Digit —  Articles —  The crucial role of an independent infrastructure platform

The crucial role of an independent infrastructure platform


When Raiffeisen Bank International opened a foreign nominee securities account with the National Settlement Depository (NSD) last year, it was the first foreign custodian bank to offer its clients direct access to the Russian securities market. GIS Press asked Maria Krasnova, Acting Chairperson of NSD’s Executive Board, how Russia’s CSD is doing in the current environment.

Ms. Krasnova, we at Raiffeisen GIS are proud to have opened our direct link to the Russian securities market. How did you experience this joint project?

As soon as the Russian Securities Market Law allowed foreign custodians to have direct accounts with Russia’s CSD and set out the universal terms for international financial infrastructure participants to gain access to the Russian market, we witnessed a significant interest in the new opportunities. Direct depository links mean simplified market access for investors, convenience, and, no doubt, risk and cost reduction for all parties.

In that respect, we fully live up to our mission as infrastructure provider, as the foreign nominee holder concept itself came around at the same time when the CSD was established, and we believe that offering that opportunity to more clients is our crucial task. Now, Raiffeisen Bank International uses the direct access opportunity actively and is, kind of, a pioneer, which is a great advantage both for us and for the entire market. Thanks to that experienced and active participant, we will be able to promptly improve our business processes, develop technologies, and offer new cooperation opportunities to our partners in other countries.

How has NSD adapted to the Covid-19-in-duced measures?

The current situation is, no doubt, a challenge to businesses across the globe.

The health of our clients and employees is a top priority for us. In March, NSD invoked its Business Continuity Plan, and more than 90% of our employees were sent to work from home. The requirements to information security, data protection, and uninterrupted client support have become more stringent than ever before.

The home-office regime is not an obstacle to our growth. We, like other technology-oriented financial infrastructures, have long been hammering away at digitalization of our business processes and considering partially shifting to remote work arrangements. And we have managed to adapt to the new environment quickly. With the communication tools we have at hand, remote work will become the norm for many businesses. However, as soon as the quarantine restrictions are lifted, we have a plan in place to get NSD’s office back on track.

What are the market users’ biggest concerns these days?

Many companies will face drastic changes as the economic slowdown will directly affect their profits, make them develop online communications and deploy digital technologies, and result in a dramatic increase in cyber risks and higher requirements to system capacity, availability and resilience. At the same time, compliance with stricter regulatory requirements will require significant resources and give rise to demand for transparency of financial institutions. The market needs a new, successful customer experience involving convenience, maximum effectiveness, and small costs.

As the mainstay of the market infrastructure, we see growing demand for services that help reduce costs, while ensuring cyber security and being technologically advanced. Now, as never before, our independent platform plays a crucial role allowing companies to outsource some of their services to us as a reliable partner, as the capacity of their IT infrastructure is insufficient to provide these services.

Understanding the need to promptly respond to clients’ requests and needs, we also continue playing the role of an experience sharing platform and providing advice to market participants. This would shape the landscape of the future, and we are proponents of its sustainable development.

The NSD is offering a number of new internet-based services. How well are they accepted?

From the first days of the CSD, we sought to build a technologically advanced business. By law, the CSD is required to communicate with its clients in an electronic format and provide different participant categories with a wide range of accesses to services.

For instance, large companies that make trades, including abroad, require full automation of processes and straight-through processing. To communicate with such companies, we use mostly SWIFT. Those companies that need automation to a lesser extent are provided with tools for both semi-automatic and manual data processing (GUI), namely user-friendly and functional web-clients. For the purpose of remote delivery of documents required for KYC or compliance purposes or to sign up for any services, NSD’s clients may use the User Account solution. As of April, 97% of all documents submitted by clients to update their details or to sign up for services were received via that channel.

With technology advancing further, we have tapped into new segments, such as B2B2C. For example, the E-voting service designed to enable retail investors to vote electronically at shareholder meetings has added to our experience in dealing with individuals. In the current environment, there is a very high demand for the E-voting service, with the number of its registered users up 262% from last year.

Market volatility has contributed to a higher demand for remote services from retail investors who are interested in investing in non-Russian securities. A lot has been done to simplify their transactions, including the launch of a remote tax management service designed to avoid double taxation.

We also see great interest in payment services optimization, more precisely in the SWIFT gpi (Global Payments Innovation) service. It is gaining traction across the globe, and NSD, as a financial institution, has joined the SWIFT gpi initiative. By offering such a set of absolutely different, while convenient, remote services to a wide range of clients, we are pursuing a challenging but achievable goal to become a one-stop- shop platform for financial market participants.

Can you please elaborate on Transit 2.0, your new financial message exchange platform?

Transit 2.0, one of our major projects, has evolved from the existing service designed to enable securities market participants to communicate via NSD’s electronic data interchange system, but now offers a new, wider functionality.

Thanks to Transit 2.0, banks and their clients, large corporations, may use common messaging formats to communicate with each other, which contributes to cost reduction and greater convenience. Moving forward, we seek to integrate Transit 2.0 with the SWIFT Service Bureau and the Bank of Russia’s Financial Messaging System, so that different participants could use a single, user-friendly interface to communicate via different channels, thus reducing their operating costs and risks. At the moment, our partners include a variety of banks and corporations, such as Raiffeisenbank, Slavneft, Sberbank, and Gazprombank, and the list is growing.

The NSD has announced to update its trade repository format scheme. What is it all about?

Indeed, we are now making some minor changes to the trade repository’s technical scheme. However, those changes are not global, but relate mainly to the way the trade repository interacts with the central bank. More importantly, they will not affect market participants.

Which new projects keep you busy at the moment?

The CSD’s project pipeline includes projects aimed at developing services related to non-Russian open-end mutual investment funds, expansion of our network of correspondent banks as a cost management tool, offering new opportunities for foreign investors’ access to the Russian market and Russian investors’ access to foreign markets, as well as continued development of digital channels for communication with clients.

As a critical element of the market infrastructure, NSD has been involved in a number of large-scale projects that required setting new standards and launching new platforms. Along the way, NSD has gained a unique expertise that we can now offer not only in the securities market, but also beyond. Today, our expertise is much needed in regulator’s projects such as the pension industry reform and the launch of Marketplace, as part of which NSD is planning to act as Registrar of Financial Transactions (RoFT). Those projects are strategic for us. Their implementation will require using NSD’s key competencies, such as capability to handle big data, data protection, cyber security, high system performance, and operational interaction with the regulator.

The interview was issued in GIS Press, July 2020

Contact us
Leave your message using the feedback form
Subscribe to newsletters
Enter your email address in the form below
Спасибо за подписку
Пожалуйста, проверьте почту и подтвердите ваш email
Вы уже подписаны
Email %email% уже подписан на рассылку