Derivatives market recovers unevenly: Bank of Russia’s review
The derivatives market has been restoring gradually after its structure changed in 2022. Although certain transactions were conducted without interruption, their amounts declined. These are FX forwards and swaps — the Russian economy needs FX risk management instruments as it is still focusing on exports.
The situation was most complicated in the segments where market risk was accepted primarily by non-residents, whereas the segments where the percentage of non-residents was not high initially are recovering considerably faster. Interest rate options in rubles demonstrate an upward trend as well. The development of this market has been driven by the expansion of lending by Russian banks at floating interest rates and the hedging of such loans by non-financial companies.
The dedollarisation of the financial system and the economy was one of the factors promoting the start of transactions with yuan-denominated derivatives. Nevertheless, market participants still need to hedge FX risks related to US dollars and euros. Therefore, transactions in these currencies will still be conducted.
Some transactions have not been resumed yet, but this is mostly about unusual instruments. Even before the interruption, such transactions were conducted by a limited number of market participants.
More details are available in the information and analytical commentary Over-the-Counter Derivatives Market in 2023.