New Market Realities: Opportunities and Challenges

Nikolay EgorovDirector General, NDCMember of AECSD ACSDA Leadership Forum October 6 – 9, 2009 Santiago, Chile

Agenda

• AECSD evolution

• NDC strategic development

Association Members

Central Depository of Armenia

The National Depository Center (Azerbaijan)

Republican Central Securities Depository (Republic of Belarus)

Georgian Central Securities Depository

National Securities Depository of Moldova

Central Securities Depository (Kazakhstan)

Central Depository (Kyrgyzstan)

State CSD of the Republic of Uzbekistan

Interregional Stock Union (Ukraine)

The National Depository of Ukraine

Depository Clearing Company (Russian Federation)

The National Depository Center (Russian Federation)

AECSD was established in 2001.The Association incorporates 12 depositories from 10 CIS countries:

Objectives

• Harmonization of the regulatory framework

• Establishment of depository links among the members to support cross-border securities transactions

• Standardization of the technologies for the depository operation, procedures for depository transaction processing, and rules and regulations governing the depositories' activities

• Adoption of international messaging standards for depository transactions and their use in the national practice

• Development of Electronic Document Interchange

• Supporting a coordinated process to enable the Association members to integrate into the global depository system  

Governance Structure

General Meetingof AECSD Members

Chairman

Secretariat

NDC, Russia

Working Groups• Depository Links• CSD Legal Issues• Development of Electronic Messaging Standards• Administration of the Association Website

Working Groups Activities

• Report “Correspondent accounts of non-residents in depositories

of the Association of Eurasian Central Securities Depositories”

(October 2008)

• Report “Clearing Activities in AECSD Member Countries”

(October 2008 )

• Corporate actions survey (October 2009)

International Activities of the Association

• An observer status in ECSDA, AMEDA and ACG

• Participation in international conferences and forums (CSD10, Annual Russian Securities Forum, SIBOS etc.)

• Organizing and holding seminars and trainings on depository and clearing services for Association members

• Proposal on cross-membership of AECSD and ACSDA as observers

VI International AECSD Conference

Tashkent, Republic of Uzbekistan

15-16 October, 2009

Main Agenda of the Conference:

• The role of depository in the issuer's corporate actions in AECSD

• Record-keeping of rights for securities: from depository to custodian

• Regional markets during the crisis period: does the crisis generate ideas or obstacles

Agenda

• AECSD evolution

• NDC strategic development

“The National Depository Center” (Closed Joint Stock Company)

• Member of the MICEX Group

• The biggest Russian settlement depository servicing all types of securities

• NDC provides DVP settlement services for both primary and secondary markets and FOP /DVP settlement for OTC trades

• Settlement depository of three Russian stock exchanges

• AA- Thomas Murray rating

NDC performance highlights for IH 2009

• Value of securities held in NDC: RUB 4.7 trillion (+7.2%)

• Number of issues held: 2758

• Number of inventory operations: 1 164 366 (-8.1%)

• Turnover: RUB 26.7 trillion (-7%)

• Capital and retained earnings (RAS) for IQ2009 vs IQ2008 : RUB 1,85 bln. (+25%).

• Net Income (RAS) for IQ2009 vs IQ2008: RUB102 mln. (-21,1%)

Strategic Direction: Effective Corporate Governance Structure

• On August 10, 2009 NDC became a Closed Joint Stock Company

• MICEX SH and NDC – on the way to merge

Benefits for clients

• Providing a full range of settlement services

• Raising capitalization to strong the market position

• Improving perception of the Russian financial infrastructure globally

The National Depository Center

(NDC)

MICEXSettlement House

(MICEX SH)

MERGE

NDC as Efficient Locationfor Domestic Settlement (1)

Government bondsNDC – de-facto CSD

• Trading only on MICEX

• Main Trading Mode – T+0, Negotiated Deal Mode– T+0-T+2

• Payment agent – Bank of Russia

• All trades are settled on DVP basis

EquitiesNo CSD

• Book-entry form• Exchange trades (on MICEX, RTS) – same as bonds• OTC: re-registration vs. settlement

depository/custodian• Trade settled through registrar – T+3 – T+7 cycle• Trade settled via settlement depository/custodian –

T+0

Corporate & Regional BondsNDC – de-facto CSD

• Issued in dematerialised form with global certificates

• Main Trading Mode T+0, DVP, Negotiated Deal Mode T+0-T+30 DVP basis

• NDC as a paying agent in 29% of all transactions

NDC as Efficient Locationfor Domestic Settlement (2)

• NDC and ING Wholesale Banking project• SSS - a temporary scheme, like NDC-DCC Bridge, will be

replaced by more sophisticated CSD settlement services• STP• Fixed fee• Blue chips • Non-exclusive scheme

SSS was created to allow faster settlements

and faster links with various markets

Speedy Settlement Scheme (SSS)

International Settlement Facilities

Correspondent accounts

• CSD the Republic of Kazakhstan

• NDC of the Republic of Azerbaijan

• CSD of the Republic of Belarus

• Clearstream Banking• Euroclear

New DVP service via Euroclear Bank

link

Сash clearance account16420

Securities

clearance account

12065

Corporate Actions in Russia: NDC’s Value Proposition

• 75% of documents handled by NDC are related to CAs

• NDC is the biggest Russian payment agent for the issuers of corporate and regional bonds

• NDC acts as the Russian National Numbering Agency and is authorized by FFMS of Russia to qualify the foreign securities for trading on the Russian market

NDC statistics, 2007 - 1Q 2009

* Excluding bonds of the Bank of Russia

0

50

100

150

200

250

300

350

2007 1Q 2007 2Q 2007 3Q 2007 4Q 2008 1Q 2008 2Q 2008 3Q 2008 4Q 2009 1Q

Merger / pari passu (cancellation of additional issues)

Corporate actions (conversions, entitlements, exchange offers, redemptions, repurchases etc.)

Alliance Lite: Service Aimed at Boosting International Standards in Russia

Back-office

LUCH

Web-access

Alliance Lite(Operator entry)

File Act(file exchange)

NDC Participant

Internet (web)SWIFT security

Internet (web)NDC security

Internet (e-mail)NDC security LUCH files

Custody Banks

Brokers/Investment Managers

LUCH files

SWIFT files

LUCH files

SWIFT Community

The First Step to CCP and Securities Lending

• CCP for MICEX SE market - new project aimed to implement risk management system for fair market participants

• Securities lending as NDC service for CCP

Accepted orders

Lender MICEX Stock Exchange

Trading floor

MICEX as a

Clearing system

Borrower -Central

Counterparty

NDC Settlement depository

Securities available for ASL trades

Net – positions

Net - positions

Instructions

Contact Information

• AECSD Secretary

The National Depository Center

13, bldg 1, Mashkova St., Moscow,105062, Russia

Tel.: +7 (495) 232-0513 

E-mail: aecsd@aecsd.com • AECSD Website: www.aecsd.com

Thank you for attention!