Russia Prepares For Halting Foreign Exchange Trading

Sanctions will cut off the Russian stock exchange from operations.

The Bank of Russia is in “constant readiness” to introduce new sanctions, including against the infrastructure of the domestic financial market, Elvira Nabiullina, the head of the Central Bank of the Russian Federation, said at a press conference on Friday.

According to her, the Central Bank is preliminary discussing with the Moscow Exchange a scenario in which the exchange itself and the National Clearing Center (NCC), its key structure responsible for registering all transactions, will be subject to restrictive measures.

“We <...> are considering different options together with the exchange in order to ensure the functioning of our infrastructure,” Nabiullina explained.

Sanctions that will cut off the exchange from the ability to conduct transactions in dollars (if they are introduced by the United States) and euros (if they are introduced by the European Union) will lead to a halt in foreign exchange trading in Russia.

In this case, the Russian ruble exchange rate will be “set on the basis of data on over-the-counter trading, including using bank reports,” Nabiullina said back in December. The relevant regulatory documents of the Central Bank, according to her, are already ready.

The managing director of the trading platform, Igor Marich, warned in early December that the Moscow Exchange would be forced to stop trading in dollars if American sanctions were imposed. “In the event of American sanctions, the US dollar will not be traded, but in the structure of the foreign exchange market, it no longer plays such a role (as before),” he reassured. According to Marich, the share of the American currency in trading on the foreign exchange market dropped to 32% in October-November, although before the war it reached almost 80%.

“In this case, the Central Bank can consider the official rate for over-the-counter transactions,” Marich said.