The session was attended by Head of MIFC Taskforce Alexander Voloshin, Head of Federal Financial Market Service (FFMS) Dmitry Pankin, Deputy Chairman of the Bank of Russia Sergey Shvetsov, Head of MICEX-RTS Ruben Aganbegyan, Head of National Settlement Depositary (NSD) Eddy Astanin, and representatives of the Ministry of Finance, VTB, Sberbank and major foreign banks in Russia.

The discussion focused on Russian stock market risks in the event of opening Euroclear and Clearstream nominee accounts at the Russian Central Depositary.

The sole contender for the Central Depositary in Russia is NSD (MICEX-RTS clearing depo). The Central Depositary is due to appear in Russia this year.

According to previous reports, market participants fear that opening Euroclear and Clearstream nominee accounts at the Russian Central Depositary will lead to all Russian trades settling abroad. Euroclear has conducted a series of investor meetings, pitching Russian securities settlement services, due to be offered 1 July, following the nominee account opening at the NSD. D.Panlin told Interfax that he sees the need to discuss the procedure and timeframes for opening Euroclear and Clearstream nominee accounts at the Russian Central Depositary.

Pankin told Interfax on Friday that according to the opposite standpoints produced by the debate, opening Euroclear and Clearstream nominee accounts could cause a liquidity drain or not cause it at all. “The danger of international depositaries gaining access is that foreigners will operate in our market through their traditional institutions. Russian securities trading could migrate from our exchange to the foreign OTC market, and added value – such as Russian depositaries and brokers’ commissions, could also be exported to the West”, said Head of FFMS.

The Bank of Russia and the NSD, as well as Euroclear/Clearstream partners VTB and Deutsche Bank were in favour of Euroclear and Clearstream’s direct access to the Russian market. Most of the other session participants, including Head of MICEX-RTS, were against.

“There was heated debate, but it all came out well for the market. We decided that Euroclear and Clearstream gaining access now is harmful for our market”, said an anonymous source.

He added that the issue of Russia’s reputation after denying access to foreign depos was also discussed.

Deputy Chairman of the Bank of Russia Sergey Shvetsov said earlier that the Central Depositary calls for reasonable and consistent steps. “If we aim to create an international financial center, let us go about it in a reasonable manner, not make it up on the spot. We need consistency: do as we planned. If we change our decisions every 6 months, we won’t see any investors coming here”, he said.

According to the session participants, Alexander Voloshin was of a different opinion. “Voloshin stated that Russia’s reputation would not suffer, as it had been established at the outset that Euroclear and Clearstream would open nominee accounts sometime after the Central Depositary opens, when our CD is competitive enough”, said a source at the session.

CEO of MDM Bank and Ex-Head of FFMS Oleg Vyugin, also present at the session, told Interfax that opening nominee accounts for depos like Euroclear and Clearstream could be possible only when the Russian CD is open, marketed abroad and accepted as central depositary by foreign regulators and major investors. “The CD Act did not provide that international central depositaries would receive nominee accounts immediately after the CD is established. The idea of the Act is creating Russia’s own settlement infrastructure to service foreign participants”, he said.

Vyugin said that more effective and competitive Euroclear and Clearstream could divert many clients if they gain direct access to Russia, thus taking away liquidity in Russian securities. “In that case, our stock market will switch to an outsourcing scheme”, he pointed out.

According to the Central Depositary Act, FFMS is to draft a list of companies eligible for nominee account opening. The Service has published a draft online, omitting Euroclear and Clearstream head companies, but including their subsidiaries. Market participants propose having the subsidiaries removed from the list.

“FFMS has to decide which central depositaries can open nominee accounts. This list could be initially restricted to CIS central depositaries, for instance”, said Vyugin.

Shvetsov said earlier that if Euroclear is denied a nominee account at the Central Depositary, they could operate through Deutsche Bank. “This will not make much difference liquidity-wise”, he stated at the time.

A source said that Euroclear processing Russian securities by proxy would lower efficiency and raise service fees. “This will effectively mean a late arrival in Russia”, he said.

Project Group №1, Ruben Aganbegyan, Eddie Astanin, Dmitry Pankin, Sergei Shvetsov, Alexander Voloshin, Oleg Vyugin