ETF admittance to Russian market: regulator’s requirements
Yields on securities of exchange-traded funds (ETFs) admitted to trades on Russian exchanges should be determined by an index from the Bank of Russia list or another foreign stock index. In addition, a stock exchange will be obliged to hire a market maker to ensure fair values and trades for such securities.
These requirements are set by the Bank of Russia in its draft ordinance on admitting foreign ETFs’ securities to on-exchange trading. The ordinance is expected to take effect on 1 October 2021.
Also, the Bank of Russia is to introduce differentiated requirements for ETFs’ three-month average net asset value (NAV) based on the type of their securities listings. A three-month average NAV of ETFs with valid contracts with any stock exchange is to be 25 million rubles and more. The figure of those with no such contract should exceed 100 million rubles. Such high thresholds for the so-called unsponsored listing are to prevent small and risky foreign exchange-traded funds from entering Russian exchanges.
It is important to note that on 1 April 2022 the Bank of Russia cancels two requirements. Firstly, foreign funds will not have to indicate in their prospectuses the Russian stock exchange they intend to trade their securities on. Secondly, the list of entities authorised to purchase such securities will not have to include a Russian broker.
All these steps will be instrumental in drawing high-quality funds listed on the top exchanges to the Russian market.
In addition, the Bank of Russia has prepared amendments to the Regulation ‘On Securities Admittance to Organised Trades’. These amendments stipulate the procedure for including foreign ETFs’ securities in quotation lists, the content of and deadlines for disclosing information on them, and deadlines for delisting securities by an exchange if recommended by its advisory body.