The recent Russia-Ukraine conflict has had detrimental effects on Russian financial markets with the currency weakening dramatically; at the same time trading volumes recorded at the country’s main derivatives bourse have crossed new highs with average daily trading volume crossing $25 billion. The exchange saw a sharp uptake in trading activity in the month of February after continued disturbances between the Eastern European neighbors.
Moscow Exchange’s overall volumes were up 41% from figures reported in 2013. In the FX markets daily volumes were up 27% to $25 billion on a MoM basis, in January the exchange’s average trading volume was $18.7 billion. The exchange also reported record volumes in the synthetic CNY/RUB contract; average daily volume was $71.4 million.
The ruble has been weakening against the greenback for a number of reasons; primarily driven by slow economic growth in a country that is dependent on the energy sector. Russia’s central bank has been keeping quiet with little intervention as it aims for a free-floating currency in 2015.
Derivatives volumes at the exchange were also in the green with traders looking to hedge the falling ruble. Turnover in EUR/RUB FX futures was $222 million (or 1.72 million contracts), up 70.5% compared to December 2013.
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Moscow Exchange saw an uptake in trading volumes in dollar Ukraine hryvnia futures, open interest in the USD/UAH FX futures contract increased to $1.02 million, a twofold growth compared to December 2013.
Moscow Exchange has been developing its user base among retail investors. The exchange reported a large spike in the number of FX traders, in a two week period (between the end of January and the 11th of February) figures jumped 75% from 65,000 users to 113,000 on the 11th of February. The sharp rise was triggered by the on boarding of Finam, a brokerage firm, as a direct member for FX trades. Finam became the third company to connect to the exchange, other firms include Otkritie and KIT Finance.
Russia’s hard-line stance on neighbor, Ukraine, has been impacting the global financial markets, commodity prices were affected with Brent rising to the highest level of 2014 today. Russia holds significance in the energy sector, especially for Europe where it exports nearly a third of the region’s gas.
The first trading day, March 3rd, since Russia’s military intervention went smoothly according to the exchange, market volatility was higher than normal and the FX markets saw average daily volumes peak at $46 billion.