Analytical credit rating agency (ACRA) affirms the rating of CCP NCC (hereinafter NCC) at AAA(RU), outlook Stable, says an official statement issued by ACRA.
“Such high credit rating assigned by ACRA indicates that NCC is on the right track of its development and transformation into a reliable and efficient company performing central counterparty functions within the Moscow Exchange Group,”- said Eddi Astanin, Chairman of NCC’s Executive Board.
As said in the statement, the credit rating of NCC reflects its strong and stable business profile, exceptional liquidity position and high capital adequacy, which compensate for the risk profile. According to the methodology of the Bank of Russia, NCC is a systemically important central counterparty, and it serves as a clearing organization for the Russian financial market.
In ACRA’s opinion the high likelihood of extraordinary support to NCC from the state is based on NCC's importance and exclusive role in the financial services market of the Russian Federation. The Agency believes that in case of a need, financial support to NCC in the form of capital or additional liquidity can be promptly provided by the state directly or through Moscow Exchange, whose activities are significantly influenced by the state.
The Agency’s experts note the strong business profile is associated with NCC’s exclusive role as a clearing organization and central counterparty, which ensures the majority of transactions in the key segments of the Russian financial market and guarantees the fulfillment of obligations under them. ACRA positively assesses the high corporate governance and risk management standards at NCC, which enable it to accept the minimum risk relative to the scope of transactions.
ACRA notes that NCC’s capital adequacy ratio (134% as of September 1, 2021) is at comfortable level that allows to cover central counterparty risks, as well as the risks of potential impairment of NCC’s own balance sheet assets.
“The counterparty risk is mitigated by NCC through its rigid eligibility criteria for market participants and a strict margining policy (with prompt marked-to-market reevaluations)”, - as ACRA says. The structure of central counterparty protection levels combined with a set of measures to be taken in case of default of clearing participants have a positive impact on ACRA’s assessment of NCC's risk profile. The Agency also takes a positive view of the fact that in order to reduce the possibility of losses amid crisis phenomena in the economy in 2020, NCC has strengthened its risk procedures.
The assessment of NCC’s risk profile is constrained by a significant amount of assets exposed to market risk (over 300% of common capital), as well as by materialization of operational risks in 2018 and 2019. According to ACRA, the liquidity position is assessed as strong given the specifics of NCC’s operations.
Notes for editors:
Central Counterparty National Clearing Center (CCP NCC), part of Moscow Exchange Group, was established in May 2006. It operates as a clearing house and central counterparty on the Russian financial market. The Bank of Russia has assigned CCP NCC the status of a qualifying central counterparty and recognized it as the systemically important central counterparty. The primary function of CCP NCC is to ensure stability of the financial market in its authority using innovative risk management which meets international standards and provide participants with effective clearing services. The company’s equity capital amounted to RUB 74,38 billion as of October 1, 2021.
Tel. for inquiry 89162949139
National Clearing Centre (NCC, part of Moscow Exchange Group) has been granted the status of Qualified Derivatives Dealer (QDD) by the United States Internal Revenue Service (IRS).
QDD status will allow Moscow Exchange to facilitate trading in US securities for banks and brokers, as well as on the Money Market. Professional traders will be able to make better use of the margin trading mechanism on MOEX’s Equity Market for their retail clients.
With this status, NCC will be able to administer dividend equivalent income on US securities, in particular income transferred as a result of repo transactions, where the record date for the dividend is between the first and second parts of the repo. This eliminates cascading tax when income is transferred through a chain of repo transactions. Furthermore, NCC relieves the buyer under the first part of the repo transaction from having to make withholding own its own. Tax administration of dividend payments without QDD status does not comply with US legal requirements.
Irina Grekova, Managing Director for Compliance and Business Ethics at Moscow Exchange, said:
"Assignment of QDD status confirms Moscow Exchange Group's strong commitment to complying with all requirements, including US laws and regulations, and our efforts to build a culture of trust in the Russian financial market."
Georgy Uryutov, Deputy CEO at NCC, said, "QDD status will allow NCC to expand the liquidity management options for its clearing members and facilitate further growth in the scale of the entire Group's business."
Trading in international shares with settlement in RUB started on Moscow Exchange in August 2020. Today, 281 international securities are available for trading. From 27 September 2021, market participants and their clients will be able to trade international shares in US dollars. By the end of the year, the number of international shares available for trading is expected to increase to 500.
International stocks are currently traded and settled in RUB using MOEX’s robust infrastructure, which includes a qualified central counterparty and record-keeping with the central securities depository. Dividends are set in the issuers’ currency, i.e. in USD for American securities.
Individual investors may submit Form W8 used to calculate the dividend tax payable for U.S. securities.
National Settlement Depository (NSD, part of Moscow Exchange Group), will not charge a fee for the acceptance and recognition of Individual Identification Form W-8BEN when paying income on US securities until the end of January 2022. Form W-8BEN is to be completed by private investors holding US securities to avoid double taxation. When the form is in place, the tax will be 13%: 10% for the United States and 3% for the Russian Federation. If Form W-8BEN is not filed, tax will be withheld at the increased rate of 30%. The form is valid for three years. If Form W-8BEN is not filed, tax will be withheld at an increased rate of 30% under US law and 13% to the Russian tax authorities.
Central Counterparty National Clearing Centre (NCC) has launched the core unit of MAAPC, Model for Adaptive Anti-Pro-Cyclicality, designed for automatic assessment of current and prediction of upcoming market volatility.
Rinat Kirdan, NCC’s Chief Risk Officer, commenting on the event, noted that the Model is built to provide early warning signals of material changes in volatility of the various asset classes accepted as collateral by NCC. ‘We believe that these signals will provide clearing members with additional time to respond in a timely manner to changes in NCC’s margin levels. The introduction of MAAPC is NCC’s solution for a systemic problem of margining models’ procyclicality at central counterparties, which has further exacerbated during the pandemic’.
NCC intends to employ MAAPC to enhance its indicative risk rate approach, which, in turn, will help to strengthen risk protection of clearing members and especially individual investors, the number of whom grew dramatically in recent years.
Notes for editors:
Central Counterparty National Clearing Center (CCP NCC), part of Moscow Exchange Group, was established in May 2006. It operates as a clearing house and central counterparty on the Russian financial market. The Bank of Russia has assigned CCP NCC the status of a qualifying central counterparty and recognized it as the systemically important central counterparty. The primary function of CCP NCC is to ensure stability of the financial market in its authority using innovative risk management which meets international standards and provide participants with effective clearing services. The company’s equity capital amounted to RUB 74,32 billion as of September 1, 2021.
Tel. for inquiry 89162949139
Fitch Ratings affirmed Central Counterparty National Clearing Centre (NCC) Long-Term Foreign-Currency and Local-Currency Issuer Default Ratings (IDR) at 'BBB', and the Viability Rating (VR) at 'bbb', according to the press-release issued on August 18, 2021 by Fitch Ratings on its web site. The Outlooks are Stable.
“The affirmation of the Ratings to NCC equal to Russian Federation sovereign rating signifies efficiency and financial stability of NCC, which is a system-forming element of the Russian financial market”, said Eddie Astanin, Chairman of NCC’s Executive Board.
NCC is a central clearing counterparty on all MOEX exchange markets. And, as said in the press-release of Fitch Ratings, in its role as an intermediary between market participants, NCC acts as a counterparty for each trade and is ultimately responsible for the performance of trading obligations in case of the failure of one or more of the clearing participants.
The affirmation of the VR, in the words of Fitch Ratings, reflects NCC's exceptionally strong credit profile in the context of the Russian market, based on the entity's intrinsic strength. NCC has a high resilience to potential losses due to sound risk management and controls, the largely short-term nature of its risk exposures, and robust solvency, which is further protected by extra buffers and a loss cap (with any excess loss to be shared between market participants). The VR also reflects NCC's strong liquidity and solid profitability.
The full version of Fitch Ratings’s press release is available on its official website: https://www.fitchratings.com/research/non-bank-financial-institutions/fitch-affirms-national-clearing-centre-at-bbb-outlook-stable-18-08-2021
Information for editors:
National Clearing Centre, member of Moscow Exchange Group, was established in May 2006. NCC implements functions of clearing house and central counterparty in the Russian financial market. Bank of Russia assigned NCC status of a qualifying CCP and recognized it as a systematically important central counterparty. The main and basic NCC function is to ensure stability on the segments of financial market, implementing advanced and complied with international standards risk management system and providing market participants with clearing services enabling them efficiently use their funds in the market. As of 01.08.2021, NCC capital amounts to 73,4 bln rubles.