Russia has suffered keenly in the global financial turmoil, including its booming derivatives market. A year later, there is plenty of vigour in the market, with new contracts and hopes of regulatory and tax improvements.
Russia has suffered keenly in the global financial
turmoil, and its derivatives market – booming until a
year ago – is no exception. Volume in some products
collapsed almost overnight. But as the world begins to talk of
green shoots, is the Russian futures and options market showing
signs of recovery? Agnieszka Troszkiewicz
discovers that there is plenty of vigour in the market,
with new contracts and hopes of regulatory and tax
September 2008: stocks tumbled around the world as Lehman
Brothers collapsed. Russia’s long oil-fuelled boom
suddenly crumbled. Turmoil on the stockmarkets caused several
Russian banks to default and seek bailouts.
Amid high volatility, many players withdrew from the Russian
derivatives market, making it more expensive to trade
– a vicious circle that led to a sharp contraction in
"During the winter and spring, lots of banks
actually stopped any activities in derivatives. It was a very
difficult time," says Sergey Romanchuk, deputy head of treasury
at Metallinvestbank in Moscow and president of ACI Russia. "For
all instruments – exchange-traded, OTC – the
interest to trade fell dramatically."
The Moscow Interbank Currency Exchange (Micex) suffered
worst among the three main exchanges offering Russian
derivatives. Its monthly trading volumes, driven almost
entirely by the dollar/rouble future, collapsed from a record
of 17.9m contracts in September to a mere 1.48m in November.
They have recovered slightly since but are still nothing
compared with the exchange’s glory days. In July,
3.06m contracts were traded.
Micex declined to comment for this article. But it is clear
that the slump in trading was due in large part to players
shunning the market. Active participants had their limits cut,
sometimes sharply. As volume and open interest fell, other
traders backed away from the lower liquidity, while some who
had planned to begin using the market postponed the
Although some big houses started to trade derivatives in May
and June this year, there have not been many newcomers, and
many of those who were expected have yet to show up.
Forts powers ahead
Yet across town, Futures and Options on Russian Trading
System (Forts) has not had nearly such a bad time.
"Forts did not suffer from the financial turmoil. On the
contrary, during volatile times the market brought new
opportunities to investors," says Evgeny Serdyukov, head of
This confident line glosses over the fact that
Forts’ volumes halved between July and November
2008, from 28.3m contracts to 14.2m.
But Serdyukov has a point. Since February, Forts has
recovered strongly, so that it has now left last
year’s highs far behind.
Each month from March to June this year, Forts set a new
monthly trading record, culminating with 48.6m trades in June.
The total in July was almost as high, at 46m. Total volume in
January-July this year of 246m contracts has already surpassed
the 230m contracts traded in the whole of 2008.
In Forts’s case, high volatility seems to be
attracting speculators. In particular, the exchange has pulled
in many new retail investors.
Micex, dominated by large banks acting for clients wanting
to hedge currency risk, has been more vulnerable to falling
volumes. "Perhaps it was because of the immediate drop in
client business that they cover," says Mikhail Kazarin, head of
derivatives and structured products at Rosbank in Moscow.
To put it another way, Micex was a one-trick pony. Its
USD/RUB Future accounted for 100% of volume every year until
2006. In 2007 it began to win a smattering of trades in other
futures: Compounded MosIbor Overnight, Three-Month MosPrime
Rate and the Micex Index. Last year Feed Wheat and a
euro/rouble contract came onstream. But the USD/RUB still
accounted for 99.8% of trading.
Forts is much more diverse. Before the crisis its biggest
products were the RTS Index Future, which made up 36% of
trading in the first half of 2008, followed by a fast-growing
equity options segment and several actively traded single stock
futures: Sberbank, VTB, Gazprom and Lukoil. It also had
dollar/rouble futures, gold and oil.
Like Micex, Forts was hit hard in one product. Its equity
options business collapsed from 7.26m trades in July 2008 to
1.75m in August, 1m in September and a mere 314,000 in October.
This segment has barely recovered: there were 1.5m trades in
But Forts’ other main products, especially the
RTS Index Future, Sberbank, Gazprom and the USD/RUR Future,
have all swelled since last year.
This article is available to subscribers and registered users
Please log in to continue reading.
Not yet registered? Take a free trial.
If you have already taken a free trial you
have ongoing access to the analysis section of FOW.com including this story.
Log in using your details below to read.
Already have an account? |