DVP settlements in Central Bank Money

NSD offers DVP settlements through correspondent accounts held by clearing participants or clearing participants' clients with the Bank of Russia (a "correspondent account with the Bank of Russia").  Settlements on a DVP-1 basis have been available at NSD since 2015, and settlements on a DVP-2/DVP-3 basis have been available to NSD's clients since 10 January 2020. The new service widens the range of settlement options available to NSD’s clients and combines the advantages and reliability of DVP settlements with money management flexibility.

Advantages

  1. Clients may still enjoy the key advantages of DVP settlements:
    • convenient time schedules;
    • reduced risk of default by both counterparties;
    • a single clearing instruction for cash and securities;
    • the opportunity of quickly transferring securities to trading accounts for on-exchange trading;
    • full straight-through processing of settlement instructions (Full STP);
    • competitive fixed fees that do not depend on the trade amount.
  2. In addition, the following new advantages are now available to clients:
    • the opportunity to make DVP settlements in Central Bank money in line with global practices;
    • no requirement for both counterparties to have trading bank accounts with NSD;
    • settlements are possible both between counterparties whose bank accounts are held with the Bank of Russia, and between counterparties, one of whose bank accounts is held with the Bank of Russia and the other with NSD.

To sign up for the service, the following steps are required:

  • Enter into a Clearing Services Agreement with NSD.
  • Open an owner trading securities account / nominee trading securities account / trustee trading securities account / foreign nominee trading securities account with NSD, with NSD being designated as the clearing house.
  • Enter into a supplemental agreement to the Correspondent Account Agreement with the Bank of Russia.*
  • Enter into a new agreement with NSD concerning cash settlements which fulfill obligations regarding securities, the clearing of which is carries out by NSD.
  • Give an instruction to NSD (transaction code - 07, purpose - 14) to register the details of the correspondent account held with the Bank of Russia.

* If it is intended to use a correspondent account of a clearing participant's client to make settlements, the clearing participant's client is required to enter into a supplemental agreement to the Correspondent Account Agreement with the Bank of Russia, and an agreement with NSD concerning cash settlements which fulfill obligations regarding securities, the clearing of which is carries out by NSD.

  • DVP settlements through a correspondent account with the Bank of Russia are available on a DVP-1, DVP-2, or DVP-3 basis.
  • NSD submits requests for cash reservation and collection orders with respect to correspondent accounts with the Bank of Russia in accordance with the procedure provided for by the Clearing Rules and the agreements referred to above.
  • Payers (clearing participants / clearing participants' clients) set the parameters which they require in the Bank of Russia's Payment System in accordance with Bank of Russia's Regulations No. 595-P of 6 July 2017 "On the Bank of Russia's Payment System" (Section 5, paragraph 5), by sending a message in the format required by the Bank of Russia’s Unified Formats of Electronic Financial Banking Messages (UFEBS).
  • NSD does not control maximum and total limits set by clearing participants / clearing participants' clients in the Bank of Russia's Payment System.
  • DVP transactions through a correspondent account with the Bank of Russia do not require a clearing participant to open a trading bank account with NSD.

Specific features of DVP-1 settlements through a correspondent account with the Bank of Russia

  • NSD accepts instructions for DVP-1 settlements through a correspondent account with the Bank of Russia from 9:00 a.m. to 7:30 p.m.
  • NSD itself cancels non-executed collection orders by the close of business.
  • If the cash balance in the correspondent account with the Bank of Russia is insufficient, the Bank of Russia gives notice to that effect to NSD, and NSD issues a statement to the clearing participant, stating that the available cash funds are insufficient to settle the trade cleared by NSD.

Specific features of DVP-2/DVP-3 settlements through a correspondent account with the Bank of Russia

  • Clearing instructions for DVP-2/DVP-3 settlements are processed during NSD's clearing sessions at 12:00 p.m., 2:00 p.m., 4:00 p.m., or 7:40 p.m.
  • For clearing instructions for DVP-2/DVP-3 settlements, NSD, before building a clearing pool, submits a request to the Bank of Russia to reserve cash funds in the correspondent account with the Bank of Russia to the amount equivalent to all potential (gross) liabilities of the clearing participant. Based on the responses received from the Bank of Russia, NSD calculates net liabilities. NSD submits collection orders to the Bank of Russia for the amount of the net liabilities, up to the amount reserved in the correspondent account.
  • Cash funds in the correspondent account with the Bank of Russia are reserved up to the amount of available liquidity with consideration to the limits set by the clearing participant / clearing participant's client for NSD in the Bank of Russia's Payment System.
  • Cash funds are reserved in the correspondent account with the Bank of Russia for the duration of the clearing session only.
  • Upon receipt of a notice from the Bank of Russia confirming that the cash funds have been reserved in the correspondent account with the Bank of Russia, NSD takes the following steps to settle the trade:
    • where the clearing of the trade results in the clearing participant having liabilities, NSD submits a collection order to the Bank of Russia's Payment System to settle the liabilities using the cash funds reserved in the correspondent account with the Bank of Russia;
    • where the clearing of the trade results in a zero amount of net liabilities for the clearing participant, NSD submits a request to the Bank of Russia's Payment System to cancel the reservation of the cash funds in the correspondent account with the Bank of Russia;
    • where the clearing of the trade results in the clearing participant having claims, NSD submits a request to the Bank of Russia's Payment System to cancel the reservation (if a request for reservation was submitted earlier) and an instruction to credit the relevant amount to the correspondent account with the Bank of Russia.
  • No cash funds reserved for DVP-2/DVP-3 settlements may be used for DVP-1 settlements.
  • For the purposes of DVP-2/DVP-3 settlements, debit and credit transactions in correspondent accounts with the Bank of Russia may be executed during the settlement period of the Bank of Russia's regular session.
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