Our task is to ensure that any financial market participant working in Russia does not feel any differences compared with the services provided globally.
In 2017, National Settlement Depository (NSD), Russia’s CSD, celebrates its fifth anniversary. Eddie Astanin, Chairman of the Executive Board of NSD, speaks about NSD’s performance results and plans for the future.
- How would you describe NSD’s key operational results for this year and for the recent five years?
- Speaking globally, during recent years, National Settlement Depository has fundamentally transformed its business model and has been integrated into the global financial market. If we focus on landmark projects that have been successfully implemented in recent years, I would mention obtaining the official status of the central securities depository, implementation of the foreign nominee concept, and NSD’s links with ICSDs, as well as significant development of technologies and the legal framework with regard to corporate actions.
- How has the role of the Russian record-keeping infrastructure changed?
- Russia’s record-keeping infrastructure has followed the global development trend, and in some aspects, it has even led the charge. For example, from the beginning, the CSD was created as a non-banking credit organization which maintained not only securities accounts, but also cash ones with direct access to the Bank of Russia’s settlement system. Record-keeping institutions become market utilities, helping their clients reduce costs and mitigate risks, on the one hand, and increase margins on transactions, on the other hand. Safekeeping assets of different categories, settlement and collateral management of transactions with these assets, providing information about these assets, and building channels to exchange messages between service providers and their customers, including retail clients – all of these are the characteristics of existing and future models of record-keeping infrastructure. In Russia, we have a saying: “Fish looks for deeper water, man – for better places to live.” From this perspective, the post-trade industry is now in the stage of developing rapidly and searching for new applications, including in segments that are adjacent to the financial market. It is moving towards a financial supermarket model. Globalization, regulatory initiatives (for example, G-20), and new breakthrough technologies – FinTech – contribute to this. Technologies which previously supported the sector are now being transformed into business drivers.
- However, there are also regulatory requirements.
- Indeed, this is the most important factor. I recall that in 2015, during a CSD panel discussion that I attended, the moderator asked speakers: “Could you name the most important factors that can have a positive or negative impact on the development of the CSD industry?” My answer, without hesitation, was regulation. In 2009-2016, the post-trade industry developed very quickly due to regulator’s activity related to adopting CSD legislation, laws related to clearing operations, foreign nominee accounts, corporate actions reform, etc. Currently, there are ongoing discussions about crypto currency regulation in Russia. The results of these discussions may lead to a regulatory ban on operations using these assets or the development of new types of digital assets which may be serviced by CSD; in the latter case, we speak about “blue ocean” opportunities.
- Which projects related to integrating Russia’s infrastructure into the global financial system do you consider to be priority ones?
- These priority projects can be united into three groups: the standardization of financial messages; compliance and cyber security; and the development of direct operational interactions with Asian financial institutions and CSDs.
- Did sanctions and the general deterioration of the geopolitical situation surrounding Russia affect your plans?
- NSD is the infrastructure, “a water pipeline,” adopting a term from Peter Norman’s book Plumbers and Visionaries. We do not conduct our own operations on the market. Instead, we serve our clients’ needs. For us, geopolitics is the external environment in which we and our clients work. At this stage, our mid-term strategy is unchanged. However, I do not exclude the possibility that we may need to make adjustments in the future due to the external situation. The current degree of tension, unfortunately, means that a vector focused on market fragmentation has been formed.
- You are a member of SWIFT’s Global Board of Directors. Could you explain how your cooperation is being developed?
- NSD and SWIFT have a long-term partner relationship; NSD is the largest user of SWIFT services in the Russian market, acting as the CSD and a nationally important payment system. However, my activities as a member of the Board of Directors are focused on developing SWIFT in the best interests of the global community of SWIFT users, taking into account the position of ROSSWIFT, Russia’s SWIFT users association. In particular, Russian SWIFT users pay attention to issues related to the development of message exchange formats, compliance, cyber security, and technical support services, etc. I am happy to say that during the most recent two years we have succeeded in fulfilling many plans. For example, we changed the model for supporting Russian users by transferring the support directly to the global SWIFT level. We managed to successfully reduce fees for Russian users. With the support of the Bank of Russia, we have increased users’ attention to and responsibility for cyber security and undertaking measures stipulated by CSP. In addition to this, in the summer 2017, the Innotribe Startup Challenge was held in Russia for the first time. This is a contest for startups that SWIFT has held since 2011; it allows participants to demonstrate their developments and establish contacts within the professional financial market community.
- The world is experiencing a crypto asset revolution. What do you think about this issue?
- We believe that there may be exciting new opportunities if Russia develops an appropriate regulatory framework. As I have already explained, there is a lively and ongoing discussion about crypto currency regulation in Russia. I cannot predict the results of these discussions. However, we are backing those who support adopting a law that will regulate operations with digital assets. I suppose that combining the new regulation and the adaption of post-trade technologies for custody, record-keeping, and stock market settlements could create a platform (a bridge) between the traditional financial world, which of course will not disappear in the near future, and the emerging world of digital assets.