Moscow Exchange has formally begun shifting its settlement period to a T+2 regime, as it pursues initiatives to modernise its market and raise competitiveness.
The shift to T+2 from the current cycle of advanced depositing, where the entire sum traded must be deposited before the trade, known as T+0, will occur between today and 1 January 2014.
From today, both T+2 and T+0 settlement will be available for the 15 most liquid names on the exchange, until 1 July, when only T+2 will be available. On this date, T+2 settlement will be extended to a larger number of securities, and by 1 January all 1,780 securities will be settled on a T+2 basis.
Meanwhile, government bonds will also be open to a T+2 settlement period from today.
“The globally recognised T+ settlement model lowers costs for market participants, increases efficiency of deployed capital and will lead to higher trading volumes,” said Alexander Afanasiev, CEO, Moscow Exchange. “This system is already in place on Moscow Exchange’s foreign exchange market, now has come the time for it to be implemented on the equities market.
Plans to change the Russia’s settlement regime to T+2 were initially mooted a year ago, and the exchange predicts all exchange participants will be able to meet the new settlement requirements by July.
“The system of pre-payment for trades played a positive role as the Russian securities market was getting off the ground. Trading in Russia is now integrated into the global financial markets and our issuers expect the latest in settlement and risk management tools,” Afanasiev said.
The move to T+2 is the most recent in a string of initiatives designed to modernise Russia’s premier exchange. This included the creation of the exchange itself after the 2011 merger of the country’s largest trading venues MICEX and RTS. Other reforms include granting Euroclear access to the country’s central securities depository to offer post-trade services for liquid government bonds, Russian OFZs, announced last year.
In Europe, EU policymakers are looking to mandate T+2 settlement across the region, to harmonise divergent settlement cycles. This process has been backed by the European Central Bank, which has developed a new settlement regime that depends upon the wide uptake of T+2. The programme, titled Target2-Securities, has wide industry support and is due to go live in 2014.