Top Forex Brokers Halt Ruble Trading On Their Platforms
Three top forex brokers that provide retail foreign exchange trading platforms halted in trading rubles currency today, citing growing signs of stress among the banks that underpin trade in the battered Russian currency.
FXSTAY, one of the biggest platforms catering to online and retail traders of currencies, said the halt stemmed from the expectations of banks that Moscow would impose outright capital controls within the next few days.
RIA Novosti news agency quoted Economy Minister Alexei Ulyukayev as saying after a meeting of top policy makers on Tuesday that there had been no discussion of capital controls.
“Most Western banks have stopped pricing U.S. Dollar vs Ruble ,” FXSTAY said in a statement emailed to Reuters. “As such, FXSTAY can no longer offer this instrument to our clients and will begin closing any existing client trades in USD/RUB effective at Noon EST today.
FXSTAY said the firm has 14 different liquidity providers, with total retail trading volume of $20 billion a day. She said the volume of rouble trade against the dollar on the platform is “very small, not material.”
The dollar rose almost 25 percent against the rouble at one point on Tuesday, climbing above 80 rubles, despite Moscow’s raising of official interest rates to 17 percent from 11.5 percent overnight and prompting speculation there would be moves to halt a further exodus of capital.
The rouble, however, recovered much of the lost ground to trade at 67.60 per dollar. Dollar-rouble is the 10th most heavily traded currency pair globally, according to Bank of International Settlements data.
Angus Campbell, an analyst at another platform, FxPro, said a number of the top tier-one banks that provide its liquidity had ceased quoting prices on one of its systems, prompting it to halt trading there.
“We had to do this to protect both ourselves and clients,” Campbell said. “Hopefully, market conditions will return to normal by tomorrow and we can push prices on to the platforms as usual.”
Attempts to reach executives at Citibank, Deutsche Bank, JPMorgan and HSBC, among the larger currency-trading banks, were unsuccessful.
EBS, owned by London-based broker ICAP, and Gain Capital said it was business as usual in terms of rouble trading. Gain said it increased the margin requirement for trading in dollar/rouble to 20 percent from 2 percent.
Traders and analysts said liquidity in the Russian rouble was evaporating fast and, to some extent, the more liquid Norwegian crown was acting as a proxy for the Russian unit.
The crown fell to its lowest against the dollar in more than a decade and dropped below parity against its Swedish counterpart for the first time in almost 15 years. It retraced all of those losses by the mid-afternoon in New York.
JPMorgan said in a note that a relentless slide in oil prices was pushing up yields on U.S. lower-rated bonds, boosting volatility in currency markets and hurting overall liquidity in the $5.5 trillion a day market.
“Although FX volumes this month are actually above average for a typical December, bid-offer spreads have been widening for several weeks, and the pace has quickened alongside recent moves in oil and credit,” JPMorgan said.
“It is unlikely that this surge reflects year-end seasonals, as bid-offer spreads exhibit much less variation by calendar month than trading volumes do.”
Volatility has spiked across the asset classes, from Wall Street’s favorite fear gauge of U.S. blue-chip volatility to euro/dollar rates to U.S. high-yielding bonds.
Oil’s collapse to below $60 a barrel has seen spreads on high-yield bonds from U.S. energy companies balloon over Treasuries, almost doubling from end-August levels and fanning fears of a spike in defaults.