Moscow Exchange expands interest rate derivatives offering
On 10 February 2020, Moscow Exchange launched a cash-settled futures contract on the USD-denominated Russian Secured Funding Average Rate (RUSFARUSD), which tracks rates of CCP-cleared repo orders and trades secured with USD-denominated General Collateral Certificates (GCC) on MOEX’s Money Market.
Igor Marich, FX and Money Market Managing Director at Moscow Exchange, commented:
"RUSFARUSD is the only gauge in Russia that represents the cost of funding in foreign currency and is calculated based on actual trades executed on the most widely traded segment on the Russian money market. The new futures will complement MOEX’s interest rate derivatives offering and allow banks, investment companies and their clients to hedge interest rate risk in foreign currency on the Russian market."
The new contract will help manage the risk of changes in the cost of USD-denominated loans in the Russian market. Buyers will be able to hedge interest income received from a loan secured by GCCs, while sellers will benefit from hedging their cost of capital. By selling the futures, managers of Eurobond portfolios will reduce their exposure to interest rate risk.
The settlement price is calculated as 100 minus the average RUSFARUSD over the settlement month. 12 monthly contracts will be listed at the same time for 12 consecutive months; this month, 11 contracts are quoted for settlement in March 2020-January 2021, inclusive. The notional value of the contract is USD 20,000.
RUSFAR tracks the value of secured money. It is calculated based on CCP-cleared repo transactions using GCCs, which is the most widely traded segment of the Russian money market. More than 200 participants are connected to the GCC repo market, setting market rates for regular terms O/N, 1W, 2W, 1M, 2M and 3M by making anonymous order book trades. Fifteen market-makers quote the instrument on a regular basis. In 2019, the volume of CCP-cleared repo transactions using GCCs grew by 15.3% YoY to RUB 54 trln.
Details of the contract are available on MOEX’s website.