The National Bank of Ukraine streamlines the rules governing FX purchase/sale auctions. The relevant amendments to this effect are approved by NBU Board Resolution No. 655, dated October 1, 2015, On Amendments to the Regulation on the conduct of FX auctions by the National Bank of Ukraine.

Up until now, the regulator has been required to announce upcoming FX auctions beforehand. Instead, under the amended Regulation, auctions shall be announced not only beforehand but also on the same day when the auction is held.   This will enable the National Bank to respond in a more prompt manner to the imbalances in the foreign exchange market.  As before, auction announcements and auction details shall be communicated to banks via e-mail.

The Resolution also draws a distinction between the terms of a competitive bid and a noncompetitive bid.  A competitive bid indicates a certain level of the hryvnia exchange rate against the foreign currency, whereas in a noncompetitive bid the exchange rate is not indicated. “Thus, a noncompetitive bid secures the possibility to purchase or sell foreign exchange through the auction,” said Director of the NBU Open Market Operations Department Serhii Ponomarenko   In particular, competitive bids can be satisfied at the cut-off rate or at the exchange rate quoted by the market players, whereas noncompetitive bids can be satisfied at the exchange rate calculated as a weighted average of the exchange rates quoted in the bids that have been satisfied at the auction.

At the same time, the updated regulation strengthens the responsibility of banks for the execution of bids submitted to participate in the auction. The bank, whose bid has been selected by the National Bank to be satisfied at the auction, is required to enter into an FX sale/purchase agreement with the National Bank of Ukraine and confirm the deal via the System for Confirmation of Deals in Ukraine’s Interbank Foreign Exchange Market. Such a bid cannot be revoked. The banks attempting to violate the Regulation will be denied participation in the next three auctions.

The amendments shall take effect from October 3, 2015.