Together with the Federal Treasury and Bloomberg and with assistance from the Bank of Russia, NSD has developed and rolled out a system for providing liquidity to Russian commercial banks through tri-party repo trades with the Federal Treasury. Federal Treasury's repo trades with an OFZ basket are broadly similar to Bank of Russia's repo trades with a securities basket:
- Tri-party structure of a repo trade
The role of a clearing house, settlement organization, and collateral management agent is played by NSD.
- Trades involve a securities basket
A trade is made with a basket of securities, rather than with a single security. Thanks to this, it is possible to accept more securities as collateral for a trade and, where necessary, to substitute securities provided as collateral either if the borrower (credit institution) needs them or upon a corporate action event.
- Bloomberg terminals are used to give orders
The client submits an order to make a repo trade through a Bloomberg terminal that gives notice of Federal Treasury's repo auctions to the client, registers client's orders, and notifies the client of order execution.
- The maturity of a repo trade and the settlement type (DVP3) are set by the Federal Treasury
- Repo trades are made at an auction and with a maturity of one or more days
- The Federal Treasury draws up a list of trades for its further submission to NSD
- Repo trades with the Federal Treasury have a margin pool segregated from margin pools for repo trades with other creditors
- Collateral: an OFZ basket (basket code: GCFEDBONDS).
- The haircut of 5% and the permitted margin ratio/maximum margin ratio of 0.05% are set by the Federal Treasury
- Neither partial settlement of a trade, nor repo rollover is permitted
- Securities for which corporate actions (other than coupon income payments) are forthcoming are not allocated as collateral*.
- A margin (if required) is collected in the form of securities only
- Securities marked by the client (credit institution) as to be used as collateral in trades with different creditors are first allocated as collateral for repo trades with the Bank of Russia
To sign up for the service, a Russian credit institution that satisfies the Federal Treasury's eligibility requirements, must enter into a master agreement with the Federal Treasury for repo trades.
Documents required to benefit from automatic reporting of repo trades with the Federal Treasury to the Trade Repository are available here.
Contact details for getting advice on how to sign up for the service and on technical questions, as well as for your feedback, are available here.
For the detailed description of the product, please view the presentation:
Procedure for corporate actions
On a record date for a corporate action other than coupon income payment ), NSD does not allocate securities to be participating in the corporate action or substitutes such securities (provided that the credit institution holds other securities comprising the OFZ basket). Clients need to monitor information on such corporate action events either on NSD's web site or using the DISC NSD service.
In addition, information on forthcoming corporate actions is available on NSD's web site in the section in which NSD posts details of corporate action events on the record dates of which NSD does not allocate securities as collateral or substitutes such securities. If no information on the type and date of a corporate action for securities is posted in that section, those securities will be allocated as collateral for repo trades, and, accordingly, such securities will not be automatically substituted.
* If any securities were allocated as collateral before the announcement of a corporate action, NSD substitutes the securities on the record date for the corporate action.