WFC – CSD Collaboration

22 May 2015

CSD Collaboration World Forum of CSDs (WFC) Tanya Knowles WFC Secretariat

Cancun, Mexico May 2015

About the World Forum of CSDs

3

• Formed in April 2011 representing over 125 CSD world wide

• Association of associations which is comprised of the five regional CSD associations:

• Asia - Pacific Central Securities Depository Group (ACG)

• Americas’ Central Securities Depositories Association (ACSDA)

• Association of Eurasian Central Securities Depositories (AECSD)

• Africa & Middle East Depositories Association (AMEDA)

• European Central Securities Depositories Association (ECSDA)

• WFC Board consists of 10 members.

• Two senior representatives from each of the five regional CSD associations

• Preferably the Chairmen and Vice-Chairmen of each association.

• Supported by the secretariat’s / executives on the regional associations

Main Purpose of the WFC

4

Collaboration

Inter-association communications and information sharing

Represent the CSD community with

industry stakeholders including CPSS-IOSCO, ISSA, World Bank, AGC and Thomas Murray.

Support region hosting World Forum of CSDs

Conference and Agenda Steering

Committee

Input on behalf of the regional CSD

associations to international bodies

Cooperation through Task Forces

5

Task Force One: WFC Single Disclosure Task Force Update

• Aimed at harmonised disclosure reporting format for the CSD industry for the AGC questionnaire and the CPSS-IOSCO Disclosure Framework.

• Project has been supported by CPSS-IOSCO Drafting Committee and AGC representatives

• With the support of the regional associations, the Task Force currently procuring a suitable online tool for the implementation of a solution in 2015.

Task Force Two: WFC CPSS-IOSCO Training Task Force

• Address the common gaps identified by CSDs having completed the assessment of the CPSS-IOSCO Principles and sharing this information

• AMEDA hosting the first training event in collaboration with the WFC from 16-18 November 2015 (Abu Dhabi, UAE)

• The training is targeted at the staff within CSD and regulators who are directly involved in working on the CPSS-IOSCO Principles on behalf of their organisation including non-AMEDA members

Other Collaboration

6

International Securities Services Association (ISSA)

• The WFC is represented on the ISSA Operating Committees

• Provided input to the ISSA Working Groups on a number of their reports including Collateral Management,

Shadow Banking, Corporate Actions, Out of Network Assets, Regulatory Impacts and Risk Management

CPSS-IOSCO

• Actively involved in providing feedback to CPSS-IOSCO on behalf of the CSD industry and made formal

submissions in respect of the Final CPSS-IOSCO Disclosure Framework & Assessment Methodology and the

CPSS-IOSCO consultative report on the Recovery of FMIs

Swift

• Engagement with SWIFT on the services to CSDs and collaboration moving forward

Association of Global Custodians (AGC)

• Feedback on the AGC questionnaire and Single Disclosure Project

WFC 2015 Agenda

• Steering Committee created to formulate the topics and agenda for WFC 2015 and will begin work on the WFC

2017 event

Key Benefits and Challenges of Collaboration for the WFC

7

Benefits:

• Sharing knowledge, expertise and experiences

• Greater credibility with outside stakeholders

• Pooling resources to have a greater impact

Challenges:

• Resource constraints

• Priorities and commitment of stakeholders

• Gaining consensus amongst all stakeholders

Communication Initiatives

8

Thank you - World Forum of CSDs (WFC) Tanya Knowles – WFC Secretariat

ACG ACSDA AMEDA AECSD ECSDA

Shanghai-Hong Kong Stock Connect

CSD Collaboration World Forum of CSDs (WFC) Conference

Cancun, Mexico, May 2015

Liu Jian (Jason)

CSDC

What’s the SHHK SC?

11

Shanghai-Hong Kong Stock Connect (SHHK SC) is a mutual market access

program, through which investors from Chinese Inland and Hong Kong

can trade and settle shares listed on each other’s market via the exchange

and clearing house in their local market.

Part I: Trading Connect

HKEx and SSE set up SPVs in SH and HK respectively.

SPVs become a special mem. / non-mem. trading participant of HKEx and SSE respectively.

The Exchanges and SPVs act as order routing facilitator for orders placing.

12

Hong Kong stock orders Inland A-share orders

13

Hong Kong Chinese Inland

CSDC

HKSCC

Inland Investors Foreign Investors

HKSCC

Participants CSDC

Participants

HKSCC's Securities Account

CDSC's Securities Account

CSDC and HKSCC become member of the other party.

CSDC and HKSCC open securities account with each other and hold

securities for home participants/investors as nominee

CSDC and HKSCC are responsible for clearing and settlement

obligations arising from the Connect towards each other

Part II: CCP & CSD Connect

14

Market Performance

0

300

600

900

1 200

SSE Turnover (bil. RMB)

0

100

200

300

HKEx Turnover (bil. HK$)

0

5000

10000

15000

20000

25000

30000

0

1000

2000

3000

4000

5000

20

14

.04

.11

20

14

.06

.11

20

14

.08

.11

20

14

.10

.11

20

14

.12

.11

20

15

.02

.11

20

15

.04

.11

SSE Composite Index（Left） Heng Seng Index（Right）

15

Quota Usage

-60,00

-30,00

0,00

30,00

60,00

90,00

120,00

14.11.17 14.12.1 14.12.15 14.12.29 15.1.12 15.1.26 15.2.9 15.2.23 15.3.9 15.3.23 15.4.6 15.4.20

Shanghai Connect (100M RMB)

(10,00)

10,00

30,00

50,00

70,00

90,00

14.11.17 14.12.1 14.12.15 14.12.29 15.1.12 15.1.26 15.2.9 15.2.23 15.3.9 15.3.23 15.4.6 15.4.20

Hong Kong Connect (100M HK$)

16

Why succeed?

Match with China’s national policy of reform and opening-up and the

strategic plan of the internationalization of the RMB

Substantial support of regulators and relevant authorities from both

sides

Concerted collaboration between exchanges and clearing house

Other factors: same time zone, close geography, familiar language,

tight political and economical relationship, etc.

www.chinaclear.cn

Thank you!

Liu Jian (Jason)

China Securities Depository and Clearing Corporation Limited

jianliu@chinaclear.com.cn

WFC2015 CSDS COLLABORATION

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Eddie Astanin Chairman of the Executive Board, NSD Association of Eurasian Central Securities Depositories (AECSD) 22 May 2015

19

New capital inflow

Growth of the market liquidity

Rapid infrastructure development

Liquidity outflow via links

Increasing competition with local custodians

CASE: THE OPENING OF THE RUSSIAN GOVERNEMENT BONDS MARKET

EXPECTATIONS WORRIES

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CASE: THE OPENING OF THE RUSSIAN GOVERNEMENT BONDS MARKET COLLABORATION WITH MARKET COMUNITY

ICC AECSD IFC

Foreign Nominee Concept

RU

SSIA

N M

ARKET Taxation and disclosure

Glo

bal Cust

odia

ns

Invest

ment

Banks

CIS

CSD

s

Regula

tor

Corporate Actions (e-proxy-voting, ISO 20022, e-voting, cascading)

Golden Source (legal status) IC

SD

s

Loca

l Part

icip

ants

“Central Bank Money” settlement

Mark

et

Expert

s

Account Structure

Tariffs

21

CASE: THE OPENING OF THE RUSSIAN GOVERNEMENT BONDS MARKET

Source of yield info: Ministry of Finance, Russia

(1) ICSDs entered the market

MARKET IMPACT:

April 2012 – decrease of liquidity

on fear that ICSDs will not be able

to enter Russian market

October 2012 - trading volumes

have increased since

announcement of ICSDs links

150 bps drop in OFZ yield over 5

months following ICSDs entry

Inflow into OFZ market from

international investors – USD10 bln

(1)

OFZ secondary trading volumes on Moscow Exchange have increased since ICSDs launched their services

-

10

20

30USD bln

Main Trading Mode Negotiated Deals

RUB / USD is 32.3451 as of 30.09.2013

22

Political project - IFC (CBR, MoF)

Strong international experts support (ICSDs, CSDs and community - ICC) …

Resistance of market groups Gaps in market practice, legislation and technologies Geopolitics makes regulators to shift their focus toward other subjects

(currency, oil prices) Decrease appetite of the international investors to equity market and

corporate bonds market

CASE: THE OPENING OF THE RUSSIAN GOVERNEMENT BONDS MARKET

Factors of success

Challenges 4%

6% 7%

13%

20%

25% 28%

24% 25% 24% 22% 26% 24%

19%

0%

5%

10%

15%

20%

25%

30%

J-12

M-1

2

M-1

2

J-12

S-1

2

N-1

2

J-13

M-1

3

M-1

3

J-13

S-1

3

N-1

3

J-14

M-1

4

M-1

4

J-14

S-1

4

N-1

4

J-15

OFZ share of balance in foreign nominee accounts,

RUB bln and % (as of the end of the quarter)

107 203 655 799 818 869 894 815 945 898 387 877

0,00%

0,01% 0,01% 0,01% 0,01%

0,01%

0,01%

0,09% 0,10%

0,15%

1Q14 2Q14 3Q14 4Q14 1Q15

C&M bonds and equity share of balance in foreign nominee accounts,

RUB bln and %

C&M bonds Equity

0,9 19,9 0,1 0,8

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CA technologies (ISO 20022, e-voting) in collaboration with CSDs of Turkey and India

Repeat the success story with CIS markets (Armenia, Belorussia and etc.)

Potential links with Asian CSDs (Hong Kong, Singapore, China, South Korea, Vietnam, Japan, etc.)

NEXT FUTURE

10

37

69 60

52 38

63 71

Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15

Russian securities: e-proxy-voting

(number of corporate actions), units (per reporting period)

THANK YOU! +

DISCLAIMER • This presentation has been prepared and issued by NSD (the “Company”). Unless otherwise stated, the Company is the source for all data

contained in this document. Such data is provided as at the date of this document and is subject to change without notice • This document does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a

solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company

• The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the Company, or any of its subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives, accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or otherwise arising in connection therewith

• This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance, achievements or industry results to differ materially from those in the forward-looking statements include, among other factors:

– Perception of market services offered by the Company and its subsidiaries – Volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and

its subsidiaries operate – Changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities

markets – Competition increase from new players on the Russian market – The ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that

are popular with the Company's and its subsidiaries' customers – The ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the

competitiveness – The ability to attract new customers on the domestic market and in foreign jurisdictions – The ability to increase the offer of products in foreign jurisdictions

• Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based

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Panel on CSDs Collaboration IBERCLEAR case study: REGIS-TR

Cancún, 22 May 2015

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

Different methods of collaboration:

Business

Oriented

High

Low

Number

of CSDs

High Low

ECSDA

Liquidit

y

Alliance

Sponsor

s

for T2S

LUM

REGIS-TR Highly Business Oriented

Collaborations:

• REGIS-TR (2 CSDs)

• Link-Up Markets (11 CSDs)

Low Business Oriented Collaborations:

• Liquidity Alliance (5 CSDs)

• Sponsors for T2S (24 CSDs)

• ECSDA (41 CSDs)

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

Case study: REGIS-TR

• Project began in 2011 by 2 CSDs: Iberclear and Clearstream.

• Trade Repository EMIR compliant

• A Joint-Venture Company was created located in Luxembourg.

• SLAs have been agreed between founding shareholders and REGIS-TR

Company.

• A Spanish branch has been opened.

• The IT service provider is Iberclear.

• Commercial effort is in charge of Clearstream.

• February 2014 was the Reporting Start Date.

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

2014 REGIS-TR figures

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

REGIS-TR analysis (i)

• Business oriented Company

• Only 2 CSDs strongly involved

• 2 complementary cultures

• Company created with 3 employees

• Currently 14 members of the staff

• Has achieved critical mass

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

REGIS-TR analysis (ii)

• Clear market niche

• Clear competitor

• Clear clients

• Regulatory requirement

• 2 CSDs sufficient for business

• Clear definition of roles between partners

• Iberclear as IT provider is not a problem

• Powerful commercial force from Clearstream

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May 2015

Panel on CSDs Collaboration

IBERCLEAR case study: REGIS-TR

Tramontana, 2 Bis - 28230 Las Rozas

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