29.04.22
14:32

The Central Securities Depository: from a Local to a Regional Recordkeeping Hub

As a result of introduced sanctional restrictions, regional and local professional participants of the securities market using the services of Russian recordkeeping organizations were limited in access to the infrastructure of international capital markets. The international depositories Euroclear and Clearstream introduced restrictions on the accounts of these organizations and the possibility of conducting transactions with them.

In two months, from February 24 to April 24, to relocate foreign securities professional securities market participants with personal accounts in KSCD have submitted for registration to the Central Securities Depository about 4,300 orders for the entry and withdrawal of securities to/from nominal holding. This is 9.1 times higher than the same indicator in the previous year. As of April 24, 2022, more than half of the 4,300 orders placed via KCSD have already been fulfilled by international depositories.

During this period, 38.5 bln securities were transferred to KCSD for servicing, and 1.5 bln securities were withdrawn from service. The number of foreign securities issues serviced by KCSD increased 2.2 times from 431 to 939.

"This happens mainly due to the "repatriation" of assets of Kazakhstan investors kept in the accounts of foreign custodians, brokers and depositories. In the future, we do not exclude appearing interest from regional investors. At the same time, KCSD has worked and continues to work in strict accordance with current legislation, international KYC, AML/FT standards and complies with sanctions restrictions, " explains Edil Medeu, Deputy Chairman of KSCD.

If you look at the structure of foreign securities by country of registration (Figure) , you can notice that the largest volumes of new issues put into service in KCSD are in the USA (72%), Ireland (5%), the Cayman Islands (3%) and Great Britain (3%).

Among new foreign securities issues, more than half (63%) are shares of non-residents, one-fifth (20%) are securities of mutual investment funds, while the remaining 17% are international bonds (Figure) .

The growth in foreign securities accepted by the Central Securities Depository for servicing contributes to the expansion of KCSD’s activities and the exchange trading geography of KCSD’s clients. The clients may engage in transactions to purchase and sale of those securities not only on the international capital markets, but on the Kazakh stock market as well by making settlements in KCSD.

“The Central Securities Depository has all the resources and technical capabilities to take more securities, including foreign ones, for depository services. This is in line with our strategic goals to strengthen the position of KCSD in Kazakhstan and the region. Transfer of foreign securities to the service of the Central Securities Depository allows Kazakhstan professional participants to store securities in a more reliable environment without the risk of sanction restrictions, as well as to carry out transactions and perform settlements with these securities within Kazakhstan without withdrawing them to foreign accounting organizations, ” states Yedil Medeu, Deputy Chairman of the Central Securities Depository.

Today, the Central Securities Depository is already a local settlement hub used by investors for registering and recording transactions with securities. A wide correspondent and depository network of KCSD gives investors access to settlements on transactions with foreign securities.

The implementation of KCSD’s new business strategy for 2022–2024 and the large-scale digitalization of its activities under the existing circumstances will contribute to the accelerated transformation of KCSD from a local accounting hub to a regional one with the expansion of the zone of influence and deepening ties with international capital markets.