1 Russian Depository System: modern theory, practice and trends. Adamova Karina Ph.D.(Economics) Finance Academy, Moscow E-mail: adamova karina@rbcmail.ru. - презентация

1 1 Russian Depository System: modern theory, practice and trends. Adamova Karina Ph.D.(Economics) Finance Academy, Moscow

2 2 Contents: 1. Regulation basis and the structure of the Russian depository system. 2. Custody services and depository operations of the banks 3. The last trends on this market

3 3 1. Regulation basis and the structure of the Russian Depository System. Russian State Regulation of the Depository System is based on: Civil Code Civil Code Securities market Act Securities market Act Legal acts of the main state regulators of Legal acts of the main state regulators of the securities market the securities market

4 4 Main Regulators on the Depository Services Market Ministry of Finance Ministry of Finance Federal Financial Markets Service (previously it was Federal commission for securities market) Federal Financial Markets Service (previously it was Federal commission for securities market) Central Bank of Russia Central Bank of Russia PARTAD (The Professional Association of Registrars, Transfer Agents and Depositories) PARTAD (The Professional Association of Registrars, Transfer Agents and Depositories)

5 5 The Structure of the Russian Depository System Depository 1 Custodian 1 st level Custodian n level Investor Custodian 1st level Custodian n level Investor Depository 3 Custodian 1st level Custodian n level Investor Custodian 1st level Custodian n level Investor Depository 2 Custodian 1st level Custodian n level Investor Custodian 1st level Custodian n level Investor

6 6 The Main Functions of the 1 st Level Depositories are: Theory: Theory: Accounting and custody of securities Accounting and custody of securities Securities settlements Securities settlements Informational and administrative functions in case of securities operations Informational and administrative functions in case of securities operations

7 7 World Practice: World Practice: Accounting and custody of securities Accounting and custody of securities Securities settlements Securities settlements Paying dividends or other incomes on securities Paying dividends or other incomes on securities Monitoring the Issuers corporate actions Monitoring the Issuers corporate actions Calculating the value of clients securities portfolio (optional) Calculating the value of clients securities portfolio (optional) Tax management (optional) Tax management (optional) Informational services Informational services Banking services Banking services Crediting with securities (optional) Crediting with securities (optional) Clearing (optional) Clearing (optional) Russian Practice: Russian Practice: Accounting and custody of securities Accounting and custody of securities Securities settlements Securities settlements Paying dividends or other incomes on securities Paying dividends or other incomes on securities Monitoring the Issuers corporate actions Monitoring the Issuers corporate actions Informational services Informational services Clearing (optional) Clearing (optional) The Main Functions of the 1st Level Depositories are:

8 8 2. Custody services and depository operations of the banks Basic services: Basic services: Holding the certificates of the documentary securities and accounting securities rights. Holding the certificates of the documentary securities and accounting securities rights. Intermediary services in paying all kinds of securities incomes. Intermediary services in paying all kinds of securities incomes. Informing clients in case of Issuers corporate actions. Informing clients in case of Issuers corporate actions. Global corporate operations in case of Issuers corporate actions Global corporate operations in case of Issuers corporate actions Securities settlements. Securities settlements. Accompanying services: Accompanying services: Holding clients monetary accounts intended for settlements under the securities operations and receiving dividends and interests paid on securities. Holding clients monetary accounts intended for settlements under the securities operations and receiving dividends and interests paid on securities. Checking the securities certificates for authenticity, their collection and transportation. Checking the securities certificates for authenticity, their collection and transportation. Acting in the name of the client on the annual shareholders meetings. Acting in the name of the client on the annual shareholders meetings. Informational services on the securities market. Informational services on the securities market. Monitoring the Issuers corporate actions, informing and supporting clients. Monitoring the Issuers corporate actions, informing and supporting clients. Banking services Banking services Calculating the value of clients securities portfolio Calculating the value of clients securities portfolio Other services based on securities operations. Other services based on securities operations.

9 9 Classification of the Depository Operations of the Bank Administrative Opening accounts; Closing accounts; Changing clients information; Canceling clients orders. Inventory Individual: Posting securities on the account; Securities withdrawal; Securities transfers; Securities moving; Securities blocking. Global: Split; Consolidation; Securities conversion. Informational Issuing account statements and client reports.

10 10 Banks Depository Rules Operational Depository Rules Depository Agreement Clients Rules Clients Orders and Reports Operational Rules Administrative Orders and Reports

11 11 Top 8 Safest Custodian Banks as at Custodian MarketVol ume, mln. USD Capital, mln. USD Insurance covering, mln. USD Safety Rate, % 1 Sberbank of Russia ,35 2Alfa-Bank ,08 3Rosbank ,99 4 ACB Soyuz ,04 5 International Moscow Bank ,71 6Citybank ,3 7Vnesheconombank ,04 8Gasprombank ,27

12 12 3. The last trends on the market Current situation on the market. Current situation on the market. Central Depository of Russia. Central Depository of Russia. Securities accounts of Global Custodians and Settlement Organizations holding with Russian Custodians. Securities accounts of Global Custodians and Settlement Organizations holding with Russian Custodians. Integration processes between the post-soviet countries. Integration processes between the post-soviet countries.

13 13 Total securities market capitalization as at was mln. USD Total securities market capitalization as at was mln. USD The number of depositories in Russia as at was more than 700 The number of depositories in Russia as at was more than % of the market volume of securities were served by 10 largest depositories (see below table) 80% of the market volume of securities were served by 10 largest depositories (see below table) Market Statistics

14 14 Top 10 Depositories which served the largest volume of securities up to DepositoryStatus Market Volume, mln. USD 1 ING Bank (Eurasia) Bank National Depository Center Depository GasprombankBank Depository-Clearing Company Depository Settlement-Depository Company Depository VnesheconombankBank CitybankBank Garant SDK Custodian/Special Depository Pekoinvest Investment company Central Moscow Depository (JSC) Custodian/Special Depository Total volume

15 15 Wide diversity of depository technologies on the securities market without any unifications is the main reason of non-effective corresponding relations, Wide diversity of depository technologies on the securities market without any unifications is the main reason of non-effective corresponding relations, Insufficient structure of Depository System: unlimited number of levels of corresponding depositories relationships is the main reason in troubles of identification of the securities owner/real investor, Insufficient structure of Depository System: unlimited number of levels of corresponding depositories relationships is the main reason in troubles of identification of the securities owner/real investor, Securities regulation needs significant changes in case of market demand and especially in case of integration in international financial market. Securities regulation needs significant changes in case of market demand and especially in case of integration in international financial market. Three main problems of Russian Depository System:

16 16 New Model of The Structure of the Russian Depository System 1 st level Central Depository 2 nd level Custodian 3 rd level Custodian Investor 2 nd level Custodian 3 rd level Custodian Investor 2 nd level Custodian 3 rd level Custodian Investor

17 17 Integration processes between the Depository Systems of post-soviet countries 2000 – Establishment of the International Association of Exchanges of CIS Countries – Establishment of the International Association of Exchanges of CIS Countries – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Toshkent – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Toshkent – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Almaty – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Almaty – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Baku – International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Baku –International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Moscow –International Congress Integration of Depositories Systems – is the basis of the effective cooperation on the international securities market, Moscow. 22 nd December 2004 – First Conference of the Association of Eurasia Central Depositories. 22 nd December 2004 – First Conference of the Association of Eurasia Central Depositories.

18 18 Association of Eurasia Central Depositories. Association – is a professional organization which activity is concentrated on the evolution of the national financial markets, on the unification of the legal regulation and the principles of structuring national depositories systems. Association – is a professional organization which activity is concentrated on the evolution of the national financial markets, on the unification of the legal regulation and the principles of structuring national depositories systems.

19 19 Members of the Association: Members of the Association: State Central Securities Depository of the Republic Uzbekistan, State Central Securities Depository of the Republic Uzbekistan, JSC Depository-Clearing Company (Russian Federation), JSC Depository-Clearing Company (Russian Federation), Non-for-profit Organization National Depository Center (Russian Federation), Non-for-profit Organization National Depository Center (Russian Federation), PLC Interregional stock union (Ukraine), PLC Interregional stock union (Ukraine), National Depository of Ukraine, National Depository of Ukraine, National Securities Depository of Moldova, National Securities Depository of Moldova, JSC National Depository Center (Azerbaijan), JSC National Depository Center (Azerbaijan), Republican Unitary Enterprise Republican Central Securities Depository (Republic Belarus), Republican Unitary Enterprise Republican Central Securities Depository (Republic Belarus), PLC Central Securities Depository of Georgia PLC Central Securities Depository of Georgia JSC Central Securities Depository (Kazakhstan), JSC Central Securities Depository (Kazakhstan), JSC Central Depository (Republic Kyrgyzstan). JSC Central Depository (Republic Kyrgyzstan).

20 20 Thank you