NSD Announces Q1 2018 Results

• The value of securities under custody reached RUB 41.7 trillion
• The value of OFZ balances in foreign nominee accounts increased 31% and amounted to RUB 2.3 trillion
• NSD was accredited as Local Operating Unit (LOU)
• NSD launched the service for opening individual accounts with ICSDs

Central Securities Depository (CSD) services

In Q1 2018, the value of securities under custody reached RUB 41.7 trillion – this was a 18% increase as compared with the same period of 2017 (RUB 35.2 trillion). The number of foreign securities issues serviced by NSD grew 64% – from 5.8 thousand to RUB 9.6 thousand.

The value of balances of Federal Loan Bonds (OFZ) in foreign nominee accounts amounted to RUB 2.3 trillion – this was a 31% increase compared with Q1 2017 (RUB 1.8 trillion).    

The total number of securities issues serviced by NSD grew 32% - from 12.7 thousand in Q1 2017 to 16.8 thousand in Q1 2018.

In the first quarter of 2018, one more company – AMC Sistema Capital - joined the centralized platform for record keeping and distributing UIT units developed by NSD together with NAUFOR. To date, eight brokerage companies (nominees) and seven asset management companies use the platform.

The number of inventory operations in the CSD increased 12% Y-o-Y and reached 798 thousand operations in Q1 2018 (compared with 714 thousand in Q1 2017), including 603 thousand exchange trade operations (+8%; 559 thousand operations in Q1 2017) and 196 thousand OTC trade operations (+26%; 155 thousand operations in Q1 2017).

In Q1 2018, the volume of DVP transactions grew to RUB 1.9 trillion; this was 32% more than in Q1 2017 (RUB 1.5 trillion).

There was a stable interest of NSD’s clients in using the new services (linked transactions and instruction prioritization). In Q1 2018, the total number of operations involving these services amounted to 1,555.

NSD implements its strategy for building a high-tech infrastructure at the international level: in Q1 2018, NSD launched a new service – opening individual accounts with ICSDs. Individual accounts intended for settling via ICSDs will let clients segregate their assets and will provide them with additional options for conducting settlements via ICSDs.

In Q1 2018, two commercial bond programs in a total maximum amount of RUB 510 billion and 7 commercial bond issues in a total amount of RUB 0.46 billion were registered. Five commercial bond issues for a total sum of RUB 0.15 billion were completed.

Corporate Actions (CAs)

In Q1 2018, 650 meetings of security holders were initiated using e-proxy voting and e-voting technologies. 70 repurchases of shares and 5 corporate actions to exercise the pre-emptive right to purchase shares were also initiated. In Q1 2018, the total value of repurchased shares reached RUB 25 billion.

Totally, 3,153 corporate actions involving Russian securities were conducted in Q1 2018; this was 7% more than in the same period of the previous year (2,941 actions). In Q1 2018, the number of corporate actions involving foreign securities grew significantly due to the increase in the number of securities issues serviced by NSD (from 2,148 issues in Q1 2017 to 5,029 ones in Q1 2018) and reached the highest growth level –134%.

In Q1 2018, there was a considerable growth in yields paid and repayments on securities made via NSD. The amount of payments on Russian securities increased by 43% from RUB 2.8 trillion in Q1 2017 to 4 trillion in Q1 2018; this was mostly attributable to overnight bond repayments. The amount of payments on foreign securities increased 66% to RUB 318 billion (as compared with RUB 191 billion in Q1 2017).

The Collateral Management System (CMS)

In Q1 2018, against the background of the increasing liquidity surplus, the value of repo transactions which the Federal Treasury performed using NSD’s collateral management system reached RUB 1.1 trillion, and the  value of repo transactions with the Bank of Russia performed using NSD’s CMS was RUB 73 billion.

The number of the OTC repo market participants who signed up for NSD’s CMS service grew to 45 companies.

In Q1 2018, NSD launched a new service – Liquidity Management – allowing to re-distribute funds automatically between NSD’s and NCC’s clearing operations in trade bank accounts. The company also implemented the automatic selection of securities for NCC’s clearing operations.

Repository

During the reporting period, the number of trades registered with NSD’s Repository exceeded 2.8 million (compared with 2.4 million in Q1 2017). The value of the transactions was 3% less than in the same period of 2017 – RUB 100.4 trillion (RUB 103.3 trillion in Q1 2017).

In Q1 2018, the top 3 instruments of registered transactions included:

The top 3 instruments in terms of the volume of reported transactions included (RUB trillion):

Despite the increase in the number of reports submitted, the Repository’s formatting and logic check (FLC) service which was launched in 2017 led to a substantial improvement in the quality of information sent by clients to NSD’s Repository. There was a significant reduction of the number of messages canceled due to reports submitted by clients with a delay of more than 3 business days: from 1,982 in Q1 2017 to 7 messages in Q1 2018.

Information Services

In Q1 2018, the number of contracts concluded with information service users grew 16% and reached 454 contracts. The highest growth of the number of users was demonstrated by NSD’s Valuation Center; the number of its users doubled as compared to Q1 2017.

In Q1 2018, NSD completed the most part of work on the Single Disclosure Window technological platform. The Interfax news agency and major Russian issuers began testing the platform. In Q3 2018, Single Disclosure Window services will be available to the wide community of issuers.

NSD’s Supervisory Board approved the new version of the Valuation Center’s fee model due to the implementation of new methodology and products for calculating fair values of financial instruments. Meanwhile, it was decided not to change fees for existing services. In Q1 2018, the Valuation Center began calculating values of mortgage securities based on the methodology developed by NSD and the Agency for Housing Mortgage Lending (AHML). The service for calculating values of mortgage securities will be put into commercial operation in May 2018. 

In 2018, NSD plans to implement a few RegTech solutions which allow improving technologies for generating mandatory reports submitted by Russia’s financial market participants. In Q1 2018, NSD implemented a new functionality in the API NSD, a source of reference data on issuers, for viewing and uploading information required to determine the circulation of securities on the Moscow Exchange, and developed the prototype of products for generating the Form 711. On 1 March 2018, the API NSD system incorporated the Bank of Russia’s reference data required for generating reports on form OKUD 0420415 (Report on Securities Submitted by a Professional Securities Market Participant (for professional participants)) and on form OKUD 0409711 (Report on Securities (for credit organizations)

As part of the Bank of Russia’s activities for introducing XBRL reporting standards in the Russian market, NSD began testing complex solutions together with IT companies which implement XBRL solutions on the 1С platform.

Payment and Settlement System

NSD is Russia’s largest settlement non-banking credit organization in terms of the scale of settlement operations, capitalization, and the number of serviced participants in financial markets; it is also a nationally important payment system.

In Q1 2018, the value of money transfers reduced by 23% and reached RUB 72.9 trillion (compared with RUB 94.2 trillion in Q1 2017). The number of these transactions reached 276 thousand – this was 3% more than in the same period during the previous year (268 thousand).

In Q1 2018, NSD added Hong Kong dollars, Chinese renminbi, Swiss francs, and British pounds to its basket of currencies for converting into US dollars and/or Euro. The conversion is available for payments made as part of corporate actions using client bank details or based on a client’s special instruction.

In Q1 2018, NSD improved the client interaction channel by way of API, an online banking service. Now, clients may directly connect their software to NSD’s payment services in real time without using a special process for transmitting messages via the automated online Web Client; this allows reducing costs and saving time required for the interactions. Web Client users may access the API system for free and to exchange XML messages based on the ISO 20022 standard.

National and Substitute Numbering Agency and pre-Local Operating Unit (pre-LOU)

On 5 January 2018, National Settlement Depository successfully passed all stages of the accreditation process of the Global Legal Entity Identifier Foundation (GLEIF) and received the certificate confirming NSD’s accreditation as Local Operating Unit (LOU). To date, NSD is the first and the only accredited LOU in Russia and CIS countries. This is the permanent status which has replaced the temporary one (pre-LOU) which verified NSD’s compliance with CLEIF’s regulatory and technological requirements.

In Q1 2018, NSD assigned 50 new LEIs and verified 104 LEIs. LEIs assigned by NSD are recognized by regulators, market participants, pre-LOUs, 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 and CFIs.

In Q1 2018, NSD assigned 614 ISINs, CFIs and FISNs to Russian financial instruments and 21 respective codes to financial instruments of CIS countries. In Q1 2018, the number of qualified foreign securities amounted to 1,800 securities.

In Q1 2018, NSD as the substitute numbering agency for CIS countries began assigning international codes to Moldovan issuers’ securities and sending the codes to the international database of the Association of National Numbering Agencies (ANNA). Pursuant to ANNA’s regulatory requirements, NSD assigns not just ISINs but also CFIs and FISNs to Moldovan financial instruments.

Technological services

NSD as the central link of the financial market pays special attention to the development of the reliable IT platform and partner programs, and ensures the high level of information security.

In Q1 2018, the total number of SWIFT service users provided by NSD’s SWIFT Service Bureau reached 63. The Service Bureau clients’ average daily traffic increased 78% compared with the same period of 2017 and reached 14,615 messages per day.

NSD announced the development of the Transit 2.0 platform allowing banks and corporations to exchange financial messages. The new project will facilitate interactions between corporate clients and settlement banks focused on the receipt and delivery of payment documents.