Moscow Exchange to allow non-residents from friendly countries to trade on bond market

Russia earlier allowed non-residents from ‘friendly’ countries to trade in its derivatives market

Russia’s primary stock exchange is set to open its doors for non-residents from so-called friendly countries to trade on the bond market starting next week.

Trading on the Moscow Exchange will commence on 15 August, Moscow Exchange said in a statement on Wednesday. The announcement comes after a months-long ban on foreign traders in response to sweeping sanctions imposed on Russia for the Ukraine invasion.

The exchange said the screening process for non-resident clients from “non-hostile” countries has started. Apart from that, it will also commence trade where the “ultimate beneficiaries are Russian legal entities or individuals”.

The responsibility of identifying the clients and their home countries will lie with banks and brokerages. Both corporate and government bonds are traded on the exchange.

Moscow earlier allowed trade in bonds denominated in Chinese yuan to lure Asian investors. The exchange also began permitting non-residents from friendly countries to trade on its derivatives market from Monday.

The exchange first said last week it would open trading to non-residents in friendly countries, a move which led to Russian stocks slipping by 3 per cent on Friday. It later clarified the ruling will only be limited to the derivatives market and not the main stock market.

Analysts had raised concerns that allowing non-residents to trade on the stock market could give a backdoor entry to investors from the European Union, the US and UK – which are currently banned from trading in Moscow – to offload any Russian stocks they still hold.

The decision to now open trade breaks a six-month hiatus in place since the day president Vladimir Putin sent troops to Ukraine, triggering sweeping western sanctions aimed at isolating Russia and countermeasures from Moscow.

Non-residents from “friendly” countries account for only around 1 per cent of Russian holdings. A spokeswoman for the bourse said last week the number of “friendly” investors was unknown as they have yet to be registered first, but the move is expected to spark interest among some investors.

Russia is aiming to attract more foreign investors to increase liquidity in the market. But it is not clear when trade would open for the main stock market.

Additional reporting by agencies