Alexander Nazarov's Update on Russia

Mon, 06/08/2012

This summer is indeed a hot season in the Russian securities market as so many important events have taken place or are being expected shortly.

Following the adoption of the CSD law, starting from July 1, 2012 foreign institutions can open a new type of account for the safekeeping of assets held on behalf of their clients under to certain conditions still under development: for example does the National Settlement Depository officially need to obtain the status of central securities depository in the market. In preparation for this the NSD is now gradually integrating with the Depository Clearing Company (DCC) to become the single service provider in the market by the end of this year. For this the NSD closely cooperates with market participants in order to achieve a smooth transition of services now supported by the DCC and will still be available for investors and market participants after the completion of the merger of the two depositories.

Notably, the USD DVP settlement model, which has been in good demand in the market for many years, will be carefully shifted to the NSD by the end of the year without interrupting service processes.

The possibility to open foreign nominee accounts at this stage raises more questions than it answers as investors need to understand what exactly their rights and obligations will be, how the transition will work and what the direct benefits are going to be. ZAO UniCredit Bank, being an active participant of the working groups and debates with the Federal Service for Financial Markets, is a solid supporter of a smooth transition process for investors and takes into account how nominee and omnibus account concepts are perceived in

Another recent development in the market is the liberalisation of government bonds trading, which can now be traded OTC and settled in foreign currency, and the introduction of income tax holidays for this type of instruments. By this the government expects to significantly increase the share of foreign investors in this segment of the market. Again, our clients will need our good care and advice on how to use the new opportunities for their best benefit.

Trading procedures will also be significantly changed with MICEX-RTS going for T+n as the predominant settlement mode for blue chip shares, with the introduction of CCP and a guarantee fund. With this in mind, I consider my recent election to the Stock Exchange Council of MICEX-RTS as a perfect opportunity to support our clients’ interests and expectations in the market evolution.

All these and many other exciting topics were discussed at the 9th annual Russian Securities Forum held in Moscow. The forum was co-sponsored by UniCredit and as usual gathered representatives of the securities industry as well as senior officials from the market regulators.

At my panel I had the opportunity to discuss with my colleagues from other custodial banks how the trading and settlement in the market will be handled in the future. My point was that the general trend will be trading in the local market against Roubles in line with the government‘s policy aimed at bringing trading with Russian securities back to Russia. Implementing this concept will depend largely on the possibility for local banks to support all our clients’ needs by high quality service and liquidity management, which will be growing. This is what UniCredit’s GSS team Russia is looking at as its primary goal.

I would like to thank our clients for their confidence and for seeing GSS Russia as their reliable partner in this challenging market and I am looking forward to a further expansion of our cooperation.

Yours sincerely,
Alexander Nazarov
CIS Regional Head
Head of Global Securities Services Russia