The National Settlement Depository (NSD), headquartered in Moscow, is a Russian

non-bank financial institution A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate ba ...

and

central securities depository A central securities depository (CSD) is a specialized financial organization holding securities like shares, either in certificated or uncertificated ( dematerialized) form, allowing ownership to be easily transferred through a book entry rather t ...

(CSD). It provides depository, settlement (bank account), and related services to financial market entities. Its services cover both

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

listed in Russia's 2011 Federal Law "On the Central Securities Depository", and other Russian and foreign equity and debt securities. NSD is the CSD of the Russian Federation, and was assigned CSD status by the Russian Federal Financial Markets Service in 2012. It is the largest securities depository in Russia by market value of equity and debt securities held in custody, which in June 2022 were 70 trillion roubles ($1.12 trillion). It is a member of the

Moscow Exchange The Moscow Exchange (MOEX; rus, Московская биржа, r=Moskovskaya birzha, p=mɐˈskofskəjə ˈbʲirʐə, a=) is the largest exchange in Russia, operating trading markets in equities, bonds, derivatives, the foreign exchange market, ...

Group. In March 2022, in the wake of the

2022 Russian invasion of Ukraine On 24 February 2022, in a major escalation of the Russo-Ukrainian War, which began in 2014. The invasion has resulted in tens of thousands of deaths on both sides. It has caused Europe's largest refugee crisis since World War II. An ...

, NSD's accounts were blocked and frozen at international CSDs

Euroclear Euroclear is a Belgium-based financial services company that specializes in the settlement of securities transactions, as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P. Morgan & Co. to settl ...

and

Clearstream Clearstream is a financial services company that specializes in the settlement of securities transactions and is owned by Deutsche Börse AG. It provides settlement and custody as well as other related services for securities across all asset cl ...

(CSDs which together held €50tn of assets on behalf of investors). In addition, the European Union added NSD to its sanctions list, blocking NSD's accounts in euros, and in Euroclear and Clearstream; as a result, NSD could not service

forex The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...

-denominated bonds issued by Russia and Russian companies. NSD suspended transactions in euros.

History

On 27 June 1996, MICEX Settlement House was incorporated, which was a credit organization that provided settlement (bank account) services, including cash settlement services for trades in the financial market. MICEX Settlement House's primary business was to provide settlement services in the

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for th ...

markets operated by the

MICEX The Moscow Interbank Currency Exchange (russian: Московская межбанковская валютная биржа) or MICEX (russian: ММВБ) was a stock exchange that operated in Russia from 1992 to 2011. MICEX was the leading Russi ...

Group. National Depository Center (NDC) was incorporated on 21 January 1997. NDC was established to serve as the principal securities depository in the

government securities A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...

market, and started acting in such capacity in March 1998. The same year, NDC started providing services for corporate, sub-federal, and

municipal securities A municipality is usually a single administrative division having corporate status and powers of self-government or jurisdiction as granted by national and regional laws to which it is subordinate. The term ''municipality'' may also mean the g ...

. NDC gained the leading position in the Russian

debt securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any fo ...

market, and then started growing the scope of transactions with shares, investment units, and

Eurobonds Eurobond may refer to: * Eurobond (external bond) A eurobond is an international bond that is denominated in a currency not native to the country where it is issued. They are also called external bonds. They are usually categorised according t ...

. As a result, NDC became the largest Russian settlement depository by value of assets in custody, and the only Russian settlement depository that covered all types of Russian equity and debt securities. On 3 November 2010, an entry was made in the Unified State Register of Legal Entities concerning the reorganization of MICEX Settlement House through merger with NDC, which resulted in the establishment of National Settlement Depository (NSD), a unique organization for Russia. On 6 November 2012, NSD was assigned the

(CSD) status by Russian Federal Financial Markets Service's Order No. 12-2761/pz-i dated 6 November 2012. In accordance with Article 22 (paragraph 5) of the Russian CSD Law, Russian CSD status may be granted to one organization only. In 2014, following an analysis of all financial market infrastructure organizations operating in Russia, the

Bank of Russia The Central Bank of the Russian Federation (CBR; ), doing business as the Bank of Russia (russian: Банк России}), is the central bank of the Russian Federation. The bank was established on July 13, 1990. The predecessor of the bank can ...

recognized NSD as a systemically important central securities depository, systemically important settlement depository, and systemically important trade repository. On 25 December 2012, the NSD Payment System was recognized by the

as a systemically important

payment system A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchange possible.Biago ...

, and on 16 July 2012 – as a nationally important payment system.

Ownership and management

NSD's majority shareholder is the

, holding a 99.997% interest in NSD's share capital. The remaining shares are owned by a number of banks and securities market participants. On 30 June 2011, the Shareholders Agreement with respect to NSD was signed, which secured for NSD's customers the right to participate in managing NSD and ensured a balance between the interests of NSD's majority and minority shareholders. Under the Shareholders Agreement, up to five major customers of NSD may become its shareholders every year, thus becoming entitled to participate in managing the company. The Chairman of NSD's Executive Board is

Eddie Astanin Eddie Astanin (russian: link=no, Эдди Владимирович Астанин, born December 16, 1961; Moscow) is a Russian economist, the chairman of the executive board of National Settlement Depository, Russia's central securities deposit ...

. The Chairperson of NSD's Supervisory Board is Bella Zlatkis.

Business

Central Securities Depository

NSD is the

in the Russian stock market, and provides services with respect to securities both in the capacity of the CSD under Russian Federal Law No. 414-FZ dated 7 December 2011 "On the Central Securities Depository", and in the capacity of a nominee holder of other Russian and foreign equity or debt securities. NSD provides services for the safekeeping of global certificates and depository recordkeeping of 100% of Russian federal loan bond ( OFZ) issues, and 99% of Russian corporate and regional (sub-federal or municipal) bond issues. In 2014, the large international securities depositories

and

gained full access to the Russian securities market, thus providing non-Russian companies and

investment fund An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...

s with investment opportunities. In 2014, in compliance with the

FATCA The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., including indication ...

requirements, NSD was registered with the

U.S. Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

and was assigned a Global Intermediary Identification Number. NSD says it meets all of the requirements to "eligible securities depositories" and satisfies the criteria set out by Rule 17f-7 of the U.S. Investment Company Act of 1940. The

Bank for International Settlements The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work thr ...

noted in 2015 that though the Bank of Russia has recommended that CSDs observe the "Principles for financial market infrastructures: Disclosure framework and assessment methodology," there was in fact no legal requirement that they do so.https://www.bis.org/cpmi/publ/d139.pdf It also noted that the NSD did not have in place arrangements to alert non-Russian regulators to certain information, and did not have in place certain information-sharing with non-Russian CSD regulators on an automatic basis. It noted as well that NSD had not been in contact with non-Russian relevant regulatory authorities, such as those in the US and Europe.

Withholding agent

Since 2014, in accordance with the

Russian Tax Code The Russian Tax Code (russian: Налоговый кодекс Российской Федерации) is the primary tax law for the Russian Federation. The Code was created, adopted and implemented in three stages. The first part, enacted July ...

, NSD has been acting as a

withholding Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, Tax deduction at source or a ''Prélèvement à la source'', is income tax paid to the government by the payer of the income rather than by the recipient of the income. ...

agent when paying out income on Russian equity or debt securities.

Trade repository

On 1 October 2013, NSD started acting as a trade repository for all trade types (such as

repo A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two par ...

contracts, OTC

derivative In mathematics, the derivative of a function of a real variable measures the sensitivity to change of the function value (output value) with respect to a change in its argument (input value). Derivatives are a fundamental tool of calculus. F ...

contracts, and other contract types entered into under a master agreement, as defined in Article 51.5 (paragraph 6) of the Russian Federal Law "On the Securities Market"). NSD's Trade Repository: * Gathers and registers information on derivative and repo contracts entered into under master agreements. As part of the first phase of the Trade Repository launch, NSD registers repo and currency swap contracts; * Keeps a register of registered contracts; * Provides

confirmation In Christian denominations that practice infant baptism, confirmation is seen as the sealing of the covenant created in baptism. Those being confirmed are known as confirmands. For adults, it is an affirmation of belief. It involves laying on ...

s of registered contracts to clients or the Russian regulator; and * Is charged with ensuring the integrity and security of information. By the end of 2014, the number of Trade Repository clients reached 1,130 market participants who registered, in aggregate, 138,000 reports on master agreements and trades.

Payment system

As a systemically important

, the NSD Payment System was assessed by the Bank of Russia for observance of the international standards, namely the Principles for Financial Market Infrastructures issued by the

Committee on Payment and Settlement Systems The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work thr ...

of the

and the

International Organization of Securities Commissions The International Organization of Securities Commissions (IOSCO) is an association of organizations that regulate the world's securities and futures markets. Members are typically primary securities and/or futures regulators in a national jurisdic ...

(CPMI-IOSCO) and recommended by the Bank of Russia for observance by Russian important payment systems. In 2014, the number of

cash transfer A cash transfer is a direct transfer payment of money to an eligible person. Cash transfers are either unconditional cash transfers or conditional cash transfers. They may be provided by organisations funded by private donors, or a local or re ...

s to or from clients' bank accounts held with NSD was 998.39 thousand; the total amount of RUB cash transfers to or from clients' bank accounts held with NSD was RUB 298.06 trillion; and the total amount of foreign currency cash transfers to or from clients' bank accounts held with NSD was equivalent to RUB 9.62 trillion.

Clearing and collateral management

NSD offers

collateral management Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party in a trade. Collateral management began in the 1980s, with Bankers Trust and Salomon Brothers taking collateral again ...

services for tri-party

transactions with the Bank of Russia or the Russian Federal Treasury. Trades are entered not with an individual security, but rather with a basket of securities. To clear trades, NSD applies a variety of settlement models, including DVP-1, DVP-2, and DVP-3.

Delivery versus payment Delivery versus payment or DvP is a common form of settlement for securities. The process involves the simultaneous delivery of all documents necessary to give effect to a transfer of securities in exchange for the receipt of the stipulated payment ...

or DVP is a form of settlement for securities that involves simultaneous delivery of securities by the seller to the buyer and cash by the buyer to the seller. The service is based on NSD's clearing platform that allows for making DVP transactions in more than one clearing session, with securities being settled on a gross basis and cash being settled on a net basis (DVP-2); or with net settlement of both securities and cash (DVP-3); or outside clearing sessions with settlement on a trade by trade basis (DVP-1). The DVP settlement mechanism allowed clients to settle trades both in Russian rubles and—until 2022—non-Russian currencies (USD or

Euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

). NSD offers the opportunity to settle trades on a DVP basis using correspondent accounts with the Bank of Russia via the Real Time Gross Settlement System (BESP). With the launch of the electronic matching service, NSD's clients were provided with the opportunity to receive information on the availability of potentially matching instructions, i.e., unmatched instructions that differ from each in one

data field In computer science, data that has several parts, known as a '' record,'' can be divided into fields (data fields). Relational databases arrange data as sets of database records, so called rows. Each record consists of several ''fields''; the fie ...

. NSD says that the Hold & Release functionality offered by NSD contributes to greater reliability of settlements and their control by clients. The number of Bank of Russia's repo transactions with a basket of securities was 3,727 in 2013, and 8,858 in 2014. The value of Bank of Russia's repo transactions with a basket of securities amounted to RUB 14.04 trillion in 2013, and RUB 57.22 trillion in 2014.

National Numbering Agency

NSD acts as the National Numbering Agency for Russia and the Substitute Numbering Agency for the CIS countries and as such assigns ISINs and CFIs to securities or other

financial instrument Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in the form ...

s issued or registered in Russia or other CIS countries.

International

2014-21; early years

* In September 2013, CSD.Austria, the Austrian central securities depository, and NSD established an international direct link to the Russian securities market. As a result, Austrian and international

custodian bank A custodian bank, or simply custodian, is a specialized financial institution responsible for providing securities services. It safeguards assets of asset managers, insurance companies, hedge funds, and is not engaged in "traditional" commercial ...

s holding securities accounts at CSD.Austria obtained the opportunity to make direct settlement of Russian securities and hold them using CSD.Austrias' foreign nominee account opened with NSD, and NSD expanded its access to potential foreign investors. *In November 2013, the U.S.

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory ta ...

, the agency of the

United States federal government The federal government of the United States (U.S. federal government or U.S. government) is the Federation#Federal governments, national government of the United States, a federal republic located primarily in North America, composed of 50 ...

responsible for tax collection and tax law enforcement, signed an agreement with NSD recognizing it as a Qualified Intermediary (QI). * In December 2013, NSD and BNY Mellon joined forces to help Russian-based investors trade

depositary receipt A depositary receipt (DR) is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. The depositary receipt trades on a local stock exchange. Depositary receipts facilitates buying shares in f ...

s. *In 2013, FTSE Global Markets named NSD among 20 most influential financial market players in 2013. * In 2014, the large international securities depositories

and

gained full access to the Russian securities market, providing foreign companies and investment funds with investment opportunities, and provided issuers in the Russian securities market with investors. First, in spring 2013, they started settling trades with Russian federal loan bonds (OFZ), before accessing the Russian corporate bonds market in January 2014. * In 2014, NSD opened a foreign nominee account to the central securities depositories of

Armenia Armenia (), , group=pron officially the Republic of Armenia,, is a landlocked country in the Armenian Highlands of Western Asia.The UNbr>classification of world regions places Armenia in Western Asia; the CIA World Factbook , , and ''Ox ...

and

Kyrgyzstan Kyrgyzstan,, pronounced or the Kyrgyz Republic, is a landlocked country in Central Asia. Kyrgyzstan is bordered by Kazakhstan to the north, Uzbekistan to the west, Tajikistan to the south, and the People's Republic of China to the east. ...

. * In 2014, Thomas Murray Data Services, the specialist custody rating, risk management, and research firm, issued a CSD rating for NSD at AA-, which translated as 'very low Overall Risk', with 'Stable' outlook.

2022-present; after-effects of Russian invasion of Ukraine

* On March 16, 2022, Thomas Murray downgraded NSD's rating to B. * On March 18, 2022, NSD's accounts were blocked and frozen at Euroclear and Clearstream (CSDs which together held €50tn of assets on behalf of investors). * In March 2022, the European Central Securities Depository Association (

ECSDA European Central Securities Depositories Association (ECSDA) is the official association of the Central Securities Depository industry in Europe. The association provides a forum for Central Securities Depositories (CSDs) to exchange views and tak ...

) suspended NSD from membership in the association. *In June 2022, the European Union added NSD to its sanctions list, blocking NSD's accounts in euros, and in Euroclear and Clearstream; as a result, NSD was not able to service

-denominated bonds issued by Russia and Russian companies. *Also in June 2022, the NSD suspended transactions in euros.

Performance

In 2014, NSD's net income under

IFRS International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...

amounted to RUB 3.31 bln, and NSD's revenues under IFRS reached RUB 6.62 bln. As at 31 December 2014, the value of securities held in securities accounts with NSD was RUB 24.94 trillion, which was 14% higher than as at 31 December 2013 (RUB 21.8 trillion). The value of foreign securities held in NSD's clients' securities accounts exceeded RUB 2.7 trillion. In June 2022, the NSD custodied 70 trillion roubles ($1.12 trillion) worth of client assets, including 9 trillion roubles of foreign securities such as Eurobonds linked to the Russian government.

References

Articles

Why Russia remains upbeat on its partnership with China
// Hong Kong Economic Journal, 12 September 2015
WNSD implements back-to-back securities settlement technology
// Finextra, 10 September 2015
Russia Mimics Euroclear With China Market Link as Ties Grow
// Bloomberg, 3 September 2015
Boost for Russian Corporate Actions Reform
// Inside Reference Data, 21 July 2015
NSD improves procedures for counterparty checking using KYC
// The Asian Banker, 16 July 2015
Country profile. Russia
// Asset Servicing Times, 17 June 2015
Russian Central Depository Makes Corporate Actions Platform Customizable
// Inside Reference Data, 28 May 2015
NSD ‘broadly’ compliant with PFMIs
// Asset Servicing Times, 20 May 2015
NSD numbers tell mixed story
// Global custody, 30 April 2015

// FTSE Global Markets, 28 April 2015

// Global Investor, 30 March 2015
Russian CSD launches corporate action website
// ISS Mag, 23 March 2015

// Futures and Options World, 25 February 2015
Russia's NSD sees growth everywhere
// ISS Mag, 10 February 2015
National Settlement Depository deputy chairwoman Maria Krasnova tells Joanna Wright how she is helping to bring the Russian depository up to international standards
// Inside Reference Data, 7 January 2015
Interview with Maria Krasnova, Deputy Chairman of the Board, about the reform of corporate actions in Russia
// Asset Servicing Times, 12 December 2014
Efforts being made to make the Russian markets more attractive
// COOConnect, 3 December 2014
NSD Launches Electronic Matching Service
// GLOBAL CUSTODIAN, 20 November 2014
Russia: Behind-the-Scenes Progress on Operational Risk
// FinOps Report, 5 November 2014

// FTSE Global Markets, 23 September 2014
Only in Vienna – A Direct Link to the Russian Securities Market
// International Securities Magazine, 18 June 2014
Driving change in Russia's securities processing marketplace
// Financial Services Research, 30 April 2014

// FTSE Global Markets, 25 March 2014
Interviews with NSD top management. Interview with Eddie Astanin, Maria Krasnova, Maria Langouche
// FTSE Global Markets, 12 March 2014
Euroclear Opens Russia Company, Muni Debt to Foreigners Jan. 30
// Bloomberg, 22 January 2014
Russia: Is the NSD Coming in from the Cold?
// FinOps Report, 15 January 2014

External links

* * * * * {{in lang, ru Financial services companies established in 1996 Moscow Exchange Central securities depositories Companies based in Moscow