NSD Sums Up Q3 2019 Results

18 November 2019
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  • The value of securities under custody reached RUB 49.2 trillion
  • OFZ balances in foreign nominee accounts 41% increased and reached RUB 2.5 trillion

Central Securities Depository (CSD) services

In Q3 2019, the value of securities under custody reached RUB 49.2 trillion – this was a 13% increase as compared with the same period of 2018 (RUB 44.3 trillion). The number of foreign securities issues serviced by NSD grew 24% – from 11.8 thousand to 14.6 thousand. The value of the federal loan bond (OFZ) balances in foreign nominee accounts amounted to RUB 2.5 trillion; it demonstrated a 41% increase compared with Q3 2018 (RUB 1.8 trillion).

The total number of securities issues serviced by NSD grew 17% – from 19.1 thousand in Q3 2018 to 22.4 thousand in Q3 2019.

The number of inventory operations in the CSD increased 29% Y-o-Y and reached 1.1 million operations in Q3 2019 (compared with 850 thousand in Q3 2018), including 842 thousand exchange trade operations (+27%; 662 thousand operations in Q3 2018) and 252 thousand OTC trade operations (+34%; 188 thousand operations in Q3 2018).

The value of DVP OTC trades grew 38% and amounted to RUB 2.5 trillion (1.8 trillion in the same period of 2018).

The aggregate number of trades conducted with the use of the Linked transactions and Instruction prioritization services grew significantly to 12.8 thousand (860 trades in Q3 2018).

In Q3 2019, two commercial paper programs valued at RUB 4 billion in aggregate and 11 commercial paper issues valued at RUB 8.5 billion were registered. Nine commercial paper issues with the RUB 5.48 billion total value were placed.

In Q3 2019, SOLID Management joined NSD’s centralized mutual fund distribution platform. Currently, 16 brokerage companies/nominees and 13 asset management companies use these services.

Corporate Actions (CAs)

In Q3 2019, 627 meetings of securities holders were held using the E-voting technology. 81 corporate actions to repurchase shares and 15 corporate actions to exercise the pre-emptive right to purchase shares were also initiated. During the reporting period, the value of repurchased shares reached RUB 113 billion (as compared with RUB 29 billion in the same period of 2018).

Three issuers used the E-voting service in Q3 2019: ALROSA, Gazprom Neft, and NLMK. During the reporting quarter, five general meetings of shareholders were conducted with the use of E-voting (two general meetings were held in Q3 2018); the shareholders who took part in the four meetings were able to simultaneously use two remote voting systems (NSD’s E-voting and registrars’ electronic voting systems). It allowed different categories of shareholders to exercise their rights in a most convenient way.

In total, 3,653 corporate actions involving Russian securities were conducted in Q3 2019. It was 3% more than in the same period of the previous year (3,535 corporate actions in Q3 2018). In Q3 2019, the number of corporate actions involving foreign securities grew due to the increase in the number of securities issues serviced by NSD (from 6,198 issues in Q3 2018 to 8,166 ones in Q3 2019). The growth amounted to 32%.

The total value of payments on corporate actions which involved Russian securities reduced 10% – to RUB 5 trillion (against RUB 5.5 trillion in Q3 2018).  The amount of payments on corporate actions involving foreign securities declined 19% and reached the sum equivalent to RUB 143.8 billion (RUB 178 billion in Q3 2018).

In July 2019, NSD completed a project focused on automating and optimizing a service for processing mandatory corporate action involving Russian securities in the “Conversion” category. Issuers and registrars were able to send ISO20022 messages to NSD on such corporate actions as securities issues consolidation, conversion, split-offs, and consolidation of shares, as well as some other actions; NSD optimized the process for conducting these types of corporate actions.

Collateral Management (CMS)

In Q3 2019, the value of Federal Treasury repos conducted using NSD’s CMS was RUB 4.8 trillion; the repo trade average term increased, as trades with 35-108 days placement terms became more popular. In Q3 2019, the total volume of Bank of Russia repos reached RUB 705 billion. The total number of clients connected to the CMS was 159.

The first constituent entity of the Russian Federation – the St. Petersburg Committee of Finance – joined NSD’s platform that allows to invest in repo transactions using NSD’s CMS. Since the launch in July 2019, there has been a stable growth in the number of connected credit organizations and in the amount of liquidity placed in repos. The aggregate amount of the Committee’s available funds placed via NSD’s CMS platform reached RUB 45 billion.

The Moscow Exchange Group’s Single Account service that was launched at the end of 2018 has been developing successfully. This service allows for automated standard transfers of assets between client positions with NCC and NSD. Since the launch of the Single Account, 20 clients have been connected to the service. In the reporting quarter, the number of automatic asset transfers using the Single Account service reached 584 (+238%). The most popular service was the automation of securities transfers following settlements via NSD clearing procedures to trading securities accounts opened for clearing in NCC based on NSD infrastructure.

Repository

During Q3 2019, the number of trades registered with NSD’s Repository grew to 4.1 million (compared with 3.2 million in Q3 2018). The value of the registered transactions was 35% more than in the same period of 2018 – RUB 156.8 trillion (RUB 116 trillion in Q3 2018).

In Q3 2019, the top 3 instruments of registered transactions included:

Instrument Q3 2019 Q3 2018
OTC repos 3,707,585 2,893,446
FX forwards 319,987 266,392
FX swaps 59,182 39,344

The top 3 instruments in terms of the volume of reported transactions included (RUB trillion):

Instrument Q3 2019 Q3 2018
FX swaps 104.7 72.3
OTC repos 22.0 21.4
FX forwards 22.2 15.6

NSD began providing legal entities with the Reporting Agent service. It allows corporate clients to submit mandatory reports on the transactions to the regulator in a timely manner.

In Q3 2019, NSD launched a service to automatically generate statements from the Repository’s register of contracts and submit them to clients. This new service allows transaction parties to better control the reporting procedure delegated to counterparties or third parties. 

Information services

In Q3 2019, the number of contracts concluded with information service users grew 18% Y-o-Y and reached 599 contracts.

NSD continued to gradually transition to a new Reference Data product range that allows it to easily access information about issuers, securities, and corporate actions. In October 2019, a full transition of NSD’s clients to API was completed; the company discontinued supporting SIR-NSD and SIR-NSD Light products. During the transition to API, NSD closely communicated with FinTech solutions providers. Around 15 companies on the market offered standard or customized solutions that let them receive NSD data via new technical options and data interchange formats

In Q3 2019, as part of information services development, NSD continued to expand the range of data provided.  A service for providing information about changes in foreign financial instruments and their international codes was introduced. NSD products now offer an option to provide information about the code of the securities issuer’s economic sector that is required to generate reports.  The list of documents to be submitted as part of the services “Provision of scanned copies of issuance documents” and “Provision of hard copies of issuance documents” was expanded.

NSD began preparing to transition to new fee plans for using the DISC NSD system that now depend on the number of product users.  The updated DISC NSD system will also offer an expanded amount of data allowing users to get information about more than 13 thousand financial instruments which had been withdrawn from NSD’s servicing during the past ten years. In addition, DISC NSD will now allow information to be uploaded in an Excel format. The new services and fees will go into effect 1 January 2020.

NSD’s Valuation Center continued to demonstrate rapid growth in its client base. In Q3 2019, the number of subscriptions for the Valuation Center’s products increased from 297 to 327 (+10%). Valuation Center development is related to successful implementation in three strategic areas:  increasing the volume of information in current products, expanding the range of evaluated instruments, and providing clients with new options for accessing Valuation Center data. NSD offers the option of viewing all recent calculated prices for evaluated instruments and downloading them in Excel and PDF formats. Starting 1 September 2019, following the results of discussions with market participants, NSD’s Valuation Center started disclosing information about initial data levels based on which fair values of securities had been determined (the calculation methodology number), and began to publish yields on evaluated securities issues. To expand the range of instruments evaluated by NSD, the depository began broadcasting Russian issuer Eurobonds values and testing the methodology for evaluating ruble bonds without a credit rating, which is based on the score model for assessing the credit quality of securities.  To access the Valuation Center’s data, NSD introduced an interface allowing users to view data in a tabular format on the website, to filter and download them in an Excel format. 

The only product for evaluating Eurobonds issued by Russia's Ministry of Finance (MinFin) received Bank of Russia official recognition. On 24 October 2019, the Bank of Russia recognized the quality of NSD Valuation Center’s functioning during the determination of the value of MinFin Eurobonds as satisfactory. 

Payment and Settlement System

In Q3 2019, the value of money transfers reduced 11% and amounted to RUB 79.6 trillion (RUB 89.3 trillion in Q3 2018). The number of client transactions amounted to 325 thousand or 8% more than in Q3 2018 (300 thousand).

In Q3 2019, the total number of DVP transfers (crediting and debiting) in CBR money was 313, or five times more than in the same period of the previous year (60 transfers).

In Q3 2019, the total amount of DVP transfers (crediting and debiting) in CBR money was RUB 86 billion (RUB 1 billion in Q3 2018).

National and Substitute Numbering Agency, and the accredited Local Operating Unit (LOU)

NSD is the first and only company in Russia and the CIS countries that has received an accredited LOU status. This is a permanent status which replaced the temporary one (pre-LOU). It confirms NSD’s compliance with GLEIF’s regulatory and technological requirements for an organization which assigns and maintains LEIs.

In Q3 2019, NSD assigned 21 new LEIs and verified 115 LEIs. LEIs assigned by NSD are recognized by regulators, market participants, and LOUs of other countries.

NSD continues to act as Russia’s Numbering Agency and as the substitute numbering agency for CIS countries, assigning ISINs, CFIs, and FISNs.

NSD assigned 451 ISINs, CFIs, and FISNs to Russian financial instruments, and 31 appropriate codes to CIS issuers’ financial instruments. In Q3 2019, the number of qualified foreign securities amounted to 2,321 securities.

IT services

As the core of the financial market, NSD gives particular attention to developing a reliable IT platform, implementing partnership programs, and ensuring a high level of information security.

In Q3 2019, the total number of SWIFT service bureau users reached 69 companies. The Service Bureau clients’ average monthly traffic increased 54% compared with the same period of 2018 and reached 488 thousand messages per month. NSD began providing its clients with the SWIFT gpi service. The gpi solution allows for rapid cross-border real-time payments, lets users track their payments, and ensures transparency of bank fees and foreign exchange rates. In future, NSD plans to offer its clients to use the gpi service as part of its service bureau model. In Q3 2019, two new clients connected the Transit 2.0 platform, an IT solution that lets corporate clients unify their financial message interchange with their banks. The total number of the platform users was 10 companies at the end of the reporting quarter (five corporations and five banks).

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