4.1. Clearing Business
4.1.1. Clearing on the FX and Precious Metals Markets
The FX market of Moscow Exchange, the organized on-exchange market, which is the oldest one in Russia, has been holding FX trades since 1992 and precious metals trades since 2013.
NCC has been performing clearing on the FX market since 10 December 2007 and centralized clearing of precious metals trades for Russian Rubles since 2013. Spot trades are cleared and since 2014 fully and partially secured trades with derivatives (swaps and futures) are cleared in compliance with the Clearing Rules.
Trades made on the FX and Precious Metals Markets are cleared and settled by NCC as a central counterparty. NCC acts as a central counterparty for all trades made and ensures performance of obligations to non-defaulting clearing members, thus mitigating the clearing members’ risks significantly and eliminating the need to set limits for each other.
Precious metals trades are settled to trading bank accounts in precious metals (hereinafter TBC) of the clearing members maintained with NCC. Precious metals can be used as collateral for trades with other assets. Post-trading transactions include transactions with bullion bars at NCC’s storage.
In 2020, in difficult times of crisis, the clearing infrastructure of the FX market showed high quality of rendered services related to the technologies of risk management, reliability of transactions and security of settlements.
In 2020, the trading volume on the FX market was RUB329 trn, being 7% higher compared to 2019. The volume of spot trades grew by 44% to RUB97 trn and the volume of swap trades (FX secured loans) decreased by 4% to RUB232 trn.
In 2020, the number of clearing members on the precious metals market grew from 56 to 63, out of them 47 were credit institutions, 14 were broker or investment companies, 3 were mining companies (2 out of which entered the market in 2020).
In 2020, the commission fee earned by NCC on the FX market amounted to RUB1,682 mln and grew by 10.1% on 2019 (2019: RUB1,528 mln). Such growth was due to the increased volume of FX spot trades with foreign currency caused by high volatility of world currencies in view of the problem existing in the world economy and on the financial markets, which were related to the pandemic spread, decline in the oil prices (March-April), and the US elections (August-September), which caused growth of counterparties’ interest in FX spot transactions. The main growth was due to the commission fee for clearing of on-exchange FX spot trades (USD/RUB currency pair).
In November 2020, the clearing members began to provide retail clients with access to the precious metals market thus providing the facility to enter into gold and silver trades at Moscow Exchange.
Due to the growing competition on the part of numerous off-exchange electronic platforms, the main emphasis of the on-exchange market development was made on the technologic and organizational innovations, such as extended period of trading, international cooperation, links to foreign platforms.
In June 2020, the facility was implemented to perform clearing with the central counterparty and settlements of OTC trades made through electronic OTC platforms. The new service allowed to mitigate credit, settlement and operational risks of OTC trades and to perform cross-margining and netting between on-exchange and OTC trades. The service functioned as a part of the specially created mode “Clearing with CCP” (CPCL) with connection via FIX protocol.
For further development of the OTC FX market, in July 2020 Moscow Exchange purchased the equity interest in NTPro, the leading off-exchange aggregator. It would also allow to expand the line of clearing services for clearing members on the FX market.
For more effective management of risks of clearing member’s clients, in June 2020 the functionality of additional pre-trade checks of client SMA instructions was implemented, such functionality is similar to the one existing on Moscow Exchange’s securities market.
Since December 2020, the facility to enter into FX and precious metals trades has been provided to management companies of investment funds, UIF and NPF. Currently, not only professional participants of RTsB are admitted directly to the market.
The number of corporations increasing the average daily turnover on the market, who were admitted to trading on the FX market, was also growing continuously. At the end of 2020, 43 corporations, including insurance companies, were provided access thereto.
In 2020, the increasing amount of liabilities cleared was also promoted by overnight FX swap trades made by the Federal Treasury (provision of Russian rubles against collateralized US dollars).