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Russian CSD Sees Custody and Processing Volumes Grow in Q1

Russia’s central securities depository, the National Settlement Depository,  said in Q1 2020, the value of securities under custody reached RUB 50.9 trillion, a 10% growth as compared with the same period of 2019 (RUB 46.2 trillion). The number of foreign securities issues serviced by NSD grew 23% – from 13.1 thousand to 16.1 thousand. The value of the federal loan bond (OFZ) balances in foreign nominee accounts amounted to RUB 2.8 trillion; it demonstrated a 42% increase compared with Q1 2019 (RUB 2.0 trillion).

The total number of securities issues serviced by NSD grew 17% – from 20.6 thousand in Q1 2019 to 24.0 thousand in Q1 2020.

The number of inventory operations in the CSD increased 48% Y-o-Y and reached 1.3 million operations in Q1 2020 (compared with 865 thousand in Q1 2019), including 971 thousand exchange trade operations (+44%; 676 thousand operations in Q1 2019) and 309.5 thousand OTC trade operations (+63%; 189.8 thousand operations in Q1 2019).

The value of DVP OTC trades grew 146% and amounted to RUB 4.3 trillion (RUB 1.8 trillion in the same period of 2019).

The aggregate number of trades conducted with the use of the Linked transactions and Instruction prioritization services grew significantly to 13.9 thousand (996 trades in Q1 2019).

In a statement, the NSD said that, in line with the modernization of EDI channels and the migration to web technologies, NSD continues to work on transferring functionality from LUCH software and on optimizing client interactions. In Q1 2020, the Company began work on transferring non-standard document interchange between clients and the CSD to NSDirect Web Clients, and on converting depository reports into the new XML format.

Corporate Actions (CAs)

In Q1 2020, 668 meetings of securities holders were held using the E-voting technology. 55 corporate actions to repurchase shares and one corporate action to exercise the pre-emptive right to purchase shares were also initiated. In Q1 2020, the total value of repurchased shares reached RUB 4.7 billion.

The E-voting service was provided to clients of Surgutinvestneft, Russia’s largest regional registrar. Now, Surgutinvestneft’s clients can offer their companies’ shareholders to vote remotely at annual and extraordinary general meetings.  Currently, the E-voting service has been used at the meetings of shareholders of NLMK, Alrosa, Rostelecom, IC RUSS-INVEST, Sberbank, Rushydro, Gazprom Neft, and the Moscow Exchange.

In total, 3,482 corporate actions involving Russian securities were conducted in Q1 2020. It was 7% more than in the same period of the previous year (3,254 corporate actions in Q1 2019). In Q1 2020, the number of corporate actions involving foreign securities grew sharply due to the increase in the number of securities issues serviced by NSD (from 7,564 issues in Q1 2019 to 10,495 ones in Q1 2020). The growth amounted to 39%.

The total value of payments on corporate actions which involved Russian securities 30% increased – to RUB 4.7 trillion (against RUB 3.6 trillion in Q1 2019). The amount of payments on corporate actions involving foreign securities 70% declined and reached the sum equivalent to RUB 85.2 billion (RUB 281.2 billion in Q1 2019).

Collateral Management (CMS)

In Q1 2020, the value of Federal Treasury repos conducted via NSD’s CMS amounted to RUB 3 trillion (RUB 5 trillion in Q1 2019); repo contracts were concluded for longer terms (the average repo maturity increased from 7 to 23 days). In March, there was a sharp increase in the demand for liquidity due to high market volatility; the maturities of transactions were falling, and overnight trades prevailed.

In Q1 2020, the total volume of Bank of Russia repos reached RUB 779 billion (+305% as compared with Q1 2019). This was due in particular to the renewal of fine-tuning auctions in March 2020 to support the banking sector’s increasing demand for liquidity. NSD began the preparation to launch repos with a 1-month fixed rate and a 1-year floating rate.

The constituent entity of the Russian Federation – the St. Petersburg Committee of Finance – joined NSD’s platform that allowed to invest in repo transactions using NSD’s CMS. Since the launch in July 2019, the amount of liquidity placed in repos has remained stable. In Q1 2020, the aggregate amount of the Committee’s available funds placed via NSD’s CMS platform reached RUB 15 billion.

The Moscow Exchange Group’s Single Account service that was launched at the end of 2018 has been developing successfully. This service allows for the automated standard transfer of assets between client positions with NCC and NSD. Since the launch of the service, 23 clients have signed up for it, including issuers-credit organizations. In Q1 2020, the number of automatic transfers of assets using the Single Account service amounted to 1.3 thousand. The most popular feature is the automation of securities transfers after NSD’s clearing operations and of transfers of securities to trade securities accounts opened for clearing with NSD.

Repository

In Q1 2020, the activity of the Repository’s clients increased: the number of transactions registered with NSD’s Repository amounted to approximately 3.8 million or 21% more than in the same period of 2019 (3.1 million). The value of the registered transactions reached RUB 124.0 trillion; it was 3% more than in Q1 2019 (RUB 120.8 trillion).

A new fee model for Repository clients was prepared and approved by the NSD Customer Committee. The key objective of the change is to simplify fee schedules and harmonize them in line with European repository fee models. On 6 March 2020, NSD’s Supervisory Board approved the amended version of the Fees for repository services. The new fees will come into effect only on 1 September 2020 due to the financial market situation related to the COVID-19 pandemic.

NSD’s Repository set up its systems and made adjustments in its Format and Logical Control service related to extended reporting deadlines following the Bank of Russia measures to support citizens, economics and the financial sector during the COVID-19 pandemic. The deadline for submitting information on agreements (from 3 to 6 business days from the date of their conclusion, as required by Ordinance No. 4104-U) to the Repository was extended until 1 July 2020.

Information services 

In Q1 2020, the number of contracts concluded with information service users grew 10% Y-o-Y and reached 612 contracts. The Valuation Center demonstrated the highest increase in the number of clients: 225 users in Q1 2020 against 190 ones registered in Q1 2019.

Now, the NSD Valuation Center is the only fair value source officially accredited by the Bank of Russia. Every day, the NSD Valuation Center calculates the value of more than 1,350 exchange traded bonds and Russian issuers’ Eurobonds based on a new methodology and publishes information about prices for more than 1,900 instruments for reference. All estimations of fair values may be downloaded automatically; these data became available for viewing in the Valuation Center interface.

In January 2020, NSD provided its clients with the NSD DISC service option to view securities for which servicing had been discontinued. In February 2020, clients who used the NSD Valuation Center and NSD DISC services were provided with My Portfolio, a new service that reduced the time required to find and monitor necessary information.  It allowed users to set up a list of securities and upload necessary data. That way, clients can form their “portfolios” – sets of parameters allowing to manage their assets more effectively.

In March 2020, NSD began publishing data about the share of non-resident investments in federal loan bonds (OFZ). Every day, data related to certain issues are available to the public in accordance with information about balances in accounts with NSD. This information can be used to analyze global investors’ positions in Russian government ruble-denominated debt securities.

Payment and Settlement System 

In Q1 2020, the value of ruble transfers grew 13% and reached RUB 67.9 trillion (RUB 60.3 trillion in Q1 2019). In Q1 2020, there was a 10% increase in the amount of cash transfers – to RUB 11.8 trillion (compared with RUB 10.7 trillion in Q1 2019).

The number of client transactions amounted to 334 thousand; this was 26% more than in Q1 2019 (264 thousand).

In January 2020, NSD announced the beginning of a promotional period for the PVP service. The cost of the service reduced from 10.5 to 3 units per 1 million. The promotional period will continue until the end of 2020.

National and Substitute Numbering Agency, and the accredited Local Operating Unit (LOU) 

NSD is the first and only company in Russia and the CIS countries that has received an accredited LOU status. This is a permanent status, which replaced the temporary one (pre-LOU). It confirms NSD’s compliance with GLEIF’s regulatory and technological requirements for an organization which assigns and maintains LEIs.

In Q1 2020, NSD assigned 19 new LEIs and verified 118 LEIs. LEIs assigned by NSD are recognized by regulators, market participants, and LOUs of other countries.

NSD continues to act as Russia’s Numbering Agency and as the substitute numbering agency for CIS countries, assigning ISINs, CFIs, and FISNs.

In Q1 2020, NSD assigned 344 ISINs, CFIs and FISNs to Russian financial instruments, and qualified 2,244 foreign securities.

IT services

As systemically important infrastructure, NSD gives particular attention to developing a reliable IT platform, implementing partnership programs, and ensuring a high level of information security.

In Q1 2020, the total number of SWIFT service bureau users reached 71 companies. The Service Bureau clients’ average monthly traffic increased 76% compared with the same period in 2019 and reached 510 thousand messages per month.

NSD continues to scale the Transit 2.0 platform, an IT solution that helps corporate clients unify the financial message exchange with their banks. At the end of February 2020, as part of the digital transformation of the treasury function of the Rosseti Group of companies, IDGC of Center and Volga Region, Rosseti’s subsidiary located in Nizhny Novgorod, Russia, conducted pilot transactions with Gazprombank and Sberbank via NSD’s Transit 2.0 platform.

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