 bln$1.2 bln$2.2 bln Outrights$1.2 bln.$0.3 bln.$0.4 bln. FX swap$2.0 bln$4.3 bln$4.6 bln Ccy swaps$0.3 bln$0.1 bln$0.4 bln FX options$0.57 bln$1.2 bln$0.8 bln Total:$10.1 bln$9.0 bln$13.9 bln Moscow, 01 Nov 2011National Foreign Exchange Association, Russia17 Bank of England UK FXJSC: ADT in 2008-11

18. RUB/USD Futures (Russia vs CME) Quick rise in RUB/USD Futures trading volume in 2011 $bln. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia18 Russian Exchanges (MICEX, RTS) CME 2011 (Jan-Sep)$ 142 bln$ 45.3 bln. 2010 (Jan-Sep)$ 57,6 bln.$ 12.5 bln. Sep 2011 (daily)$1,2 bln.$ 0.44 bln.

19. RUB denominated Eurobonds New instrument aimed to promote MIFC and RUB IssuerAmount, R.Month EBRD15 bnMay, Aug2009 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 EBRD (floating RuOIS linked Moscow, 01 Nov 2011National Foreign Exchange Association, Russia19

20. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia20 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

21. Moscow, 01 Nov 2011 National Foreign Exchange Association, Russia21 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, new version of RISDA 2011 -RUONIA – Russian analogue of EONIA, SONIA (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

22. Moscow, 01 Nov 2011National Foreign Exchange Association, Russia22 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.