National settlement depository activities
In 2016, assets deposited with the NSD saw a 15% YoY increase and totalled RUB 36.4 tn at year-end. The number of foreign securities under custody almost doubled to 5,100 with a total value of USD 79.1 bn at year-end.
The key event of the year was the successful placement of a USD 3 bn Eurobond issue by Russia’s Ministry of Finance, where NSD acted as the Head Depository. The Finance Ministry publicly stated that the offering was a success and announced its plans to further leverage the NSD’s platform in the future.
Corporate Actions Reform
Starting from 1 July 2016, key provisions of the corporate actions reform went into effect, namely:
- NSD’s status as official corporate information source;
- a new approach to drawing up lists of securities holders;
- a new procedure for exercising securities holders’ rights in the course of corporate actions in a centralised manner through the safekeeping system;
- new methods for participating in general meetings of securities holders, namely, e-proxy voting through a securities depository or e-voting online.
In 2016, the NSD successfully processed around 15,000 corporate events. Over 3,200 shareholder meetings were held using the e-proxy voting technology based on ISO 20022. During the reporting period, approximately 7,900 corporate actions involving foreign securities were held, up 50% year-on-year.
In 2016, the NSD completed the key phase of implementing its e-voting service. As part of the e-voting project to identify securities holders, Russia’s Ministry of Telecom and Mass Communications approved the NSD’s integration with the online identification service.
In 2016, the NSD’s Repository was the first in Russia to receive a license for repository operations from the Bank of Russia.
In 2016, the number of trades registered with the NSD’s Repository reached 2.4 mn (compared to 454,000 in 2015), with the total volume amounting to RUB 403.7 tn (compared to RUB 441.3 tn in 2015).
The Repository 2.0 project was completed. Its key objectives were to migrate clients to dedicated software for transaction reporting, to facilitate reporting procedures, to abandon hard copy proxy forms and to migrate to a custodian fee model, where the payer is the message sender. A number of new services were launched, including format and logical verification, automated termination of contracts and provision of non-standard data from the contract register.
In 2016, the aggregate value of repo transactions serviced by the NSD collateral management system amounted to RUB 47.3 tn (compared to RUB 46.4 tn in 2015). Federal Treasury repo transactions with the NSD collateral management system more than doubled to exceed RUB 37.4 tn. The NSD collateral management system is used by 192 market participants.
In 2016, the NSD successfully launched the nsddata.ru web resource. As part of this service, a Corporate Information Centre news feed was established, a Securities section offering free access to basic information about securities serviced by the NSD was launched and an API data service was introduced.
The NSD also established a Valuation Centre by approving the composition of its Expert Council and its fair value analysis methodology. An accreditation procedure with the Bank of Russia was successfully initiated. During 2016, the number of Valuation Centre users more than doubled, reaching 53. The Centre has effectively utilised expanded distribution channels, widening its geographical footprint to cover the USA, the UK, Hong Kong, India and Singapore.
In 2016, the amount of money transfers remained flat year-on-year at RUB 355 tn.
In 2016, the NSD launched a new service to process cross-currency settlements: payment versus payment (PVP-1), which enables a participant’s cash transfer in one currency only if the participant’s cash transfer in another currency takes place at the same time, which makes settlements more reliable.
In 2016, the NSD pioneered a blockchain-based technology, a prototype for the e-proxy voting system to be used at meetings of bondholders. The project was nominated for the Futures & Options World International Awards and Banking Technology Awards.
The NSD and Strate, South Africa’s central securities depository, announced a consortium to develop fintech solutions for central depositories. The project involves experts from NASDAQ, the DTCC and SIX. The consortium also sparked interest from the CSD, China’s central securities depository.
The NSD signed memorandums of understanding with the China Securities Depository and Clearing Corporation Limited (CSDC), the central depository providing equities-related services and supporting Shanghai-Hong Kong Stock Connect, as well as with Shanghai Clearing House, which provides bond clearing services for the Chinese interbank bond market and acts as a central counterparty clearing house. In addition, the NSD set up a direct channel between the Russian and Chinese markets via a partnership with China Central Depository and Clearing Corporation Limited (CCDC), which settles OTC-traded government bonds.
The NSD also signed a memorandum of understanding with the Egyptian central depository and opened an account with the central depository of Georgia.
Thomas Murray Data Services, the specialist custody rating, risk management and research firm, maintained NSD’s rating at AA-, which translates as a very low-risk exposure profile with a stable outlook. The outlook for the asset servicing risk was improved to positive due to the corporate actions reform introduced by the NSD.
ollowing an independent third-party review, Thomas Murray Data Services also validated the NSD’s observance of the CPMI-IOSCO Principles for Financial Market Infrastructures.