NDC's Securities Turnover in 2007 Reaches Record RUR60.5 Trillion

17 January 2008
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The National Depository Center (NDC), Russia’s only settlement depository servicing the full range of Russian securities, announced today that in 2007 it became Russia's biggest depository based on the value of assets on deposit. Considering securities turnover it also was the leading Russia’s depository on the value of shares on deposit.

NDC's securities turnover (the market value of securities transferred in inventory operations) doubled for 2007 reaching RUR60.487 trillion (compared with RUR30.745 trillion in 2006). In October 2007 monthly securities turnover reached a record RUR7.109 trillion. Share turnover for the year rose 53.5% to RUR26.41 trillion or US$1.076 (based on exchange rates as of 31 December, 2007). The fast growth of the company's operations is attributable to the successful implementation of NDC's strategy of service diversification, liquidity growth in the MICEX Group and the decreased cost of custodial services for securities.

According to Russia's Top 30 Depositories rating, NDC has been recognized as the biggest Russian depository with securities on deposit with a market value of RUR4.6 trillion. The rating was prepared on the basis of 1H 2007 results. NDC is also the leading depository based on the market value of bonds and unit investment trusts (UITs) on deposit. In 1H 2007, NDC handled 60% of all securities on deposit among settlement depositories in Russia. In 2006, NDC was named winner of the award "Infrastructural Institution of the Year" organized by PARTAD and “Securities Market" magazine. The company won in two award categories – "Risk Management" and "Electronic Document Interchange Development."

Nikolay Egorov, Director, NDC, and Senior Vice President, MICEX, speaking at a press conference given by the heads of MICEX Group companies, explained: "NDC was already the biggest depository in 1H 2002 and 1H 2003. Considering the powerful spurt made by the Russian stock market in recent years, it is right and important to return and regain the leading positions in all segments of Russia's settlement and depository business. NDC is making every effort necessary to strengthen its role as a core part of the stock market infrastructure and to increase its global market competitiveness."

In 2007 the market value of securities on deposit with NDC rose 31% to RUR 4.312 trillion or US$176.6 billion (based on exchange rates as of 31 December, 2007) compared with the 2006 figure of RUR3.288 trillion or US$124.9 billion (based on exchange rates as of 31 December, 2006). The market value of shares on deposit for 2007 was RUR1.596 billion or 37.2% of the consolidated portfolio of all securities. The market value of UIT units on deposit rose 287% from RUR4.396 million to RUR17.07 billion.

NDC was active in the servicing of shares and of UIT units in 2007. The number of share issuers served by NDC doubled reaching 657 companies (compared with 352 issuers as of 1 January, 2007). The number of investment fund and UIT managing companies rose 70% to 85 companies (compared with 49 as of 1 January, 2007). The number of corporate bond issuers rose 76% to 513. The number of securities issues serviced by NDC in 2007 reached 2,403. This was 38% than in 2006 (1,736 issues).

The number of inventory operations conducted by NDC for 2007 reached 2.488 million, or 208,000 operations per month on average. This was 30% more than for 2006.

Mr. Egorov, commenting on the need to create conditions for expansion of the company’s business and timely implementation of new programs, said: "In the situation of general globalization, the market infrastructure of the business should quickly react to this by means of expanding the range of services. Definitely it is important to have powerful, efficient and large processing centers, but it is also crucial to ensure that performance of the services rendered to clients is based on a complete understanding of their needs which are changing while the external environment is being transformed."

NDC has put its new technological platform in operation. The platform corresponds with all requirements for use by a central settlement depository. It allows the company to carry out stock exchange settlements in full including uploading of a list of trading sections and current positions into a trading and clearing system at the beginning of the trading day, processing of collective payment order (for net settlements), gross settlements, and dynamic management of trading positions during the trading session. This has allowed improvements such as support for two settlement models in GROSS-FOP and GROSS-DVP regime with confirmation of payment, provision of online information on change in balance in trading sections after settlements on GROSS transactions, and dynamic exchange.

In 2007 five registrars switched to Electronic Document Interchange in their interactions with NDC. Among them are Registratorskoye Obschetsvo STATUS CJSC, Central Moscow Registrar OJSC, Reyestr A-Plus CJSC, TSOR CJSC and Surgutinvestneft CJSC. As a result, the share of operations conducted via Electronic Document Interchange rose up to 83.1% of all operations conducted with securities at NDC’s nominee holder accounts in registers.

Software designed for the compilation of lists of securities owners has allowed retention of the fullest possible data and also the adoption of XML formatted templates under PARTAD (previously dbf format had been used). XML format is used for the preparation of the requests to depositors for the disclosure of information of securities owners, for the receipt of data from depositors, for the transfer of securities owner information from NDC to a registrar/issuer/paying agent and also for the receipt of requests from those registrars which have adopted Electronic Document Interchange.

The company has automated the process of distributing requests for disclosure of securities owner information to depositors before due date. This is a convenient option for the collection of lists for major issuers having large numbers of shareholders. NDC has also automated a process for tracking changes in owners' data. NDC informs a depositor of a change in the number of securities on its interdepository account and of the need to disclose this information. Error checking is automatic. The new technology allows the collection of data simultaneously in multiple storage areas.

Introduction of the new section types (long term storage sections, SPO) has speeded up share placement process, the re-registration of rights for securities and to increase the efficiency of the share placement process. NDC is also working on improvement of its services in the field of interdepository interaction.

The number of securities admitted to the NDC-DCC bridge has tripled within the year (97 issues as of 31 December, 2007). Hours of operation for the NDC-DCC Bridge have been extended to 4pm from 1.30 pm.

NDC and ING Wholesale Banking, Russia’s largest custodian rendering services to foreign investors, have reacted to their clients’ needs and have successfully implemented the Speedy Settlement Scheme (SSS), designed to cut the time needed for the delivery of shares and to optimize settlements between investors and depositories’ clients.

In 2007 NDC has gradually been increasing its reliability and improving its risk management system for better compliance with international requirements to a central unit of the stock market’s settlement system. NDC has successfully implemented a strategy aimed at increasing its equity capital in accordance with the company’s management decision made previously. For January-September 2007, NDC’s equity capital rose 32% reaching RUR1.285 billion. It is expected that it will reach more than US$1.34 billion for 2007, or 38% more than for 2006.

In 2007, NDC signed an insurance agreement setting cover among the highest for Russian financial institutions, at US$50 million. Including NDC’s own self-insurance funds, the total value of NDC’s financial liabilities cover is more than US$96 million.

Thomas Murray, an international rating agency, a Standard & Poors’s subsidiary specializing in risk assessment connected with central depositories and capital markets, has affirmed in 2007 NDC’s rating at A+, which means low risk. In 2007 NDC succeeded in improving its indicators for financial and operational risks. This led ratings changes reflective of these improvements. The outlook has been changed from “under observation” to “stable.”

The company has paid special attention to the improvement of its corporate governance system and interaction with market participants. Vnesheconombank became a new member of NDC in 2007. NDC’s founders, MICEX and Bank of Russia, currently own 46.7% and 39.3% in NDC respectively, and control 50.2% and 42.3% of votes respectively. The remaining members own 7.53% of the votes. NDC’s Board of Directors includes 11 directors. In 2007 it included seven representatives of large international and domestic custodians and one independent director.

Vladimir Putin, the President of Russian Federation, has signed a Federal Law “About Alteration of the Clause 7 and Clause 11 of the Federal Law “About Securities Market” which forms conditions for depositories’ reorganization from not-for-profit organizations to joint stock companies. Thus NDC now has the needed basis for reorganization into a joint stock company, which is regarded as necessary for further corporate development.

NDC joined two self-regulatory organizations – the National Securities Market Association (NSMA) and National Association of Securities Market Participants (NAUFOR). Participation in these organizations allows the discussion of programs on formation of a model of securities-backed lending and other important issues.

With regard to cooperation with international associations NDC hosted the General Meeting and Board of Directors meeting of the European Central Securities Depositories Association (ECSDA) held on 13-14 September 2007 in St. Petersburg. Heads of the central depositories from 30 European countries took part in the meetings.

In 2007 after considering an official address by the Association of Eurasian Central Securities Depositories (AECSD) which represents the central depositories of CIS countries, the Association of National Numerating Agencies (ANNA) granted NDC the right to act as the substituting numerating agency for the CIS along with the right to function as National Numerating Agency in the Russian Federation.

NDC has opened a direct account with Euroclear Bank, Euroclear SA/NV. This allows NDC to provide its clients with new services in the international capital markets. The company has also signed a Memorandum of Cooperation with the Republican Central Depository of Securities (Republic of Belarus) (RCDS). NDC has opened a nominee holder’s account with JSC National Depository Centre (Republic of Azerbaijan). This allows NDC clients to hold Azeri companies’ securities on deposit in their NDC accounts. The company is moving to expand the range of services relating to operations with foreign issuers’ securities.

NDC, jointly with MICEX and the MICEX Settlement House, has made preparations for implementation by the Bank of Russia of direct REPO operations with corporate Eurobonds on the OTC market. NDC currently services the securities of foreign issuers which are held on deposit on NDC's account with Clearstream Banking and which are included in the Bank of Russia's Lombard List. These include 73 corporate Eurobond issues of leading international companies.

About NDC

Not-for-Profit Partnership “The National Depository Center” is the largest settlement depository in Russia, servicing the full range of equity securities of Russian issuers. It services 100% of transactions conducted in the federal bond and the Bank of Russia bond markets, more than 95% of transactions conducted in the corporate and regional bond markets, and stock exchange share transactions. NDC provides storage of global certificates and depository accounting for 99% of corporate bond issues, and 95% of sub-federal and municipal bond issues. The international rating agency Thomas Murray has assigned NDC an A+ rating as a central depository. For 2007 the value of assets in storage was more than RUR4.3 trillion. NDC is the largest paying agent on behalf of corporate bond issuers. It is Russia's national numerating agency, the substituting numerating agency for the CIS, authorized to assign the international ISIN and CFI codes. It is also a member of the international accounting infrastructure, providing settlements on the global financial markets using direct accounts at Clearstream Banking S.A. and Euroclear Bank. It also holds accounts at the Central Depository of the Republic of Kazakhstan and the NDC of the Republic of Azerbaijan. Among NDC’s founders are MICEX and Bank of Russia (the founders’ shares in the property are 46.7% and 39.3% respectively, and in the votes 50.2% and 42.3% respectively). Members include GPB OJSC (Gazprombank), Evrofinans Mosnarbank, Rosbank, VTB Bank (Vneshtorgbank), Bank of Moscow, Rossiysky Credit Bank, Vneshekonombank, ING Bank Eurasia, JP Morgan Bank International LLC, International Moscow Bank (UNICREDIT), Deutsche Bank, and Sberbank of Russia. The Partnership also has a stake in Depository Clearing Company CJSC (36.96 %) and in Settlement Depository Company CJSC (29%).


 For further information about NDC: www.ndc.ru, or NDC Public Affairs Department: +7 495 232 0910, .

 

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