Bank of Russia discusses securities market accounting infrastructure models with the market

The Bank of Russia will continue to work on a concept concerning amendments to the regulatory framework governing the accounting and transfer of rights to securities. This process will take into account proposals from the market given during public discussion of the following report: Improving Regulation of the Accounting Infrastructure of the Securities Market, which was posted on the regulator's website on 24 October 2018.

One of the key points of the discussion was reform to the licensing system for accounting institutions. Given the different types of users of registrar and depository services, the specifics of their activities, and their different approaches to organising processes, the Bank of Russia concluded that it would not be feasible to introduce a single licence pertaining to accounting procedures for the rights to securities. An alternative solution could involve lifting the restriction on combining the activities of the registrar with that of the depository and special depository.

Industry players do not object to developing competitive pricing where the registrar fulfils the functions of maintaining and storing the register of securities owners. That said, market participants highlighted the need for compliance with the principle of social responsibility when establishing requirements on tariffs, and the necessity of the antimonopoly authorities’ involvement in regulating registrars' tariffs.

Major custodians supported the Bank of Russia’s initiative to grant depositors the right to conduct securities lending operations. The regulator proposes granting a depositary this right should it be required by the depository agreement, as well as provided the depository is obliged to return securities at the request of the lender, and ensure that the lender receives all income on securities and other due cash payments, and execute the full range of corporate rights of the lender, connected with both the management of the company (for example, votes), and directly with the matter of the securities (for example, redemptions).

The majority of the market participants agreed that depositories shall be granted the right to provide depositors with a service involving securities segregation as an instrument ensuring competition between depositories.