Russia’s MOEX to Suspend the Use of US Dollar as Collateral

Russia’s MOEX to Suspend the Use of US Dollar as Collateral

Moscow Exchange (MOEX), the largest exchange in Russia, will cease using the US dollar as collateral for underwriting transactions. Announced on Monday, the new rules will become effective from August 29.

The decision has been taken by the National Clearing Center, which is the clearing organization and a CCP in all exchange markets of the MOEX group.

The latest move followed the Russian exchange’s decision to limit the use of the US dollar as collateral to 25 percent earlier this month from the previous levels of 50 percent.

The exchange did not furnish any details behind the abrupt move on banning the USD as collateral. But, the new rules are anticipated to have been brought as Russia wants to cut its dependencies on the currencies of the countries which imposed sanctions on it.

Impacts of the Ongoing War

The United States, European Union and other allied countries imposed heavy sanctions on Russia after President Vladimir Putin’s order of an invasion of the neighboring country, Ukraine. President Putin, along with other highly-ranked government officials and several Russian oligarchs are facing harsh financial and traveling sanctions from western countries. In addition, there are heavy sanctions on the country’s financial industry, leading to Russia defaulting on international debt.

Meanwhile, the MOEX indefinitely suspended trading in Japanese yen on the currency markets citing potential risks and difficulties in JPY settlements. Moreover, the Russian exchange stopped accepting Japanese yen as collateral for transactions on the offered markets.

The impact of the ongoing war can be seen in the recent performance of MOEX. It reported an overall decline of 18.8 percent in fees and commission income in the second quarter of 2022, whereas figures from the FX market jumped 13 percent. However, the FX trading volumes shrank by around 36 percent in the quarter.

Moscow Exchange (MOEX), the largest exchange in Russia, will cease using the US dollar as collateral for underwriting transactions. Announced on Monday, the new rules will become effective from August 29.

The decision has been taken by the National Clearing Center, which is the clearing organization and a CCP in all exchange markets of the MOEX group.

The latest move followed the Russian exchange’s decision to limit the use of the US dollar as collateral to 25 percent earlier this month from the previous levels of 50 percent.

The exchange did not furnish any details behind the abrupt move on banning the USD as collateral. But, the new rules are anticipated to have been brought as Russia wants to cut its dependencies on the currencies of the countries which imposed sanctions on it.

Impacts of the Ongoing War

The United States, European Union and other allied countries imposed heavy sanctions on Russia after President Vladimir Putin’s order of an invasion of the neighboring country, Ukraine. President Putin, along with other highly-ranked government officials and several Russian oligarchs are facing harsh financial and traveling sanctions from western countries. In addition, there are heavy sanctions on the country’s financial industry, leading to Russia defaulting on international debt.

Meanwhile, the MOEX indefinitely suspended trading in Japanese yen on the currency markets citing potential risks and difficulties in JPY settlements. Moreover, the Russian exchange stopped accepting Japanese yen as collateral for transactions on the offered markets.

The impact of the ongoing war can be seen in the recent performance of MOEX. It reported an overall decline of 18.8 percent in fees and commission income in the second quarter of 2022, whereas figures from the FX market jumped 13 percent. However, the FX trading volumes shrank by around 36 percent in the quarter.

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