Russia’s NSD makes new steps in bond market liberalisation

Russian non-banking financial organisations have now gained easier access to the foreign securities market through Russia’s National Settlement Depository (NSD).

NSD’s non-banking clients, including asset management companies, brokerages and investment funds, can now conduct settlement operations in the local debt market with bonds denominated in foreign currencies.

Previously, these companies could only conduct foreign currency operations in the over the counter (OTC) trading market.

The move was encouraged by Vnesheconombank and Moscow Exchange in response to market demand.

Several Russian corporations have issued bonds denominated in US dollars in the past three years.

Vnesheconombank was one of them. It made the foray in February, placing US dollar denominated Eurobonds on the domestic market.

Demand for these bonds outstripped supply threefold, gathering $1.5bn for bonds with a nominal value of $500m from 32 Russian and foreign investors.

Alexander Ivanov, deputy chairman of Vnesheconombank, said: “Lifting restrictions on trading this instrument for non-banking financial organizations is clearly a positive step. Foreign currency bonds and currency swap instruments developed in the Russian market, represent new opportunities for all types of investors.”

The total value of foreign currency bond issues registered in the Russian market currently stands at $4.36bn.

Yekaterina Novokreschenykh, managing director for primary market formation, Moscow Exchange, added: “We think that we will attract Russian investors’ attention to foreign currency bonds and generate a liquid secondary market.”

The announcement marks one more step in the liberalization of Russia’s debt market, which will take place when Russia begins trading its debt through Euroclear and other international settlement houses.

Euroclear has already been approved to handle these transactions, but to make this possible NSD must gain central depository status.

The approval of this by the Federal Financial Markets Service (FFMS) is just around the corner, as NSD submitted all the necessary paperwork earlier this month.

This development is set to open up the local market to foreign investors and increase liquidity, making it far easier for foreign investors to trade local bonds.

NSD has been preparing for its accession to central depository status for the past few months by forming international agreements with foreign data providers.

Having recently signed an information exchange agreement with Six Financial Information, it has now formed a similar agreement with SWIFT services, which will see the two organisations exchange data and reporting.

Eddie Astanin, chairman of the board of NSD, said: “Currently we are working on establishing a trade repository in the Russian OTC derivatives market. Collaboration with SWIFT, which has extensive experience in similar initiatives, will be useful to us and our clients.”

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