* Euroclear opens account to settle Russian bond trades,
resolves legal issues
* Awaiting confirmation from Russian market regulator
* Move expected to boost foreign investment in bond market
By Jason Bush and Yelena Orekhova
MOSCOW, Jan 14 Euroclear is ready to begin
settling Russian treasury bond trades once it receives clearance
from the market regulator, a change that is set to open up the
market to international investors.
Head of product management Stephan Pouyat said outstanding
legal concerns had been resolved but that Euroclear was still
awaiting formal confirmation from Russia's financial market
regulator over the correct interpretation of relevant laws.
The Brussels-based bank is the largest provider of
cross-border settlement services for securities trades.
"It's important that as far as we stand today there are no
issues as such," Pouyat said in comments cleared for publication
at the end of last week. "We are expecting the FSFM (Federal
Service for Financial Markets) to confirm our mutual
understanding (of Russian laws) in the coming days."
Settlement via Euroclear of Russia's locally-issued
government bonds, or OFZs, is being eagerly awaited by foreign
investors as the move will remove regulatory barriers that have
kept most mainstream investors out of the market.
Analysts predict that settlement via Euroclear will be the
catalyst for tens of billions of dollars of new investment, as
foreign participation in the bond market rises to levels seen in
other emerging markets.
Euroclear opened an account with Russia's National Security
Depository at the end of last month, a prerequisite for settling
the bonds that followed a raft of regulatory changes in Russia.
However, the account has yet to be activated.
"The reason is that we are still awaiting formal clearance
from the FSFM on our interpretation of rules regarding asset
protection and settlement finality," Pouyat said.
Euroclear has held extensive meetings with Russian officials
over recent months to clarify key legal issues, in particular
relating to instantaneous settlement of the bonds - so-called
delivery-versus-payment - as well as protection of assets.
The two sides have now agreed on a common interpretation of
the laws that would enable Euroclear to begin offering the bonds
once Russia's financial market regulator provides formal
confirmation of the talks' outcome.
Pouyat said that according to Euroclear's discussions with
Russian officials late last year, "formal clearance would be
Although keenly awaited by investors, the onset of so-called
Euroclearability has been a painfully slow process, requiring a
thorough revamp of capital market legislation and
infrastructure, as part of Russia's drive to convert Moscow into
an international financial hub.
"In a sense it's unfortunate because we are trying to
activate the Euroclear Bank service ... in the middle of these
watershed changes," said Pouyat.
"These changes are driven by the local market for the good
of the local market, and by extension for the good of the
international capital market. So we welcome them."
(Reporting by Jason Bush and Yelena Orekhova; Editing by
Douglas Busvine and Catherine Evans)