Page 99 - RusRPTJul24

and NSDs back in 2022 giving the CBR adequate time to prepare the OTC market, which means the exchange rate will now be determined not on the basis of trading, but on the basis of direct contracts between buyer and seller.
To determine the official exchange rates of the dollar and euro against the ruble, the CBR will use bank reports and data on transaction results coming from digital over-the-counter trading platforms. Individuals and legal entities will be able, as before, to buy and sell both currencies through Russian banks.
The purpose of the NCC clearing centre is to ensure uninterrupted exchange of non-cash instruments and currencies among trading participants. It is the guarantor of transactions and buys currencies from sellers and sells to buyers. In addition, the NCC can hold currency in accounts if clients have chosen it as a place to store their and client money. Under sanctions, the NCC will no longer be able to act as the central intermediary - it cannot hold dollar accounts in American banks. Excluded from the transaction scheme, all that remains is the possibility of over-the-counter transactions.
Stopping foreign exchange trading does not mean a complete loss of ruble convertibility. But this is another step in the opposite direction from this status, reports The Bell. For those wishing to buy and sell currencies, switching from exchange to over-the-counter trading will mean widening the spread and additional costs.
The sanctions will also make life more difficult for exporters, who need FX to complete international trades.
“This, apparently, is the main goal of the US Treasury sanctions - to reduce export revenues and complicate imports,” The Bell reported.
The knock on for consumers is the cost of imports will rise in an already high inflation environment. The volatility of exchange rates and the spreads between buy and sell will also increase.
“Only the largest banks will remain in the foreign exchange market, it will become an oligopoly, and this leads to high volatility,” a banker involved in the foreign exchange market argues in a conversation with The Bell. “It would be in the interests of everyone else to restore trading on the basis of some non-sanctioned exchange, and give clearing to banks that are not under American and European sanctions.”
Most likely, trading in replacement bonds - securities issued under Russian law instead of Eurobonds of Russian companies - will continue. Coupons on Eurobonds traded on the stock exchange will also be paid (but in rubles). Trading in these bonds will most likely stop and investors will have to hold them until maturity.
99 RUSSIA Country Report July 2024 www.intellinews.com