Kazakhstan securities market: migration to T+2 settlement cycle

Transcription

1 Kazakhstan securities market: migration to T+2 settlement cycle Presenter: Idel SABITOV, Deputy CEO KASE 10 September 2015 XII International Conference ACDE Almaty

2 Shares market: statistics KASE Index Kazakhstan's shares market's business card T+2: goals Т+2: recommendations and standards Transition from T+0 to T+2: timeline T+2: main conditions T+2: prefunding requirements and risk management elements T+0: flowchart T+2: flowchart From T+0 to T+2 2

3 Volume, bn USD 120 Shares market: statistics Market Capitalization, bn USD Traded Volume, bn USD Primary market (IPO) Secondary market bn USD as of bn USD as of '8M Equities Market % 11.4% 34.7% Issuers by Industry Sectors Energy Provision of telecommunications services Industrials Financials Materials Consumer staples 10.7% Provision of municipal services Information Technology (September) Issuers Instruments 31.5% Health Care Consumer Discretionary 3

4 Shares market: statistics Members of securities market (as of ) Volume of shares trading (for 8 months 2015) % participants mln USD 10 0 Shares 1st category Shares 2nd category 89% Number of shares National Bank Brokers: banks KASE Index shares Non-Index shares Total number of shares is 108 Brokers: asset managers Other 4

5 KASE Index Kazakhstani securities market business card Shares in KASE Index CCBN HSBK KKGB GB_KZMS RDGZ KZTK KCEL KEGC KZTO Average daily volume (USD '000) Average daily number of trades (number) KASE Index Code of shares Listed company CCBN GB_KZMS HSBK KCEL KEGC KKGB KZTK KZTO RDGZ Bank CenterCredit JSC KAZ Minerals PLC Halyk Bank JSC Kcell JSC KEGOC JSC Kazkommetsbank JSC Kazakhtelecom JSC" Kaztransoil JSC RD Kazmunaigaz JSC 5

6 T+2: goals Increasing liquidity of Kazakhstan shares market by attracting foreign investors and increasing activity of Kazakhstan based investors T+2 Providing to trade participants/investors additional opportunities to effectively manage assets/liquidity during the trading day and up to the date of settlement of the executed securities transaction Reducing number of settlement transactions and investors' costs associated with execution of deals (as obligations and rights will be offset and settlements will be done based on unified net position) Establishing clearing and settlement system compliant with international standards 6

7 Т+2: recommendations and standards "Introducing a T+3 settlement cycle, as a consequence, has a considerable direct impact on liquidity." "if the T+3 settlement system is introduced, the multilateral netting scheme will be enabled, and KASE will be able to efficiently respond to increasing liquidity" "Continuous settlements should be conducted on all securities markets. Final settlements should be done no later than on T+3." ASTANA INTERNATIONAL FINANCIAL CENTRE "Gradual transition to the T+n settlement system" "Members providing for clearing and settlement strive to comply with CPSS / IOSCO / G-30 requirements" "Clearing & settlement - T + 3, T + 5 for Frontier" More than 90% of stock exchanges on FTSE list use T+n scheme 7

8 Concept of Т+n Transition from T+0 to T+2: timeline Preparation stage 1 st stage: trial period (both cycles apply) 2 nd stage: T+2 only 3 rd stage: CCP Т+2 Concept (extended) for T+2 scheme and changes to the legislation Amendments on margin for T+2 scheme to the Rules #9 Trades of KASE Index shares on T+2 scheme Draft law on NPL with amendments to implement T+2 Transfer of T+2 functions to the main trading system Results of Kazakhstan shares market's assessment by FTSE Obtaining CCP status, introducing T+2 for other securitiesг Sept Oct and further Т Oct Nov 2015 Share trades on Т+0 scheme T+0 termination date for KASE Index shares trading 8

9 T+2: main conditions Clearing House KASE CCP KASE (at a later stage of the project) Settlement House Central Securities Depository Financial instruments KASE Index shares Prefunding partial (i.e. margin, see rates) and full (100% of securities for sell orders and repo open orders) Clearing members KASE securities market members Settlement cycle Т+2 ongoing periodic settlement Clearing multilateral netting Unified position: unified position of the trade participant to account for margin and assets used in order to cover payment obligations during settlement Short selling allowed Securities lending repo with netting Default management until T+5 incl., separation procedure, auction to sell default positions, final cash settlement (default fee 0.01% of volume for each day) 9

10 T+2: prefunding requirements T+2: risk management elements KASE Index share Price change limit (%) Initial margin rate (%) CCBN KZTK GB_KZMS HSBK KCEL 7 14 KEGC Margin contributions (clearing participants) Initial margin Additional margin Limits (KASE) Price change limit Guarantee fund (clearing participants) KKGB KZTO 9 18 RDGZ 7 14 Reserve fund (KASs) 10

11 T+0: flowchart Securities and cash accounts are maintained in CSD, except for cases where cash accounts of banks are maintained in KISC of the National Bank 2. CSD provides KASE information on balances of accounts in CSD 3. Trade participants, or in case of custodial clients asset managers, provide assets for settlements in CSD and/or KISC NB 4. Trade participants submit orders Trade participant 1* Trade participant Checking orders in the TS for assets availability and, if deal is fully covered, accepting orders Matching orders in the TS, blocking assets when concluding deals 7. Confirmation of concluded deals in TS by account managers KASE CSD KASE provides CSD an order to conduct settlements 9. CSD conducts settlements in accordance with KASE order 10. CSD provides KASE with report on execution of the order 11. CSD provides results of settlement to trade participants and account managers Account manager (Custodian)* KISC NB *Provide services to custodial client

12 8. T+2: flowchart 1. Maintaining securities accounts of trade participants and account managers in CSD 2. CSD provides KASE information on the balances of accounts in CSD 3. KASE prepares and uploads to TS information for the trading day: settlement prices, price change limits and margin rates Trade participant 1* Trade participant KASE 7. CSD 6. ** T+0 T+1 4. Trade participants, or in case of custodial clients asset managers, provide margin 5. Trade participants submit orders based on set limits and margin rates 6. Checking orders in TS for compliance with limits and margin rates and if compliant, accepting orders. Matching orders in TS, blocking margin when concluding deals 7. KASE conducts clearing on concluded deals 8. KASE provides clearing session results to trade participants and asset managers 9. Trade participants and account managers reconcile concluded deals in TS on T+1 (making changes or submitting cancellation requests) 10. Account managers provide settlement instructions to KASE on T Account manager (Custodian)* T Trade participants, or in case of participation by custodial clients by account managers, provide assets for settlements to CSD accounts 12. KASE provides CSD the order to conduct settlements 13. CSD conducts settlements based on KASE order 14. CSD provides KASE the report on execution of the order 15. CSD provides trade participants and asset managers with settlement confirmations *Provide services to custodial client ** CSD controls minimal balances availability 12

13 From T+0 to T+2 X V [Х] fully prefunded orders [Х] transaction should be fully prefunded at transaction execution time [Х] settlements are done at transaction concluding day [Х] management of assets used as collateral is complicated [Х] It is inconvenient to serve international clients [Х] is not compliant with international trade execution procedure [V] partially prefunded orders [V] transactions execution results in lower transaction costs (due to netting) [V] settlements are done on the second working day [V] is compliant with international trade execution procedure [V] facilitates more convenient assets management [V] allows for more convenient services to international clients 13

14 Questions? 14

15 Thank You! Contact Information Address: Kazakhstan Stock Exchange Almaty Towers, Northern Tower, 8th Floor 280, Baizakov Str., Almaty , Kazakhstan Phone: (+7 727) Fax: (+7 727) Website: 15