Clearstream to connect Ukraine market to ICSD network

Clearstream has partnered with Citi to act as its local account operator giving Ukrainian government bonds access to its ICSD network.

By Joe Parsons

Clearstream is planning to link up the Ukrainian market to its international central securities depository (ICSD) network, with Citi acting as its local account operator.

Ukrainian government securities will be eligible on the ICSD system from the end of May, with Citi acting as the cash correspondent bank and local operator of Clearstream’s account with the National Bank of Ukraine (NBU).

This will enable settlement of all government bonds denominated in the local currency through the international system of Clearstream, improving efficiency at international standards while reducing costs for investors.

The joint initiative with Citi could help increase demand for Ukrainian bonds, boosting liquidity and their attractiveness in the international market.

“Being able to enter emerging markets via a stable post-trade environment is very attractive to investors all over the world. Ukraine as part of our global network creates various new investment and financing opportunities for the market,” said Jen Willems, head of global markets, Clearstream.

Foreign investors’ holdings in Ukrainian domestic government bonds exceed $1.5 billion in 2018.

Establishing international clearing and settlement links with ICSDs are one way emerging markets can increase liquidity in their domestic sovereign bond markets.

Research from PwC suggested certain emerging markets could see an increase in GDP of $13.4 billion over 10 years through ICSD links.

Last week Euroclear, Clearstream’s ICSD rival, said it expects exchanges in Asia, the Americas and Middle-East to adopt its ICSD settlement structure for exchange traded funds (ETFs), after the model was adopted by exchanges in Mexico and Hong Kong.