The article analyses transactions in the forex stock market of Kazakhstan for 2019. The information is provided for each type of currency transactions (futures, forwards, swaps and disputes) by month. Forward contracts represent only 5 % of the total volume of foreign exchange transactions on the stock market. Currency swaps were preferred by the majority of forex market participants.
Keywords: KASE, currency operations, forex market of Kazakhstan.
В статье проанализированы операции в валютном фондовом рынке Казахстана за 2019 г. Приведены данные по каждому виду валютных транзакций (фьючерсам, форвардам, свопам и спотам) в разрезе месяцев. Форвардные контракты составляют только 5 % от общего объема валютных операции на фондовом рынке. Валютным свопам отдано предпочтение большинства участников валютного рынка.
Ключевые слова: KASE, валютные операции, валютный рынок Казахстана.
In the context of transaction types, operations on spot and currency swaps and futures are conducted in the exchange market, while forward operations are conducted in the interbank currency market. At the beginning of 2019, the volume of one-day and two-day foreign exchange swap transactions amounted to USD 21.9 billion. Overall, the total volume of foreign exchange swap transactions exceeded the volume of spot transactions by 3.3 times. The share of forward contracts is still insignificant and accounts for 5.0 % of the total volume of spot and FX swap transactions (Figure 1).
Fig. 1. Trading volume on the currency market by type of transaction
Made by author with the source [1]
By the middle of the year, the volume of transactions on the exchange market rose to USD 30.2 billion, but by the end of the fourth year it reached USD 19.9 billion, a 26.8 % decrease. During the year, the volume of foreign exchange swap transactions fell from USD 21.9 billion to USD 13.2 billion (by 36.1 % since the beginning of the year). In June, two futures transactions were carried out on the exchange market, their share accounting for 5.9 % of the total volume of spot and FX swap transactions.
Since the hedging operation of currency risks is widely spread with the counterparty-bank, it is reasonable to refer to KASE statistical data on interbank currency trading. In despite of significant volumes of interbank trades exceeding exchange ones, the overwhelming number and volumes of these transactions do not refer to currency transactions, i.e. purchase and sale of foreign currency. Interbank market statistics also reflect currency risk hedging transactions.
Thus, in Q1 2019, the volume of one subsidiary bank's operations, mainly in hedging equity capital from foreign exchange risks, amounted to USD 21.2 billion, or 66.2 % of the total volume of over-the-counter trading (65.7 % in Q4 2018). At the same time, these transactions were conducted within the banking group and had no impact on the volume of demand or supply of foreign currency in the domestic foreign exchange market and, therefore, on the formation of the tenge exchange rate.
The share of forward deals in the total volume of over-the-counter transactions is still small:
in the first quarter — 2.1 %;
in Q2–2.2 %;
in Q3–1.7 %;
in the fourth quarter — 1.7 %.
This means that forward deals are not in high demand by FX traders, regardless of their advantages.
Without hedging currency risks, trading volumes on the interbank market are much smaller and comparable with those on the exchange currency market. In Q1 2019, the trading volume in the interbank foreign exchange market (except for equity hedging transactions) amounted to USD 10.9 billion, which is 6.6 % less than in the previous quarter (Q4 2018 — USD 11.6 billion).
The total volume of transactions on the OTC foreign exchange market amounted to USD66.7 billion at the end of 2019, up from the beginning of the year by 7.1 % (USD62.0 billion in Q1). As for the proportion between currency spot and swap, in 2019 the volume of OTC foreign exchange swap transactions exceeded the volume of spot transactions by 21 % (Figure 2).
Fig. 2. Trading volume in the interbank forex market by type of deals
Made by author with the source [1]
As a reminder, starting from January 1, 2014 the National Bank of the Republic of Kazakhstan has introduced requirements according to which «an open long and/or short position of a bank on derivative financial instruments in the currency of a foreign country (group of foreign countries), opened on conditional claims accounts and accounts of contingent liabilities should not exceed 30 % of the open long and (or) short position of the bank in the same foreign currency on balance sheet accounts.
On 22 April 2018 the amendments were made to No. 9 of the Rules for Brokerage and Dealer Activity on the Securities Market, approved by the resolution of the Board of the National Bank of Kazakhstan dated 3 February 2014 that broker organizations were granted the right to participate in exchange trading on the foreign exchange market [2]. To access currency trading on KASE, a broker must have a license of the National Bank to conduct banking operations in national and foreign currencies and membership in KASE in the category of «foreign currency”. In addition, there is a commission fee of KASE on foreign currency transactions at a rate of 0.0005 % of the amount of each transaction, concluded by the broker. For the participation of brokers in the trades on the foreign currency market it is provided for the settlement of trades on the terms of pre-delivery of sold and payment for purchased foreign currency, the restriction of net purchase per day — no more than $ 100 thousand per client of the brokerage organization in the equivalent of tenge at the official rate of the National Bank. In terms of development of the currency market in Kazakhstan, the new rules will increase the number and diversity of currency players on the exchange, which will certainly contribute to the development of this market. However, the restriction of net purchase per day to the amount not exceeding $100 thousand per client of a brokerage organization is bewildering, so it means that only fairly small transactions (by the standards of the currency market) will go through brokers, while large transactions will still go through the banks.
References:
- Financial Market Review 2019. — Текст: электронный // nationalbank.kz: [сайт]. — URL: https://nationalbank.kz/?getpg=Search %20For %20Page (дата обращения: 08.06.2020).
- KASE will provide brokers with access to currency market trading. — Текст: электронный // kapital.kz: [сайт]. — URL: https://kapital.kz/finance/69275/kase-predostavit-brokeram-dostup-k-torgam-na-valyutnom-rynke.html (дата обращения: 08.06.2020).
