Russia’s National Settlement Depository (NSD) completed a merger with the Depository Clearing Company at the end of 2012, allowing for the full formation of Russia’s first Central Securities Depository (CSD) in April 2013. Eddie Astanin, Chairman of NSD’s Executive Board, discusses what this milestone represents and Russia’s ambitions for its core financial market infrastructure.
How is the new CSD changing the country’s financial market?
Russia’s CSD can now service all types of instruments on the Russian financial market, fully meeting the requirements of CSD law and the definition of Rule 17f-7. It is recognized as the eligible securities depository by the foreign investor community – we have seen a huge transfer of assets from register accounts to NSD accounts. From November 2012 to April 2013 the total volume of assets has jumped from RUB 9.5 trillion to RUB 17.3 trillion. So it’s a good result.
We have links with ICSDs – Euroclear and Clearstream – and have seen huge demand from foreign clients to use these links and access the Russian government bond market (OFZ): In the last six or seven months the bond yield has dropped more than 150bp.
In April, we opened foreign nominee accounts from CSDs in the CIS – Ukraine, Belarus and Kazakhstan. There is also demand from other foreign CSDs, such as Poland and Austria, to open nominee accounts here, showing there is real interest on the part of clients in those countries to come to Russia’s financial market.
What are the key new products and services associated with the CSD?
In February, we launched a trade repository with two types of derivatives – OTC repo trades and OTC currency swaps. We are establishing links with international trade repositories and providing Russian banks and entities with reporting on OTC trades from international counterparties to the Russian trade depository. In partnership with Regis-TR, a Clearstream company, we are planning a more comfortable solution for international counterparties reporting OTC trades with derivatives to the Russian trade depository.
Another interesting project will be the full launch of a T+2 settlement scheme on all securities markets. We are expecting the final stage to come online in September 2013. We have to provide reliable and effective cycles for T+2 settlement, in line with local and international requirements.
How are you developing electronic communications in the trading system?
Part of our global program focuses on implementing electronic communications channels for our clients, our registrars and our international investors. Electronic voting is one of the key products demanded by investors. At present there is a gap between investors who own Russian shares and their ability to participate in core protections, like annual shareholder meetings.
One of the tasks for this year is to implement SWIFT messages (MT 564) for core protections. There are expectations from the international community and Russian investors for the CSD to get this system. In addition, in 2014 we are going to implement new SWIFT messages concerning core protections – including information about shareholders.
How has the market reacted to the Bank of Russia’s recent launch of tripartite repo transactions?
Currently more than 90 banks had signed up – demonstrating its success. We have a positive growth dynamic in this segment, and have a joint project with the Moscow Exchange to establish collateral management services for exchanging repo transactions. By mid-2014 we plan to launch this same model on exchange floors with a Central Counterparty (CCP) clearing house. We have already witnessed this value chain model work very well at Deutsche Börse Group, which in our view is a benchmark for this product.
Are Russia’s collateral management services developing?
Collateral management services are one of the key areas for development for the CSD industry – because there is real demand on different world markets to get these services. It is a constantly ongoing process. We are using our links with ICSDs and other CSDs to set up virtual collateral management, which is based on Russian CSD accounts.
You are making links with local CSDs – do you plan to make Russia the regional CSD hub?
Establishing bilateral links with regional CSDs is part of our plan to set up a regional network with a Russian CSD as the hub of liquidity. For international investors it will provide an easier way to reach regional CSDs and those CSDs’ financial markets via a single entry point. It will also be an easier and cheaper way for CIS investors to reach other international markets, for which we know there is a growing interest.