Bank Of England: Minutes Of The London FXJSC Main Committee Extraordinary Meeting - 4 March 2022

Minutes

On 4 March 2022, the London Foreign Exchange Joint Standing Committee (FXJSC) held an extraordinary meeting (via conference call) to discuss FX market conditions, functioning, and operational issues in light of the developments in global financial markets resulting from the Russian invasion of Ukraine. The meeting was conducted in accordance with the FXJSC’s Terms of Reference and Competition Guidelines.

Minute 1 – Welcome and Apologies

Rohan Churm (Chair, Bank of England) welcomed attendees and provided some context for convening the extraordinary meeting (with similar meetings being held in different jurisdictions). Members were welcomed to share any notable observations on recent developments across markets.

Minute 2 – Market Conditions

Members broadly noted that, with the exception of trading related to the Russian Rouble, market conditions had remained relatively robust and traded volumes high, despite some widening spreads in short-end US dollar funding markets at the start of the week. The magnitude of moves had been minor in response to this shock, compared to those seen during Covid (2020) and following the collapse of Lehman Brothers (2008). Some members noted that conditions could worsen. It was highlighted that the Bank of England, alongside the Bank of Japan, European Central Bank and Swiss National Bank, continued to run US dollar lending operations for eligible counterparties backed by a swap line from the US Federal Reserve. There had not been significant use, but those operations were available for market participants to use.

The main issue raised by members was Russian Rouble settlement. With regards to this, participants had coped well dealing with immediate difficulties, while those with longer-dated contracts were likely to face further challenges over month/quarter-end. The movement, and continued closing, of Russian Rouble nostros beyond the end of March was something that market participants would need to consider in the context of closing out contracts (which would likely include creating yield curves, discount curves etc). Members noted the resourcing impact of this. One avenue to resolve contractual challenges was the ongoing ISDA/EMEA work on updating their contractual documentation to facilitate the resolution of outstanding rouble-referencing FX transactions.

Other points included:

• The increasing divergence between onshore/offshore Russian Rouble markets and consequently the fungibility of both.
• Fund exposure and valuations for Russian Rouble non-deliverable forwards (NDFs) when there was no set fixing price. Matching was helping trade settlement in the short-term, but it was uncertain how this might work when looking further out. Therefore, members noted the challenges posed to corporates using NDFs, such as how costs would be settled in Russia, and other affected currencies, beyond the short-term.
• Concerns about potential cyber threats were increasing, with some members confirming they had heightened their threat levels as a result. It was important for markets to remain vigilant.

Mr Churm closed the meeting by reiterating that the Bank remained available to discuss any observations or concerns.

Attendees

Alan Barnes – Financial Conduct Authority
David Clark – Refinitiv Benchmark Services Ltd
Galina Dimitrova – The Investment Association
Giles Page – Citigroup
James Kemp – FICC Markets Standards Board
James O’Connor – Bank of England
John Blythe (Chair, Operations Sub-committee) – Goldman Sachs
Kevin Kimmel – Citadel Securities
Lisa Dukes – Drax
Marc Bayle de Jesse – CLS
Neehal Shah – BNP Paribas
Neill Penney – Refinitiv Benchmark Services Ltd
Nina Moylett – M&G plc
Peter Vincent (Alternate) – State Street
Rajesh Venkataramani – Goldman Sachs
Richard Bibbey – HSBC
Richard Purssell – Insight Investment
Robbie Boukhoufane – Schroders
Rohan Churm (Chair) – Bank of England
Russell Lascala – Deutsche Bank
Sarah Boyce – Association of Corporate Treasurers
Sharon Blackman (Chair, Legal Sub-committee) – Citigroup
Simon Manwaring – Natwest Markets
Stephen Jefferies – JP Morgan
Wang Yan – Bank of China
Zar Amrolia – XTX Markets

FXJSC Secretariat

Alex Hutton – Bank of England
Frederick Ladbury – Bank of England
George Johnston (Legal Secretariat) – Bank of England
Lauren Rana – Bank of England
Ouadi Belayate – Bank of England

Apologies

Sophie Rutherford – State Street