On 14-16 June, National Settlement Depository (NSD), Russia’s central securities depository, took part in the Network Management Conference (NeMa 2016) organized by the International Centre for Business Information (ICBI). NeMa is one of the most important events for the post-trading infrastructure participants; it brings together representatives of securities market from all over the world.
This year, it was the biggest event in the NeMa’s history: more than 500 delegates from 40 countries attended the conference. Representatives of investment funds and asset management companies joined the traditional NeMa participants: delegates from global custodians, regional banks, exchanges, CSDs, brokerage companies, dealers and fintech companies. Alexander Nazarov, Director, Head of Research and Development Department, represented NSD at the forum.
Among key topics discussed at the event were the European markets and infrastructure development, the outlook of the T2S (TARGET2-Securities) platform, the ways to reduce costs and optimize operations, including some functions outsourced to specialized companies, as well as financial technologies.
The participants of NeMa raised the issue of approaches to the due diligence procedure for the companies operating on the financial market. According to the experts, in addition to global custodians and local sub-custodians, the users of services will involve new participants in the process, including central counterparties, banks and CSDs.
Furthermore, the delegates highlighted the new role of CSDs in the risk management process when providing services on securities markets. In particular, it was pointed out that CSDs as well as custodians should be responsible for protecting assets and investors’ operations and maintaining service quality.
The special focus of the event was the opening of direct accounts by global custodians and other foreign securities market participants with CSDs, and the role of these accounts’ operators. Three models were considered: a traditional one (when a global custodian uses a local depository as a provider of services on the market), a direct access model (when an account is opened with the CSD using the local operator of the account), and a hybrid one (when an account is opened with the CSD, but additional services, including corporate action processing, are provided by a local custodian). The delegates added that these models should complement each other rather than compete, allowing market participants to select convenient options.
The conference participants also discussed financial technologies, or FinTech. It was pointed out that fintech companies became more influential, and that their activities needed regulation, as the technological development was well ahead of legal support of the industry. According to the delegates, over the next 5-10 years blockchain technologies will be implemented in the banking sector and the securities market.