Ruble Liquidity Dead as Interbank Market Dries, LMAX next to Suspend Trading

Trading in the ruble has 'quieted' down a bit today, but liquidity remains a problem as trading of the currency

rp_rubles-300x170.jpgAfter yesterday’s hectic volatility in the Russian ruble, business is trying to come back online today. Yesterday’s wild moves in the ruble resulted in brokers big and small such as Saxo Bank, IC Markets and GAIN Capital cutting leverage in the USD/RUB and EUR/RUB as well as a few brokers such as Alpari UK, FXCM and AxiTrader shutting down trading altogether. However, despite yesterday’s closures at the abovementioned brokers, most firms had only temporarily closed trading but reopened it today. An example is FxPro, which closed ruble trading but reopened its feed for clients.

However, this could soon be changing as what remains today is any form of meaningful market depth of liquidity. Several trading venues, such as Bloomberg’s Tradebook platform that halted ruble trading yesterday, remain closed today. As well, activity at the Moscow Exchange for spot ruble has been restrained by increased margin requirements at the exchange. In addition, after increasing margin requirements to 100% at LMAX Exchange, the trading venue notified clients that it plans on suspending trading in the USD/RUB and EUR/RUB at 4 pm BST indefinitely, stating, “Due to the heightened concern around the clearing and settlement of ruble pairs we will be suspending USD/RUB and EUR/RUB.”

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As a result, whatever trading has taken place today has been vulnerable to wide spreads; Any large trade hitting the market has the ability to move the USD/RUB a few percentage points up or down. For traders, this means that they remain stuck in a state of lacking clarity on whether their broker will suddenly decide to close trading in the ruble. Also, the wide spreads have pretty much limited the ability for traders to enter stop losses, with slippage expected on all trades. Based on announcements about “extreme volatility” from brokers to their clients, they are letting customers know to “trade at their own risks.”

As we enter the afternoon of trading in Moscow, with venues such as LMAX Exchange suspending trading, liquidity is expected to become more problematic. In reaction, several brokers have already indicated that they are initiating early session closures until volatility dies down.  FX trading at the Moscow Exchange, itself, will be closed from New Years until January 9th as it enters its holiday trading hours.

Therefore, without a return of the interbank market and reliable data, we expect ruble trading at retail brokers to suffer more contraction. This is especially so as we get closer to the holidays, with generally always-low volume periods and trading desks limiting their overnight exposure.

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