Double charge: trading in the dollar equivalent on the Moscow Stock Exchange will simplify the calculation of the ruble exchange rate

The launch of dollar-equivalent trading on the Moscow Stock Exchange may improve the determination of the ruble's market exchange rate. The new tool will allow investors to make transactions with the "US dollar – Russian ruble" pair. Trading directly in American currency through the exchange is impossible due to US sanctions, but now the platform makes it possible to manage this currency position. The tool is available to banks and brokers, but in the future, experts expect ordinary investors to be allowed to use it. How this will affect the stability of the ruble exchange rate is in the Izvestia article.

What is the essence of the new Moscow Exchange instrument?

On Monday, February 16, for the first time since June 2024, transactions on the dollar/ruble currency pair took place on the Moscow Stock Exchange, according to the site's website. The American dollar was trading in the range of 70.5–76.3 rubles. The last transaction was conducted at 14:58 Moscow time.

In June 2024, the United States imposed blocking sanctions against the Moscow Exchange, which isolated the site from the dollar system and stopped trading in the American currency. Since June 13, transactions with the dollar and euro began to take place on the over-the-counter market through Russian banks.

Therefore, the launch of trading on the USDRUB_TOM instrument came as a surprise to many investors. After that, the Moscow Exchange issued a message stating that operations with the currency pair were being transferred from the over—the-counter OTCM mode to the anonymous CETS trading mode on the stock exchange.

The tool was created to manage the currency position, as explained in the message of the Moscow Exchange. It will allow a wider range of participants to form trading and arbitrage strategies on the dollar/ruble pair.

At the same time, it cannot be said that dollar trading has been restored. In fact, the Moscow Exchange presented a settlement, non-deliverable instrument, explained Alexander Potavin, an analyst at Finam Financial Group. In other words, the purchased contract does not provide physical currency, and it cannot be withdrawn to a bank account. All profit and loss calculations are made in rubles.

— These will be trades in the dollar exchange rate, and not in the dollar itself, — the expert explained.

The main purposes of using the tool are risk management of an open currency position and currency speculation, said Kirill Kononov, an analyst at BCS World of Investments. At the moment, trading is open only to professional market participants — banks and brokers.

How will the launch of the instrument affect the ruble exchange rate

After the imposition of sanctions against the Moscow Exchange, the market lost a source of accurate and timely information about changes in the ruble exchange rate. The data on the value of the national currency came from the over-the-counter market, which is, in principle, more subtle and volatile, and the quotes of the foreign currency Forex market did not reflect real transactions with the ruble within the country.

As a result, the Bank of Russia began to set the official exchange rates of the US dollar and euro against the ruble based on bank statements and data on over-the-counter trading. Now the regulator updates them daily, taking into account data on past transactions with the national currency.

In general, the Central Bank will now have the opportunity to return to the practice of setting the exchange rate, explained Alexander Potavin from Finam. Such an indicator may be more representative because it takes into account transactions of a larger number of market participants and makes the system more transparent compared to over-the-counter and interbank trading.

The launch of a new Moscow Exchange instrument should make the ruble exchange rate more stable, Alexander Potavin believes.

— As a rule, the more market participants make transactions with a particular exchange—traded instrument, the more objective its market price becomes, - said Natalia Milchakova, a leading analyst at Freedom Finance Global.

However, a more liquid market as a whole can be more volatile. This happens for the same reason: due to the large number of transactions, Natalia Milchakova noted. As a result, the ruble exchange rate may begin to change more actively, but there should be no sudden unexplained drops or abnormal growth of the dollar under such a system. At the same time, in a narrow, low-liquid market, only a couple of large transactions are enough for the asset price to shift significantly.

At the same time, one should not think that the new instrument will replace the over-the-counter currency market, Alexander Potavin explained. At the latter, the physical supply of currency necessary for the economy takes place.

Prospects of the foreign exchange market in the Russian Federation

— Theoretically, after some time, we can expect the appearance of a simplified analogue of currency trading for a mass investor, - said Alexander Potavin.

A similar instrument for the euro is likely to appear later, Natalia Milchakova added. It was not launched at the same time as the dollar instrument, since the euro is less in demand in the domestic market than the American currency.

Finam is confident that the new tool will attract market participants right now. An increase in the number of transactions will increase liquidity and reduce the spread between buying and selling currencies. The dollar exchange rate will not rise or fall from this, but its dynamics will become more transparent.

At the same time, the Russian market has become very devalued in recent years, said Kirill Kononov, an analyst at BCS World of Investments. A reverse movement to the currency is possible, but practice will show how quickly it will happen. The tool will be of interest to small and medium-sized companies that find it difficult to quickly transfer currency to foreign markets.

Some market participants consider the launch of dollar trading in CETS mode to be a preparation for the lifting of US sanctions, Alexander Potavin added. A week earlier, Western media reported on a memorandum prepared by the Kremlin with a possible return of Russia to the dollar settlement system and the entry of American companies into the market. This requires a full—fledged dollar trading system, and the launch of the Moscow Exchange instrument is perhaps the first step towards normalization without violating sanctions.