Moscow 2017 CENTRAL BANK OF RUSSIA S REPO TRADES WITH GENERAL COLLATERAL AND NSD COLLATERAL MANAGEMENT SYSTEM

Transcription

1 Moscow 2017 CENTRAL BANK OF RUSSIA S REPO TRADES WITH GENERAL COLLATERAL AND NSD COLLATERAL MANAGEMENT SYSTEM

2 DESCRIPTION Bank of Russia and NSD developed a service to provide banks with access to the Bank of Russia s liquidity via Tri-party REPO trades with NSD s clearing and collateral management. The service provides: New trading and settlement opportunities for domestic banks Cost of trade reduction Sophisticated technology of eligible collateral selection and collateral management, risk reduction Access to NSD DVP clearing solutions 2

3 OTC REPO MAIN FEATURES Trades are made via Moscow Exchange (MICEX TRADE SE) or Bloomberg. MOEX trading system allows trade orders, marking or collateral substitution orders submission, 1st leg settlement and collateral status view REPO terms: 1 day, 7 days, 90 days, 12 months Auctions and fixed rate trades 4 clearing batches: 12.00, 14.00, 16.00, First leg settlement via gross or net settlement Second leg settlement method: DVP3 (netting) CBR Lombard list is used as collateral, additional limitations on collateral can be set up by Collateral Giver NSD collateral management system^ STP collateral selection and replacement, daily Mark-to-Market Minimum haircuts Automatic rollover of second leg settlement date when the Collateral Giver is short in liquidity 3

4 PARTICIPANTS AND THEIR CONTRACTUAL RELATIONSHIP NSD Clearing, settlement, collateral management Depot Account Agreement Clearing services agreement Collateral Management Services Agreement Banking Account Agreement Electronic Data Interchange Agreement Information Exchange Agreement Depot Account Agreement Banking Account Agreement Electronic Data Interchange Agreement Clearing Services Agreement Collateral Management Services Agreement Bank of Russia Liquidity provider via REPO trades Master Agreement Limits on counterparts Individual restrictions on eligible collateral Individual threshold for margin call Bank Liquidity receiver and collateral giver Collateral includes securities from Bank of Russia list of eligible securities (so called Lombard list ) 4

5 ELIGIBLE COLLATERAL AND HOW TO SPECIFY SOURCE SECURITIES Eligible collateral for REPO trades Securities from the Bank of Russia s list for REPO trades GCOLLATERAL Minimum haircuts from Bank of Russia List of additional identifiers that Collateral Giver can use: GCSHARES shares from REPO collateral list GCFOREIGN foreign securities from REPO collateral list GCNOSHARES REPO collateral list except for shares GCBONDS REPO collateral list except for shares and foreign securities CBBR Bank of Russia bonds Collateral giver must define source securities which he allows to use as collateral by submission of special marking order to NSD How to specify source securities: Source securities and/or accounts can be defined by Collateral Giver via NSD s application LUCH, NSDirect or by means of Web-service REST (in this case development of Collateral Giver application used to create marking order is required) Main depot accounts as well as trading depot accounts for NSD or NCC (National Clearing Center) clearing can be used Marked securities are not blocked or moved to separate account after marking order submission Marking order can be submitted at any time Accounts, sub-accounts, securities ISINs, max allowed securities amounts can be specified 5

6 TRADE SETTLEMENT Trade order is submitted via Bloomberg or MOEX trading system (MICEX TRADE SE) Collateral Giver can indicate extra options in the trade order Collateral sufficiency is not checked at the trade order submission stage Bank of Russia provides trades blotter which is considered as clearing order for both parties to NSD Collateral selection is done from securities specified by Collateral Giver just before the upcoming trade settlement taking into account the existing limitations and haircuts Trade settlement is done with particular selected securities 6

7 ADDITIONAL OPTIONS At the trade order submission stage Collateral Giver may indicate : Additional securities identifier (sub-basket): only bonds, only shares, only foreign securities, all eligible securities except for shares, Bank of Russia bonds. NSD will select collateral in compliance with the chosen sub-basket. ISIN Securities with indicated ISIN will be selected in trade s collateral with first priority (except Bank of Russia bonds). Trade settlement mode DVP1 (gross settlement without netting) Trade will be settled right after the trade blotter receipt by NSD from Bank of Russia without waiting for the nearest clearing session. 7

8 1 ST TRADE LEG SETTLEMENT Trading system 3. Trade is done 2. Confirmation 1. Trade order Bank of Russia 9. Report on trade settlement MS009 Report on exposure and it s collateralization MS118 Aggregated report on changes in trades exposure MS Report on changes in trade exposure MS Trades blotter NSD 5. Collateral allocation 7. Clearing 8. Settlement 6. Report on changes in trade exposure MS018 Report on securities blocking after eligible collateral selection MS101 Bank 9. Report on clearing and settlement status MS009, Report on securities transfer MS102 Report on trade settlement MS194 Report on exposure and it s collateralization MS118 Aggregated report on changes in trades exposure MS Collateral Giver submits trade order for auction participation via trading system 2. Bank of Russia accepts trade order and confirms trade via trading system 3. Trade is made 4. Bank of Russia submits trades blotter to NSD 5. NSD selects and allocates trade collateral in form of securities, partial allocation (and settlement) is possible 6. NSD reports on collateral allocation to Bank of Russia and Collateral Giver 7. NSD executes trade clearing 8. NSD performs trade settlement, transfers cash and securities and registers counterparts exposure for 2 nd trade leg 9. NSD submits reports on settlement, counterparts exposure and it s collateralization to Bank of Russia and Collateral Giver 8

9 PARTIAL EXECUTION OF 1 ST REPO TRADE LEG In case Collateral Giver lacks sufficient securities to execute 1 st trade leg in full, partial settlement is allowed: Trade is settled in the nearest clearing session for the value of selected and allocated collateral (at least 1 security unit) taking into account haircuts The remaining portion of trade will be settled in the following clearing sessions in case Collateral Giver provides more collateral When the last clearing session of a day has been completed, the trade amount will be considered fixed and final for the value of allocated collateral taking into account haircuts. The Bank of Russia accrues a penalty for the difference between the initial trade amount and the final one In case Collateral Giver does not provide at least 1 security unit eligible for collateral purposes, the trade will be considered to be default 9

10 2 ND LEG SETTLEMENT 1. NSD executes clearing of 1 st Bank of Russia 5. Reports on assets transfer MS102 MT900/MT910 Bank and 2 nd legs of trades in DVP3 mode. 2. NSD executes trade settlement on the base of clearing results. 3. Reports on completion of settlement MS009 MS194 MS118 MS Reports on executed trades MS018 and nonexecuted trades MS007 NSD 1. Clearing 4. Reports on executed trades MS018 and nonexecuted trades MS Reports on completion of settlement MS009 MS194 MS118 MS NSD reports to Bank of Russia and Bank on trade settlement. 4. NSD reports to Bank of Russia and Bank on executed and pending trades. 5. NSD reports to Bank of Russia and Bank on assets transfer. 2 nd trade leg is always executed: 1. In full 2. Settlement 2. In DVP3 mode (with netting) 10

11 TIMEFRAMES FOR TRADE CONCLUSION, CLEARING AND SETTLEMENT* 1 Stage Deadline for trade orders submission to participate in REPO auction (1 day trades) Time 11:15 2 Start of the 1 st clearing session 12:00 3 Deadline for trade orders submission to participate in REPO auction (7 days trades) 13:15 4 Start of the 2 nd clearing session 14:00 5 Start of the 3 d clearing session 16:00 6 Deadline for trade orders submission to participate in fixed rate REPO trades (1 day trades) 18:00 7 Start of the 3 d clearing session 19:40 *For actual timeframes for REPO trades please refer to Bloomberg service for REPO trade orders submission. 11

12 TIMEFRAMES FOR REPORTING* Stage Time Mark-to-Market (MTM) MS018, MS118, MS101, MS First clearing session MS MS007, MS009, MS018, MS118, MS194, MS102, MT900/910, MS Second clearing session MS MS007, MS009, MS018, MS118, MS194, MS102, MT900/910, MS Third clearing session MS MS007, MS009, MS018, MS118, MS194, MS102, MT900/910, MS Fourth clearing session MS MS007, MS009, MS018, MS194, MS102, MT900/910, MS Close of Business 21:30 MS118, MS218 21:30 *Provided timeframes for reporting may differ from the ones presented above. MS007 (MT537) Unsettled trade. Information on trade leg which was supposed to be cleared in the clearing session causing settlement failure. MS009 (MT575) Trade settlement confirmation. Information on the trade leg settled in clearing session. MS018 (MT558) Report on trade data capture, change and trade closure. MS101 (MT546) Report on internal securities instruction execution (block of selected collateral). MS102 (MT546/MT544) Report on execution of the aggregated securities instruction which resulted from clearing session. MS118 (MT569) Report on trades valuation, allocated collateral and collateralization. MS218 Aggregated report on trade data changes. Provided as a result of MTM, for the periods between MTM and clearing sessions and for the entire business day. MS194 (MT545/MT547) Delivery against Payment/Receipt against Payment confirmation. MT900/MT910 Debit/credit confirmation of aggregated internal payment order 12 execution.

13 ACCOUNTS USED IN REPO TRADES The following accounts can be used for the 1 st REPO leg settlement: For cash receipt by Collateral Giver: Trading bank account for NSD clearing (30411) For collateral selection by NSD: Beneficiary holder depot accounts (main depot accounts, trading depot accounts for NSD and NCC clearing services) which Collateral Giver indicated as eligible for collateral purposes The following accounts can be used for the 2 nd REPO leg settlement: For cash return by Collateral Giver to Bank of Russia: Trading bank account for NSD clearing (30411) For collateral return from Bank of Russia to Collateral Giver: Trading depot account for NSD clearing (by default) or any other account of Collateral Giver 13

14 COLLATERAL MANAGEMENT SYSTEM. MAIN FEATURES Collateral management is highly STP-ed Collateral selection from securities accounts/sub-accounts/additional identifiers/securities marked by Collateral Giver Collateral is selected from securities accounts/securities in accordance with Collateral Giver s priorities starting from securities with minimum haircuts Collateralization sufficiency is calculated for the trades pool Daily collateral Mark-to-Market Calculation and execution of margin calls after MTM and clearing sessions Return of excess collateral to Collateral Giver Collateral substitution on Collateral Giver s demand STP collateral substitution before corporate actions record date Opportunity for Collateral Giver to use Web-service (REST) for data export/import from/to NSD (Collateral Giver s application must be ready for such data exchange) 14

15 MARK-TO-MARKET Collateral value mark-to-market is done each business day at 10:30 (at T-1 prices) using haircuts provided by Bank of Russia Mark-to-market is done at a market price (source: Moscow Exchange); in the absence of a market price, the price is provided by National Securities Association (MIRP prices); government bonds are evaluated at latest market price MTM is done for the whole trades pool Margin call amounts are defined and margin calls are executed as a result of MTM 1. Report on trade data changes MS Report on trades collateralization MS Report on securities account movements MS Report on cash account movements МТ900/МТ910 (provided in case of margin call execution in cash) 5. Aggregated report on trade data changes for the period MS218 Bank NSD 1. Report on trade data changes MS Report on trades collateralization MS Report on securities account movements MS Report on cash account movements МТ900/МТ Aggregated report on trade data changes for the period MS Report on Collateral Givers with failed margin calls Bank of Russia 15

16 MARGINING Calculation of collateralization is done for trades pool Margin call (B) is submitted when trade exposure (trade liabilities) of the relevant party (S) is higher than current collateral value with haircuts (L 1 ) for the amount higher than threshold (X) Margin call is calculated to ensure that current collateral value is equal to trade exposure If current collateral value less haircuts (L 2 ) is higher than trade exposure (S) for the amount higher than threshold (X), collateral amount L 2 -S is returned to Collateral Giver in STP mode Over-collateralization Under-collateralization Threshold (Х) 16

17 MARGIN CALL EXECUTION Margin call is executed with securities as the first priority. In case there are sufficient eligible securities at accounts marked by Collateral Giver, NSD executes margin call and transfers securities to Bank of Russia s account immediately after margin call calculation. In case there is excess collateral, NSD transfers it back to Collateral Giver s account. Bank of Russia s account 4. Securities transfer Bank s account NSD 3. Internal instruction to transfer securities to collateral 1. Mark-to market and identification of under-collateralization 2. Securities selection to ensure that collateral value is equal to trades pool exposure 17

18 MARGIN CALL EXECUTION THIRD CLEARING SESSION In case Collateral Giver does not have sufficient securities by the end of the third clearing session but has cash in trading account with NSD, the margin call will be executed in the last (3rd) clearing session with cash. The second trade leg is reduced for the relevant cash amount. Bank of Russia s cash trading account 4. Cash transfer Bank s cash trading account NSD 3. Internal order for cash transfer 1. Mark-to-market and identification of under-collateralization 2. Securities selection to supply collateral 18

19 COLLATERAL SUBSTITUTION Carried out: By Collateral Giver: On demand (free of payment, number of substitutions is not limited) NSD (in STP mode): Before corporate actions record dates When the security is excluded from Bank of Russia s REPO basket When security s value less than haircut becomes zero When security is included into list of securities affiliated with Collateral Giver Collateral Giver indicates the following data in Substitution request: Returned security (securities) Particular trade with returned security (optional) Returned securities quantity Preferable securities to be included in collateral in exchange for returned ones Collateral substitution will be executed only if after such substitution trades exposure for the entire pool is covered by collateral 19

20 COLLATERAL SUBSTITUTION 1. 18/Z «Replacement security commitment» 1. Withdraws the paper can be specified with the number (strictly by the number) and without number (from 1 paper until all available in the transaction or the pool) 2. Withdrawal of securities can be carried out the transaction (if reference set) or out of the pool (NSD withdraws from all trades) 3. Replacing securities can be specified with the amount (upper to limit) and without number (as we can found) 4. Such as securities substitutes are selected first. If these are not enough, the selection is performed according to the composition of the basket of all transactions pool. 5. Matched securities distributed to all transactions irrespective of the pool, matter of any deals have been withdrawn 6. The order is executed if the result of his performance of the pool becomes (still) secured. 7. You can use orders for unplanned compensatory payment, then withdrawn securities may be omitted. 8. Selection is performed on the same algorithm as the compensatory contributions uses the same form of marking 20

21 COLLATERAL SUBSTITUTION 2. 18/Y «Replacement security order without selection» 1. Shares should be required to be pointed, perhaps an indication of just withdrawn or only replacement securities 2. Withdrawn and replacement securities are always indicated to the amount of the transaction and the reference section, from which are selected (which displays) securities. Marking form is not used. 3. The order is not executed in part, as the number of securities accounted clearly 4. The order is executed if the result of any pool is provided, or a security increased 5. You can use errands for unplanned manual compensatory payment, and securities can be not marked. 6. You can use errands for the exchange of collateral between transactions with different deadlines 3. Replacement operation reports 1. MS018 (MS218) changing structure (code CADJ) of every transaction security 2. MS101 a report on the transfer of securities to the marked sections on the securities account of the Bank of Russia and reverse operation. 21

22 CORPORATE ACTIONS When income (dividends, coupons, redemptions) is received on securities in collateral, it is credited to Bank of Russia s cash account and returned back to Collateral Giver provided that there are no 2 nd trade legs settlement defaults; in case trades are under-collateralized, such income is used in the last clearing session to execute margin call and cover under-collateralization In case securities credit to the Bank of Russia s depot account as a result of corporate actions causes over-collateralization, it is processed as any similar over-collateralization: excess collateral is returned to Collateral Giver. If the securities are not included in the Bank of Russia s REPO basket it is returned back to Collateral Giver (in case trades pool is collateralized) 22

23 2 ND TRADE LEG ROLLOVER In the event that Collateral Giver does not have cash for 2 nd trade leg settlement: Such trade with the current day s settlement date is excluded from the last clearing session NSD checks whether rollover can be done: Collateral at the Collateral Giver s accounts is enough to cover additional trade exposure, trades pool exposure is equal to collateral Cash amount at the Collateral Giver s account is enough to cover payment for rollover One trade can be rolled over no more than 3 times; total REPO period is not more than 365 days Bank of Russia did not submit instructions to NSD which were not compliant with rollover NSD executes rollover of 2 nd trade leg to the next business day and transfers payment for rollover to Bank of Russia immediately after last clearing session In case the rollover conditions are not met, NSD reports to Bank of Russia on trade default 23

24 DEFAULT Collateral default is lack of sufficient amount of marked eligible securities or cash sufficient to cover trades pool exposure at the Collateral Giver s accounts at 19:40 of the margin call submission date Default on settlement is lack of cash sufficient to execute the 2 nd trade leg at 19:40 of the settlement date in case rollover is not possible NSD submits special report on default to Collateral Giver and Collateral Receiver Collateral Receiver (Bank of Russia) may instruct NSD to exclude indicated trades from NSD s clearing or move the 2 nd trade leg settlement to earlier date (in case of collateral default) 24

25 Contacts Alina Akchurina Managing Director Collateral management and tri-party services, NSD Phone.: +7 (495) Andrey Vasilyev Product manager Collateral Management Development, NSD Phone.: +7 (495) Sergey Golubets Head of interaction with regional representatives and customers Phone.: +7(495) Iakusheva Anna Chief Specialist Phone.: +7(495)

26 THANK YOU!

27 DISCLAIMER This presentation has been prepared and issued by NSD (the Company ). Unless otherwise stated, the Company is the source for all data contained in this document. Such data is provided as at the date of this document and is subject to change without notice This document does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the Company, or any of its subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives, accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or otherwise arising in connection therewith This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance, achievements or industry results to differ materially from those in the forward-looking statements include, among other factors: Perception of market services offered by the Company and its subsidiaries Volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and its subsidiaries operate Changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities markets Competition increase from new players on the Russian market The ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that are popular with the Company's and its subsidiaries' customers The ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the competitiveness The ability to attract new customers on the domestic market and in foreign jurisdictions The ability to increase the offer of products in foreign jurisdictions Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based