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National%20Clearing%20Centre

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Organization of trade: foreign currency, government securities, bonds, ... Currency band regulation. Online matching of clearing participants' positions ... – PowerPoint PPT presentation

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Title: National%20Clearing%20Centre


1
National Clearing Centre
2008
2
National Clearing Centre (NCC)
  • NCC was incorporated on October 24, 2005, as a
    closed joint-stock company
  • NCCs shareholders are
  • Moscow InterbankCurrency Exchange, 99.329
  • National Depository Center, 0.671
  • Authorized capital
  • in 2008, the authorized capital will increase to
    1.735 million roubles ( EUR 49 million).
  • today, the equity is 824,4 million roubles,
    including the authorized capital of 700 million
    roubles.

3
NCC in the MICEX Group
MICEX
  • Organization of trade foreign currency,
    government securities, bonds, standard contracts.
  • Clearing in government securities markets (stock
    and futures markets)
  • Engineering project support and development of
    new IT products

NCC
National Mercantile Exchange
  • Government intervention inthe grain market
  • Trade petroleum products, grain
  • Clearing operations and trade settlements

MICEX Settlement House
MICEX Stock Exchange
NDC
  • Organization of trade in stock, corporate
    andmunicipal bonds,units in mutual funds, stock
    index futures
  • Cash settlements
  • Depository operations

Regional currency and stock exchanges
Saint Petersburg
Yekaterinburg
Samara
Nizhni Novgorod
Novosibirsk
Rostov-on-Don
Vladivostok
4
NCCs Operating Principles
  • NCC is the central counterparty
  • control of collateralization of executed
    transactions
  • control of performance of obligations based on
    PVP and DVP principles
  • ongoing maintenance of NCCs liquidity,
    specifically through the retention of liquidity
    suppliers
  • NCC takes risks associated with possible
    non-performance of clearing obligations by
    clearing members

5
Basic Elements of NCCs Risk Management System
  • Limitation of traded instrument price
    fluctuations
  • Preliminary depositing of participants funds
  • Availability of guarantee funds
  • Fixing of various types of limits
  • Setting requirements for the clearing
    participants financial standing and control over
    it
  • Mechanism for the substitution of an unfair
    participant by the Bank of Russia
  • MICEXs of 2.6 billion rubles guarantees
  • NCCs capital

6
From December 10, 2007,National Clearing Centre
operates as central counterparty in the MICEX FX
market
7
NCC TODAY
  • NCCs total balance as of April 1, 2008, is 37,8
    billion roubles
  • Total balance of derivative transactions as of
    April 1, 2008, is 167.8 billion roubles
  • USD- and EUR-denominated account balance as of
    April 1,2008, in the rouble equivalent exceeds 10
    billion rouble
  • The total number of banks-clearing participants
    is 464, including 338 Moscow banks and 126
    regional banks
  • 228 banks participate in the USD 4,6 million Risk
    Covering Fund
  • The equity is 824,4 million roubles, including
    700 million roubles of the authorized capital
  • Daily turnover of FX trade in March reached USD 7
    billion

8
Volumes of Trade in the Foreign Exchange Market
Involving the Central Counterparty
January 2007 February 2007 March 2007 January 2008 February 2008 March 2008
Total trade volumes (roubles in billions) 1,466.3 2,093.6 2,028.9 2,749.4 3,468.3 2,484.5
Including EUR-denominated volumes 39.6 45.9 37.3 90.9 144.4 94,8
9
Correspondent Banks
  • JPMorgan Chase Bank, New York
  • The Bank of New York, New York
  • Deutsche Bank, Frankfurt/Main
  • VTB Germany, Frankfurt/Main
  • BELVNESHECONOMBANK, Minsk
  • PRIVATBANK, Dnepropetrovsk
  • Bank TuranAlem, Almaty

10
NCCs Regional Settlement Model
Nizhny Novgorod
Saint Petersburg
Novosibirsk
Vladivostok
Moscow
Samara
Yekaterinburg
Rostov-on-Don
11
Development of NCCs Clearing Operations
  • Introduction of the central counterparty in the
    REPO government securities market
  • Upgrading of risk management system
  • Broadening the range of services provided
  • Extension of clearing to other financial market
    segments

12
NCC in the REPO Government Securities Market
  • NCCoperates as the central counterparty
  • Deals are concluded under the following terms
  • full or partial preliminary collateralization for
    the first part of a repo
  • partial preliminary collateralization for the
    second part of a repo
  • REPO deals are concluded upon matching of
    dealers requests and confirmations from NCC
  • The first and second parts of REPO deals are
    settled upon transaction settlement requests
    received from dealers and NCC

13
Improvement of Risk Management System in the
Currency Market
  • Setting of the exchange rate fluctuation limits
    and preliminary depositing standards depending on
    the external market situation adjusted for the
    current composition of two-currency basket
  • - symmetric increase of the exchange rate
    fluctuation limits with respect to the central
    rate of the current trading day and a
    proportionate increase in preliminary depositing
    standards
  • - non-symmetric setting of the exchange
    rate fluctuation limits with respect to the
    central rate of the current trading day towards
    the external market trend without changing
    preliminary depositing standards.
  • Increase of the Risk Covering Fund
  • Setting of various modes of operations performed
    by trade participants depending on the assessment
    of the current market volatility and the status
    of their open positions
  • Insurance of the NCC operational risks
  • Extension of Risk Management System to various
    financial market segments
  • Establishing of the Risk Committee and arranging
    of its functioning

14
Modes of Operations
Participant will have the opportunity to operate
depending on the assessment of the current market
volatility and the status of his open market
positions Basic mode the participants
operations are not limited, for collateral fully
covers potential exchange rate risk associated
with his positions Restricted mode with the
scale of the participants potential losses
reaches the amount of collateral, the participant
will have the opportunity to operate only for
closing the existing positions Position
close-out mode if the participant fails to
allocate collateral or its amount is not
sufficient, the participants operations are put
on hold and his position is closed out during the
trading session.
15
NCCs Services Development
  • Setting the limits of EUR-denominated net
    operations
  • Currency band regulation
  • Online matching of clearing participants
    positions
  • Intraday crediting of clearing participants to
    facilitate their obligations settlement
  • Maintaining a single ruble-denominated position
    of participants in exchange markets
  • Offering clearing participants an opportunity
    to settle securities transactions in foreign
    currency
  • Offering participants an opportunity to execute
    transactions in the stock market with partial
    preliminary collateral
  • Creating a single clearing participants
    portfolio to settle operations in various
    financial market segments
  • Beginning of operation in the interbank credit
    market

16
REGULATION OF CLEARING OPERATIONS
17
Todays Regulatory Framework for Clearing
Operations
  • Clearing operations are governed by
  • - Federal Law No. 39-FZ of April 22, 1996 On
    the Securities Market, which defines clearing
    and clearing operations only in the securities
    market
  • - Resolution of the Federal Commission for
    the Securities Market No. 32-ps of August 14,
    2002, which only defines ordinary, multilateral
    and centralized clearing in the execution of
    securities transactions
  • - Regulations of the Central Bank of the
    Russian Federation No. 219-P of March 25, 2003
    and No. 220-P of February 25, 2003, which govern
    clearing in the government securities market.
  • Standards applied to clearing in the securities
    market are used for clearing in the currency and
    government securities markets.

18
Improvement of Clearing Laws in Russia





































  • The central counterpartys (CCP) legal status
    defining will allow to introduce the CCP in the
    financial market as an independent
    infrastructural entity which concludes
    transactions for clearing purposes without being
    a trade participant and is rewarded for
    rendering clearing services.
  • Determination of the legal status of deposited
    and blocked funds (property) of clearing
    participants for securing their obligations will
    allow to reduce the risk they litigate the use
    of the above-mentioned funds by the CCP.
  • Introduction of separate legal status and usage
    mode for clearing accounts to prevent them from
    being used in the bank account mode envisioned by
    the Civil Code of the Russian Federation,
    including unconditional cash debiting upon the
    clearing participants request. The clearing
    institution needs to have the right to withhold
    the clearing participants funds until its
    obligations are fully fulfilled.

19
Improvement of Clearing Laws in Russia (contd)
  • Amendment to the Laws On Joint-Stock Companies
    and On Limited Liability Companies stating that
    the standard for major and related-party
    transactions will not apply to transactions
    concluded in the course of organized trade, which
    will reduce the risk of litigation of the
    above-mentioned transactions by market
    participants, including transactions with the
    CCP.
  • Establishing the possibility and procedure for
    using assets of the Risk Covering Fund and
    guarantee funds in full volume.
  • Introduction of the procedure for the fulfillment
    of obligations by the clearing participant in
    case of his bankruptcy or license withdrawal will
    allow to terminate the obligations of such
    participant only after their fulfillment.
  • Establishing legal grounds and procedures for the
    cancellation of clearing service agreement will
    allow to cancel such agreement by mutual consent
    between the parties rather than at any time as
    provided for by Chapter 39 of the Civil Code of
    the Russian Federation.

20
Improvement of Clearing Laws in Russia (contd)
  • Establishment by law of the procedure and new way
    for termination of obligations in the course of
    clearing will allow a clearing institution to
    define and terminate the obligations of clearing
    participants.
  • None of the ways for termination of obligations
    currently envisioned by the Civil Code of the
    Russian Federation allows the clearing
    institution which is not a party in the
    transaction to terminate the clearing
    participants obligations. This does not allow to
    conduct ordinary or multilateral clearing
    operations. Clearing with the CCP is not
    envisioned by laws of the Russian Federation.
  • Centralized clearing operations can only be
    performed using the assignment of rights what
    requires the consent from the other party in the
    transaction. The clearing centre has to track the
    rights and obligations of the party so as not to
    become the all-in-one debtor and creditor in the
    result of assignment.

21
National Clearing Centre
  • Thank you for your attention!

Our address Russia, 125009, Moscow,
Bolshoy Kislovsky Pereulok,
13 Telephone 7 (495) 782 97 94 E-mail
info_at_nkcbank.ru Internet
www.nkcbank.ru
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