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Blocking Assets at NSD: The Right, But Belated Decision


Let’s start with history. On February 28, Euroclear blocked NSD’s nominal holding account. What did it mean? This meant that settlement of all securities registered with NSD, for which Euroclear was the parent depository, with counterparties that did not have an account with NSD became impossible. In addition, it became impossible to receive dividends, coupons on such securities, and for bonds and “body” upon redemption, provided that the issuer of the security does not do this directly with NSD.

And taking into account the T+2 calculations, the blocking has been on since February 24th.

At the same time, BONY did not block the account of BEB’s nominal holding. In this context, Euroclear’s “explanation” of motives looked ridiculous: NSD’s account was blocked because it could contain securities belonging to persons (both legal entities and individuals) who fell under sanctions.

Last week, Euroclear published a “more logical” explanation: NSD is controlled by the Central Bank and state-owned banks of the Russian Federation. Indeed, through “subsidiary” relations, about 30% of NSD is owned by the Central Bank and state banks. But how 30% and “control” are “connected” is not clear to me.

What happened? Trading in foreign shares and Eurobonds on the Moscow Exchange turned out to be completely blocked, since these securities were kept in NSD and Euroclear was their parent depository. And in St. Petersburg the situation turned out to be twofold: securities accounted for in the BEB. it remains possible full-fledged trading for clients of brokers who have not fallen under sanctions, and securities accounted for by NSD can only be traded with other clients of Russian brokers. Why second? Because any broker on the Moscow Exchange has an account with NSD for accounting for clients’ securities, and almost all brokers that made it possible to trade on St. Petersburg also gave trading on the Moscow Exchange.

What was the surprise for me? And the fact that some of the securities purchased and sold in St. Petersburg by brokers were accounted for in the NSD, and not in the BEB. The only reasonable explanation for this for me is the beginning of securities trading on the Moscow Exchange and the convenience of accounting in one place. In this context, it would be interesting to look at the place of accounting for those securities that were traded on St. Petersburg and were not traded on the Moscow Exchange.

Let’s look at the situation from the point of view of a client of a Russian broker – a buyer of securities in St. Petersburg, where trading continued, with the exception of brokers that fell under sanctions. Of course, I do not understand the motives for such a decision in the circumstances, but this is not about that. When purchasing securities, he does not have the opportunity to know who his counterparty is and where the securities he purchases are accounted for. Thus, he can purchase securities accounted for by NSD, with all the ensuing restrictions. And we have a clear misleading of the buyer, which, by the way, allows him to challenge the transaction in court on the basis of the Civil Code.

And, as we have already found out above, there could be no other buyers for securities registered with NSD.

What was the right way out under the circumstances? It is obvious: it is necessary to make two “glasses”: for securities registered with NSD, and for the rest. In the first one, only clients of Russian brokers could trade with each other, in the second one, trading could take place in the usual mode with the provision of liquidity from BATS, where BEB is a broker.

And BEFORE this separation, papers registered with NSD had to be blocked.

Was it done in St. Petersburg? No. BUT! There was no blocking from the side of the Central Bank. Thus, for a long time, the clients of the Russian broker – buyers of securities in St. Petersburg, were within the framework of delusion. And those of them who purchased securities registered with the NSD turned out to be infringed in their rights, not being able to know about it at the time of the decision. So a timely blocking by the Central Bank would have avoided this situation. But we have a belated lock.

Why was she late? Well, this is a question for the Central Bank.

My profession is a journalist, but my hobby for 8 years has been studying Forex investing and trading. During this time, I managed to gain extensive experience in investing and trading cryptocurrencies and double my capital in the Forex market. To be the author of this magazine, the site owners invited me to participate in one of the 2020 trading webinars, and I will try to reveal the most relevant crypto market news for you.

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