Bond trading disrupted as ICSDs close to ruble settlement

Dan Barnes

International central securities depository (ICSD) Euroclear has announced it will no longer settle ruble-denominated transactions from 1 March 2022 until further notice.

The firms reported that the Central Bank of the Russian Federation (CBR) has introduced new measures leading Russia’s National Settlement Depository (NSD), the national central securities depository (CSD), to confirm that Euroclear accounts have been blocked until further notice.

All assets held in the firm’s account with NSD are frozen and the Russian depository will no longer be able to process receipt or delivery transactions, or corporate actions, including income and redemption events as a result.

For market participants using Euroclear, “external and bridge free and against payment settlement of transactions in Russian domestic securities (RU ISINs)” will not be executed until further notice while Euroclear will also no longer accept new internal free or against payment settlement instructions in Russian domestic securities (RU ISINs) as from the close of the real-time settlement process date on 1 March 2022.

In an operation notice the firm said, “We request clients to review their instructions already in the system to ensure that they are compliant with sanctions regulations. Based on the above, we will withdraw the acceptance of RUB as settlement currency and disable our account with ING Bank, our cash correspondent in Moscow pursuant to Section of the Operating Procedures of the Euroclear System, effective immediately. Therefore, clients are no longer allowed to transfer any RUB to ING Bank, our cash correspondent in Moscow in favour of your Euroclear Bank account. To the extent legally permissible, you should wire out any remaining long balances in RUB as soon as possible. As a reminder, VTB Bank had already been disabled as our Cash Correspondent.”

Rival ICSD Clearstream Banking had informed customers that Bridge settlement against Russian Ruble (RUB) was ceased prior to the start of business date 25 February 2022 leading to an automatic rejection of against payment bridge pending instructions in RUB at that time.

It also announced on 25 February that bridge settlement for all Russian domestic securities in all currencies ceased from 28 February 2022.

As a result, its clients’ pending instructions had to be cancelled bilaterally and were not subject to settlement fails penalty calculation as from business date 28 February 2022.

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