Russias Federal Financial Markets Services has granted Euroclear Bank access to the National Settlement Depository to offer post-trade services for Russian OFZs, one of the most actively traded classes of Russian government bonds.
Euroclear Bank will also be able to offer services for other Russian government and municipal bonds, corporate bonds and securities issued by foreign entities.
The availability of Euroclear Banks services for OFZs and other securities is dependent upon Russian public authority approval of National Settlement Depository (NSD) as Russias official central securities depository, and related regulatory procedures. Plans for Euroclear Banks OFZ and other Russian fixed-income securities services include cross-border transaction processing, asset servicing and collateral management.
Frederic Hannequart, chairman of Euroclear Bank, said: The bilateral NSD/Euroclear Bank link aims to provide the highest level of asset protection for clients using the service. OFZ and other Russian fixed-income trades will be able to settle with Euroclear Bank; settlement risk should decline as settlement finality will be based solely on the National Settlement Depositorys records.
Eddie Astanin, CEO of Russias National Settlement Depository, commented: Client abilities to conduct cross-border transactions in accounts opened with our organizations means increased transparency and, as a consequence, improved attractiveness of the Russian market for global investors. We expect this step will have a positive impact on exchange activities of Russian issuers, where they will reach a greater pool of national and foreign investors.
NSD has links with CSDs/ICSDs in seven countries. Upon launch of the link with NSD, Euroclear Bank will have links with CSDs in 45 major countries. The Russian rubble is already one of 54 settlement currencies in Euroclear Bank.
Russian on-exchange equity market capitalization increased by 7.8% in the first half of 2012, reaching the equivalent of $539 billion. Total Russian debt outstanding is valued at $302 billion of which 58% are government bonds, with the remainder in exchange bonds, corporate and regional bonds.
Euroclear and NSD (formerly known as The National Depository Center – NDC) signed a Memorandum of Understanding in 2007, laying the foundation for information sharing and potential future co-operative initiatives. Both organizations specifically agreed to explore collaborative opportunities in the fields of clearing and settlement in the Russian market.
Beset by several delays, the significant development signals Euroclears focus on the next chapter of its internationalization strategy, as set out by CEO Tim Howell in a recent interview with Global Custodian. The ICSD in March announced it has been planning a link with the NSD. Initially, there was a feeling by some that the Russian market was not ready for an ICSD to add another dimension to the cross-border business in Russia and might actually withdraw some liquidity, said Howell. “These concerns have since abated. It is very likely that Euroclear Bank will gain the necessary regulatory approvals to make Russian OFZs and other Russian debt securities euroclearable.
(JDC)