Clearstream to Settle Russian Corporate Bonds and Works With Euroclear to Open Bridge

Clearstream will offer settlement for Russian corporate bonds via its direct link to the Russian CSD, the National Settlement Depository (NSD).
By Janet Du Chenne(59204)
Clearstream will offer settlement for Russian corporate bonds via its direct link to the Russian CSD, the National Settlement Depository (NSD).

The ICSD currently offers settlement for municipal bonds and joins Euroclear, who last week launched its offering for the settlement of corporate and municipal bonds via a direct link with NSD, as settlement agent for foreign investment in Russia.

Clearstream and Euroclear are also working on opening the bridge – an interoperability link that allows customers to easily settle transactions between the two ICSDs – in Russia. Work on the extension is in response to customer demand to open the market up to global investors by upgrading the market infrastructure to make it easier for a Clearstream counterparty, which is a Euroclear customer, and vice versa to transact in the local market. The ICSDs have set up the bridge in around 30 domestic markets. Clearstream said the introduction of settlement for corporate Russian bonds, coupled with a firm commitment to establish the bridge between the ICSDs in the Russian market will help further develop the market infrastructure needed to offer investors and issuers an enhanced offering in the Russian capital market.

The two ICSDs currently have the daytime and nighttime bridge between them to facilitate efficient settlement across various markets. In addition they are have discussions about opening the bridge for individual domestic markets depending on regulatory requirements and whether they are present as ICSDs. “For Russia, regulatory constraints delayed discussions about the opening of the bridge, however the amendment in the securities law at the end of last year allows for start of those discussions,” explains Irene Mermigidis, head of Network Management at Clearstream. “What will this bring to the Russian market but also to our customers is an increased liquidity capacity at the secondary market level as well as offer foreign investors access to Russia.

“We will work for the next few months on the new service for corporate bonds and in the meantime define, along with Euroclear, the operational procedures for opening the bridge.”

Illustrating the increased foreign investor appetite in the Russian market, the share of foreign investment in OFZ government bonds has gone up by circa 25%, according to the Bank of Russia, since the establishment of new financial market infrastructure in Moscow.

As a next step, Clearstream will look to offer settlement for equities via its direct link to the NSD, due for summer 2014, in line with expected changes to Russian securities law. It currently settles equities in Russia via its indirect link to the NSD, through Clearstream’s local agent bank, Deutsche Bank Moscow.

Sergey Shvetsov, first deputy governor of the Bank of Russia, Head of the Bank of Russia Financial Markets Service, said: “Access to the corporate bonds market granted to Clearstream is a great event for the Russian market. Entry of international clearing and settlement organizations to the OFZ market already provided a positive impact by decreasing the cost of borrowings for the government. Now we continue our commitment to open access to the stock market for ICSDs on the 1st of July 2014. We are considering Clearstream’s access to the corporate bonds market as an indicator of our successful work in collaboration with NSD and international infrastructural organizations.”

Eddie Astanin, chairman of the Executive Board, National Settlement Depository, commented: “The established links between the NSD and leading international securities depositories is a positive sign of the progress made, both in legislation and infrastructure, of the Russian post- trading services market. There is still a long way to go. We have to improve accessibility of corporate actions information, develop new products like collateral management and serve investors from around the world in line with best practice. We believe that today’s launch is another big step in establishing Moscow as one of the global financial centers.”

Clearstream has offered services to the Russian market to customers since 2006, including government bonds (OFZ) since January 2012 via its indirect link to the Russian CSD.

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