Stephan Pouyat, global head of international markets at Euroclear, said the geopolitical situation has had a significant impact on Moscow’s plans to attract new investors and become a global financial center.

In 2013, Clearstream and Euroclear Bank both started offering services for Russian government bonds and the share of foreign investment increased from 3% to 25%, according to the Bank of Russia. In February Clearstream and Euroclear added Russian corporate bonds to their platforms in order to attract more international investors.

Pouyat spoke at the FTSE Global Markets Accessing Russia 2014 conference in London this week.

“We designed a project together in fixed income to attract new investors and grow Moscow as a financial centre but there is now less appetite from investors even if the pipes are very efficient,” he added. “The geopolitical environment has had an affect but once conditions return to normal investors will come back.”

In the next stage of updating Russia’s capital markets infrastructure, both Euroclear and Clearstream are aiming to launch a settlement service for equities in July.

Tim Bevan, managing director, prime brokerage at BCS Financial Group, said at the conference that 2013 was a big year for reforms Russia’s financial market infrastructure but their effectiveness has been clouded by the situation in Ukraine.

On March 3, when Russian troops went into Ukraine to take over the Crimean Peninsula, volumes on the Moscow Stock Exchange were three times the daily average, the blue-chip index fell 10.8% and the Central Bank sold $11bn of reserves to prop up the value of the ruble. This reversed the trend of increasing foreign participation in Russian equity trading in Moscow.

Tom O’Brien, head of international sales at the Moscow Exchange, said the infrastructure reforms had been successful but would take time to make an impact.

O’Brien said: “The measure of our success will be the shift of trading from depositary receipts to domestic securities and a decrease of the spreads between the domestic market and London. We still have a lot more to do.”

Many large Russian companies are have a dual listing overseas, especially in London, and volume of trading of their overseas depositary receipts can be greater than the trading volumes of their shares in Russia.

“It will be a long time before Russian companies choose to just list in Moscow as we need to be able to offer the trading activity and valuations in Russia,” O’Brien added.

O’Brien said derivatives trading volumes had increased on the Moscow Exchange since it had changed the structure of dividend payments and encouraged more trading by index arbitrage funds.

“There will be a big change later this year or next year if the U.S. CFTC approves two of our products,” said O’Brien. “We have a nascent options market and want to develop interest rate products over the next couple of years.”

O’Brien added that the Moscow Exchange was also developing relationships with overseas clearers such its partnership with Eurex, part of Germany’s Deutsche Boerse, and its memorandum of understanding with the Korea Exchange.

Maria Ivanova, vice president, business development and client relations at NSD, Russia’s central securities depository which launched in 2013, said at the conference that she hoped the trends they were seeing before the Ukraine crisis would return.

‘We saw a big uptick in repo trades before the crisis and saw more Russian bonds coming into our system to replace other sovereign debt from Portugal, Spain and Greece which increased the pool of available collateral,” added Ivanova. “Once we are back to business and the economy is on track we will continue to see these bonds used as collateral.”

Featured image via Wikimedia Commons