Russias Federal Financial Markets Service (FFMS) has granted the National Settlement Depository (NSD) status as a central securities depository, giving Russia a CSD for the first time.
The creation of a CSD in Russia has been planned for a number of years, with NSD expected all along to fill the role. Part of that plan saw Russias two main exchanges, MICEX and RTS, merge in August last year, and NSD and the Depository Clearing Corporation (DCC), the respective depositories of the two exchanges, merge in April this year. NSD has been absorbing the activities of DCC throughout the year.
The Moscow Exchange Group, the official name of the merged exchange group, says creation of the CSD will increase transparency of securities ownership, improve efficiency and give international investors easier access to Russian securities.
Importantly, some of the worlds largest investors U.S.-registered funds should have an easier time investing in Russia as they ostensibly may now deposit securities at NSD; Securities and Exchange Commission (SEC) Rule 17f-7 bars registered funds from using non-regulated CSDs. Instead, to invest in Russia their custodians have had to hold securities at any number of the dozens of registrars around the country.
The CSD is expected to enhance liquidity and lower settlement costs while ensuring that all market participants operate on the same post-trading platform, the Moscow Exchange Group says.
Earlier this week FFMS began permitting foreign custodians to open foreign nominee holder accounts with Russian custodians. Now, foreign central depositories also will now be able to open nominee accounts with Russia’s CSD.
Federal, sub-federal, municipal and corporate bonds of Russian issuers will be covered by the links with International Central Securities Depositories (ICSDs) by the end of 2012, according to the Moscow Exchange Group. Euroclear and Clearstream both have said they will link to NSD.
Alexander Afanasiev, CEO of Moscow Exchange Group, says the establishment of the CSD is a milestone event for Russias financial markets.
It is one of the key elements of guaranteeing rights of both Russian and international market participants and providing comfort to all categories of investors given it is in line with international best practices, Afanasiev says. The creation of a CSD is one the most important reforms the Moscow Exchange is executing in partnership with market participants, regulators and legislators. Other key reforms include changes to the listing rules, the introduction of settlement in T+N and creating a single family of indexes. These are the necessary elements of a modern, competitive exchange infrastructure and their implementation make the entire Russian financial market more attractive.
Eddie Astanin, chairman of the NSD Executive Board, adds: “Throughout 2012 the NSD team has worked hard to make way for todays event by uniting the Russian settlement infrastructure under the NSD brand, building a strong team of professionals, and introducing changes to the regulatory, technological, and operational aspects of our business. We thank our shareholders, Supervisory Board and clients for their strong support.”
(CG)