The MICEX Board has decided to introduce, as of 10 December 2007, a new order of purchase and sale of foreign currency with the use of centralized clearing. Practically, this will mean the beginning of the work of the Exchange’s subsidiary, joint-stock commercial bank The National Clearing Centre (NCC), which will be Russia’s first and largest credit institution specializing in clearing on exchange-based markets. This includes determining obligations of participants in clearing, offsetting these obligations and organizing the execution of obligations for transactions in compliance with the RF law.
According to the MICEX President Alexander Potemkin, “the launch of the new pattern of trading in foreign currency with the use of centralized clearing within the MICEX Group will help to improve the reliability of the risk management system, make relations among participants transparent and, in future, enable participants to use their financial assets more effectively. This new financial institution can also become a good basis for the integration of the exchange infrastructure of the Russian financial market.”
The transfer of clearing in the MICEX Group’s exchange-based currency market to the National Clearing Centre requires the introduction of a new pattern of relations among participants in trading, which involves the participation of a central counterparty. In this new pattern of relations the National Clearing Centre will act as counterparty for all transactions and provide centralized clearing for the results of trading. In its turn, the MICEX will organize and hold trading in the Unified Trading Session and act as the technological center.
The division of functions between the MICEX and the NCC required the updating of the regulatory and contractual framework of the exchange-based currency market. The new contractual framework of the currency market includes the “Agreement of the Order and Terms of Purchase and Sale of Foreign Currency with the Use of Centralized Clearing” (the Trade Agreement). This document defines the order and terms of operations in the UTS as well as the responsibilities of the parties in the course of concluding transactions and fulfilling obligations. Besides, the Trade Agreement establishes the amount of the MICEX’s coverage (2.6 billion rubles) for the NCC’s obligations for transactions concluded in the course of trading in the UTS. The MICEX provides this coverage in the case of the NCC’s failure to fulfill its obligations.
At present, the MICEX is completing the processing of documents coming from participants in the currency market. To obtain access to trading and clearing under the new conditions they have to sign a package of documents, including a supplement to the Trade Agreement, which came into effect on 8 August 2007 after it had been signed by the Bank of Russia, the MICEX, the National Clearing Centre and such leading operators of the currency market as Alfa Bank, VTB Bank, Bank of Moscow, Vnesheconombank, Gazprombank, Deutsche Bank, MDM Bank, MMB, Sberbank, Citibank and Raiffeisenbank Austria.
Find more information on this issue in the section “Currency Market/Innovations in the Organization of Trading and Settlements in the UTS” of the MICEX web site (http://www.micex.ru/currency/ets_n.html) and in the section "How to Become a Participant in Clearing” of the NCC web site (www.nkcbank.ru).
Brief information
: The National Clearing Centre (NCC) was established on 24 October 2005. Its authorized capital is 700 million rubles; its stated capital is 1.5 billion rubles. Shareholders in the NCC are the MICEX (99.329% of the authorized capital) and non-profit partnership The National Depository Center (0.671%). The NCC holds the Bank of Russia’s license to carry out banking operations in Russian rubles and foreign currency (without attracting individuals’ deposits). The NCC specializes in clearing in exchange-based and OTC markets, which includes determining the obligations of participants in clearing, offsetting these obligations and organizing the execution of obligations for transactions in compliance with the RF law.
