The National Clearing Centre (NCC) acts as a Clearing House and Central Counterparty (CCP) for MOEX’s markets. In 2013, the Bank of Russia granted NCC the status of a qualified central counterparty.
In 2022, NCC’s clearing efforts were focused on further developing clearing services and services, improving the technology platform and creating additional opportunities for clearing members to operate efficiently, comfortably and in a secure environment in the financial market.
In doing so, NCC was guided by the Moscow Exchange Group Clearing Development Strategy adopted in 2021 and the Roadmap for implementing this Strategy, which includes a detailed action plan for developing and implementing key projects and tasks.
Key projects in 2022
Development of a new margin model on the Standartised OTC Derivatives Market
A new risk management system which is an innovative margining model for the Standartised OTC Derivatives Market, has been piloted in conjunction with the risk management divisions to improve NCC’s risk-protection profile and also to help optimise the Group’s costs.
The new model is based on a scenario module, which increases its versatility. In addition, it takes into account adaptive volatility estimation models, historical VaR, scenario changes in risk factors, and allows for better option valuation through a proration model, scenario shifts in risk factors, and additional scenarios.
CCP-cleared OTC transactions
As part of the development of OTC services, the FX OTC Services Development project was implemented, the main objective of which is to expand the Group’s services into the OTC FX market and generate additional income from OTC clearing.
In addition, the new service provides post-trade services for transactions as part of the overall netting of participants’ positions to the central counterparty (CCP), as well as enabling the expansion of trading opportunities for both local and global consumers and liquidity providers.
Development of the risk management system
In accordance with the approved Road Map for development of the risk management system of NCC until 2025, the main efforts in this area were focused on implementation of a set of measures to improve risk management processes, maintaining the quality of CCP management at the level required by the regulator and in accordance with international standards. In addition, the operational processes related to risk management were optimised and automated to improve the reliability and continuity of the systems supporting the risk management system.
NCC projects and objectives
- Transition to daily calculation of stress collateral. The method allows for more accurate risk calculations for NCC and also reduces pro-cyclicality and ensures faster release of collateral for clearing members when positions change.
- A new category of clearing members, B2, was introduced. This category allows for greater risk protection for NCC while enhancing the ability of clearing members to access trading without full collateral required.
- Improved approach to monitoring the eligibility of securities accepted as collateral for trades with the CCP and automation of the process.
- Validation of the methodology for determining internal ratings for NCC’s counterparties.
- Revised approach to the calculation of provisions for expected credit losses for the purposes of IFRS 9. Refined methodology for determining the stage of impairment and calculating the probability of default, taking into account the type of legal entity based on international rating agency matrices.
- Issuance of a report on the service provider’s control procedures in the area of clearing and settlement services following the successful completion of an independent ISAE/MSRS 3402 Type I audit.
- Improved approaches to non-financial risk management in terms of development of process and risk maps and related control procedures, and expanded description and testing of contingency scenarios as part of development of a business continuity management system.
- Successful completion of an operational audit in accordance with the requirements of Bank of Russia Regulation No. 556-P.
NATIONAL SETTLEMENT DEPOSITORY
National Settlement Depository (NSD) is the central securities depository of the Russian Federation, that offers clients a wide range of services, including depository, repository, clearing services, banking services, information services, as well as collateral management and technological services.
Central securities depository
In 2022, the volume of securites in custody on NSD accounts decreased by 13% YoY to RUB 63 trln. The total amount of issued securities (ISIN) being serviced by the NSD decreased by 8.49% to 26.7 thousand (2021: 29.2 thousand).
A total of 945 issues of corporate bonds worth RUB 16.40 trillion were accepted for service in 2022, with four issues of bonds of constituent entities and municipalities of the Russian Federation worth RUB 3.136 billion.
In 2022, the number of bond issues accepted for placement with issuance documentation executed electronically was 97.6% of the total number of accepted issues.
In 2022, 38 issues of commercial bonds of 23 issuers were registered for a total volume of RUB 145.09 billion and CNY 11.8 billion. Seven commercial bond programmes were registered for a total volume of RUB 1.3 trillion.
In 2022, 38 commercial bond issues for a total volume of RUB 77.3 billion and CNY 11.8 billion were placed and 20 commercial bond issues for a total volume of RUB 6.7 billion and USD 111.1 million were redeemed.
Settlement and clearing
In 2022, the number of OTC trades cleared by NSD on a Delivery Versus Payment (DVP) basis was 133,000 (down 77%). The volume of trades amounted to RUB 5 trillion.
NSD implemented the following depository services legislative initiatives:
- Automatic conversion of depositary receipts into Russian shares.
- Forced share recordkeeping transfer under Artilcle 5, Federal Law No. 319-FZ.
Remote customer service channels
As part of the development of alternative channels for customer service when transmitting SWIFT messages on depository activities, functionality was developed using the SPFS. NSD continued to facilitate the existing SWIFT depository messaging channel, the Integration Gateway.
Modernisation of record-keeping infrastructure
In 2022, the project continued to develop a new investment instrument for individuals, people’s bonds using Finuslugi financial platform. In response to geopolitical and economic challenges, project objectives were adjusted to attract not only public sector issuers but also AAA-rated corporate issuers.
Corporate Actions Center
In 2022, NSD made efforts to adapt its systems and processes to meet the requirements of the new regulation, including those relating to the payment of income on securities. As required by the legislation, mechanisms were implemented to collect information on securities holders, receive and analyse documents from holders, and make cash distributions. The depository has started automating these processes, which will be completed in 2023.
During 2022, the issuers held 167 general meetings of bondholders. Issuers initiated 4,395 meetings of securities holders using electronic voting technology, 416 corporate actions for redemption of securities for the amount of RUB 11.3 billion and 36 corporate actions related to the exercise of pre-emptive rights.
In 2022, 31 annual general meetings of shareholders were held using e-voting. Sixteen issuers provided their shareholders with the opportunity to vote remotely at AGMs and EGMs using NSD’s E-voting service. During the year, almost 23,500 shareholder votes on meeting agendas were submitted through the E-voting service. The vast majority of shareholders used identification via the Russian State and Municipal Services Portal (Gosuslugi) or the Sber ID service, which became available for shareholder identification in 2021.
The total amount of funds deposited in repo transactions with NSD’s Collateral Management System (CMS) since the launch of the system in 2013 exceeded RUB 400 trillion, while the maximum balance due from borrowers (open position) in 2022 reached a record RUB 4.5 trillion.
In 2022, NSD launched an automated deposit settlement service. When placing temporarily free budget funds in deposits, public lenders can transfer settlement functions to NSD, completely digitalising the processes. NSD automatically distributes funds to borrowers when a deposit is made and returns them to public lenders with accrued interest at the end of the deposit period.
As part of the 2019-2024 strategy, NSD is implementing objectives to develop a national platform for government liquidity management.
In 2022, both the number of transactions, 32.41 million (-29% compared to 2021), and their volume, RUB 259.41 trillion (-63% compared to 2021) reduced significantly due to external restrictions.
The repository continued to improve services that simplify customer service and reduce transaction costs for the clients.
- As part of the development of a new area, NSD’s IT solution for reporting to the repository, a technological solution was developed to set up a direct reporting process from the client’s systems to NSD’s Repository.
- As part of the development of communication channels, a new REST API channel was set up for repository processes, enabling the client software to interact directly with the Repository and to obtain information from the Repository’s database in various samples.
As part of the development of additional services for the provision of analytical information by the Repository, new forms of extended reports were implemented in response to individual participant requests.
Financial Transaction Registrar
In 2022, FTR’s functionality was further developed:
- new clients were accepted for servicing, two financial platform operators (by the end of the year, six financial platform operators were connected to the FTR),
- the range of registered instruments was expanded to include bank cards.
At the end of 2022, information on bank deposits, transactions in bonds and shares, compulsory car insurance (OSAGO), loans and bank cards is registered in the FTR.
The form and content of the FTR statement transmitted upon requests from individuals using the unified portal of state service Gosuslugi was finalised. At the end of the year, about 20,000 statements were issued to individuals (four times more than in 2021).
NSD, as one of the main pillars of the financial sector, pays particular attention to the development of a robust IT infrastructure. It offers the market technological solutions that increase the efficiency of clients’ internal processes while ensuring a high level of reliability of the solutions implemented.
By the end of 2022, 39 corporate clients had joined the Transit 2.0 platform, most of which used the system on a permanent basis to work with their authorised banks on a one-stop-shop basis and fully integrated it into their business processes. Currently, 17 banks are available on the platform.
Out-of-the-box solutions for integration have been developed.
Platform members are able to interact with banks via the SPFS.
Corporates can now integrate Transit 2.0 with the MOEX Treasury application. Liquidity management and deposit placement on the Exchange became even easier thanks to up-to-date data from Transit 2.0 in the MXT application.
The Platform’s API Orchestrator has been started, which will enable seamless connection and management of individual API channels and monitoring of message delivery. The development of the Fintech Association’s Open API formats is underway.
SPFS Service Bureau
In 2020, NSD became the first organisation in Russia to be granted SPFS Service Bureau status. NSD is the largest SPFS service bureau that connects international counterparties to the system.
In 2022, the system’s user functions were significantly expanded, customer requests were implemented, and onboarding and training webinars were held.
To date, 75 clients have been connected to the system. The system is key to interbank interaction with Russian counterparties and is expanding the geography of its users every year.
SWIFT Service Bureau
At the end of 2022, the Service Bureau had 47 active clients. Ongoing client operations are supported, and new compulsory services are provided.