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NEW YORK. – A major index provider is considering dropping Russia from its emerging-market index if Moscow introduces restrictions on capital flows out of the country. New York based MSCI Inc said late Tuesday in a statement that the introduction of capital controls in Russia could lead to the potential exclusion of the country’s stocks from the MSCI Emerging Markets Index, a widely followed barometer.

“The introduction of restrictive measures, such as capital or foreign-exchange controls, which may lead to a material deterioration of Russian equity market accessibility, may lead to the exclusion of the MSCI Russia Index from the MSCI Emerging Markets Index,” the company said.

Another option MSCI is considering is replacing local Russian stocks with more-liquid foreign depository receipts for those shares.

Some measures available to Russian authorities to manage the economic situation could have a significant impact on the replicability of the MSCI Russia Index and the MSCI Emerging Markets Index.

MSCI’s emerging-market index covers 23 markets and represents approximately 11 percent of the world’s stock-market valuation.

The announcement follows one of the most volatile trading sessions for the rouble on Tuesday. A surprise rate hike by the Bank of Russia to 17 percent late Monday did little to stem the spiralling volatility on the currency.

The rouble sold off sharply during the session as investors liquidated positions on Russian assets also fearing the introduction of capital controls. The exchange rates showed similar volatility yesterday.

“Volatility is exploding, spreading panic and stopping all but the bravest market participants from buying ruble,” said Heinz Ruettimann, a strategist at Julius Baer.

Authorities have so far dismissed rumours that the government will move closer to imposing capital controls, but the sharp selloff in Russian assets signals that markets believe more-restrictive measures will come.

“The failed stabilisation of the rouble through the central bank’s interest-rate hike to 17 percent feeds the suspicion that capital controls will be the next tool Russian authorities will use,” said

Mr Ruettimann, adding that this decision would put Russia’s investment-grade credit rating. The Swiss asset manager is advising clients to avoid taking positions on the currency.

Meanwhile, some retail foreign-exchange brokers are increasing the collateral requirements to trade the highly volatile currency.

Starting yesterday at 11GMT, Saxo Bank increased the margin requirement for customers to execute rouble trades from 4 percent to 20 percent for trades below $375 330 and to 40 percent for trades above this value.

Also yesterday, the Moscow Exchange increased margin requirements. – Wires.