The widely discussed initiative for potential direct access of foreign nominee holders to the Russian CSD, NSD, has been legally approved.
On 3 August 2018 the Russian President signed Federal Law No 295, which introduced certain amendments to Federal Law No 414 on the Central Depository and to Federal Law No 39-FZ on the Securities Market. These amendments give the right to the National Settlement Depository to open direct foreign nominee holder (FNH) accounts for any foreign legal entity that in compliance with the laws applicable to it is entitled to register and transfer rights to securities. Prior to these amendments, FNH accounts could be opened only to ICSDs.
This new possibility for accessing the market could potentially change the role of subcustodians in the local market.
Under the direct access model, in case a foreign custodian opts for opening a direct account with NSD, it is expected that a local subcustodian will serve as operator of such account, which would eliminate the foreign custodian's risks of directly interacting with NSD and cater for the operational side of such interaction.
Impact on investors: Foreign custodians receive the possibility to open FNH accounts directly with NSD, as an alternative to the currently prevailing model of foreign custodians acting through local subcustodians.