Russian investors and brokers will be able to issue and cancel depositary receipts (DRs) in Russian companies thanks to an agreement between National Settlement Depositary (NSD) and BNY Mellon.
The two companies have developed a structure by which DRs, issued by BNY Mellon on shares of Russian companies, can be converted into a share or vice versa in Russia within one business day; this process currently takes between two and three business days.
The structure will allow DRs to trade on the secondary market, settle and be used as collateral in repurchase agreements (repos) by Russian market participants in their own time zone.
“We believe it will provide an added value service for our customers,” says Eddie Astanin, chairman of the executive board of NSD. “As a consequence we expect to see increased interest from global investors working with depository receipts in the Russian securities market.”
BNY Mellon will act as custodian for NSD and depositary bank for DRs trading in the Russian market. The NSD is the central securities depository of the Russian Federation and part of the Moscow Exchange Group.
“This is a revolutionary solution for the capital markets because it’s the first time a DR will trade on its local market,” says Christopher M Kearns, CEO of BNY Mellon's depositary receipts business. “DR’s trading in multiple markets at the same time is also a relatively new concept. This is another step towards the idea of a global security which allows investors to transcend geographical borders.”