Starting 30 March 2015, National Settlement Depository (NSD), Russia’s central securities depository, provides credit organizations with an opportunity to conduct settlements on transactions with securities on the basis of DVP model 1 using correspondent accounts opened with the Bank of Russia. The new service expands a range of settlements available for NSD’s clients and combines the advantages of reliable DVP settlements with flexible cash management.
In international practice, this technology is called settlements in central bank money; it allows reducing counterparties’ costs associated with settlements due to mitigating an impact of commercial settlement organizations’ (banks’) risks on settlements. Therefore, these settlements are mostly held in the course of major transactions.
The new service allows to conduct settlements between NSD clients’ accounts opened with the Bank of Russia or between two accounts, one of which is opened with the Bank of Russia and another one – with NSD.
Maria Ivanova, Vice President, Business Development and Client Relations, NSD, pointed out: “Implementation of the technology of settlement in central bank money is an important step toward development of the market infrastructure, bringing it into compliance with standards including the international ones. Thomas Murray, the international agency assigning ratings to central securities depositories, takes into account an opportunity of settlement in central bank money provided by a CSD to its clients.”
Delivery versus payment (DVP)
Delivery versus payment is a principle of settlements on securities transactions when counter transfers of securities (to a purchaser) and money (to a seller) are conducted simultaneously.
The service uses the opportunity of the NSD’s new clearing platform allowing to hold DVP operations in several clearing sessions with netting the funds settlement obligations (DVP model 2) or the funds and securities obligations (DVP model 3), as well as beyond clearing sessions with settlements on each transaction (DVP model 1). DVP let depositors use a unified instruction for securities and funds, pay in rubles and foreign currency (US dollars or euros) and establish priorities for instructions’ execution.