Starting from the aforementioned date, the Parties of the specified agreements, which are not concluded on organized trade issues, are obliged to register them with the NSD.
According to clauses 6 and 7 of Article 51.5 of the Federal Law dated 22 April, 1996, No. 39-FZ “On the Securities Market” (hereinafter – the Law “On the Securities Market”), as well as clause 2.2 of the Order of the FFMS of Russia dated 28 December, 2011, No. 11-68/pz-n “On the approval of the order of maintaining the register of agreements concluded under the material agreement (single contract), the provision of information required for maintaining the specified register and information from the above register, as well as presentation of the register of agreements concluded under the material agreement (single contract) to the federal executive authority on the securities market” (hereinafter – the “Order”), market participants that have concluded REPO deals or agreements recognized as derivatives, as well as material agreements on the financial market (ex., ISDA/RISDA), are required to provide information about the specified transactions to the self-regulating organization of the professional securities’ market participants, to the clearing organization or to the stock exchange (hereinafter - the “repositories”) in accordance with the Order.
According to clause 2.2 of the Order, no later than 9 months from the date of posting the Notice (i.e. by November 6, 2013), the Parties of the specified transactions are obliged to conclude the registration contract with the NSD and to provide information about the specified agreements concluded on the basis of the relevant material agreements on the financial market since August 11, 2011, and before signing the contract with the repository, if the liabilities under such agreements are not executed by the date the information was provided to the repository. According to clauses 7 and 8 of the Order, information containing details about transactions executed under the material agreement on the financial market should be provided to the repository no later than three working days from the date of conclusion, termination or fulfillment of the agreement.
According to the Law "On the Securities Market", registration applies to:
- REPO agreements;
- Agreements recognized as derivatives under Article 2 of the Law "On the Securities Market", and the Order of the FFMS dated March 4, 2010, No. 10-13/pz-n “On the Approval of Provision on the types of derivative financial instruments”;
- Agreements of other types concluded under the material agreement (single contract) on the financial market.
The NSD has stated its readiness to register only REPO deals and currency swap deliverables. Other transactions will be registered by the NSD at a later date, but no later than November 6, 2013.
The current legislation of the Russian Federation does not contain the definition of a single contract (material agreement). According to the FFMS of Russia (see Information letter dated November 8, 2012, No. 12-SKH-01/48238), the following are recognized as material agreements (single contract) if they:
- Contain separate terms and conditions specified by the sample agreement provisions, approved by the self-regulating organization of the professional securities’ market participants and are agreed upon with the federal executive authority on the securities market (RISDA) or developed (approved) by foreign organizations, the list of which is approved by the federal executive authority for the securities market (ISDA);
- Contain a provision stating that agreements (transactions) concluded under the terms and conditions of the material agreement (single contract) collectively represent a single contract between the Parties and that the breach of any of the terms of these agreements (transactions) is a violation of all agreements (transactions) concluded by the Parties under the material agreement (single contract). A material agreement (single contract) can be formulated in any form.
Due to the fact that the above definition is quite general, the OTC financial market participants should independently (based on their own assessment of the acceptable level of legal risk) determine the list of agreements subject to registration.
According to clause 4 of Article 15.19 of the Administrative Offences Code of the Russian Federation, any violation committed by the Party towards the agreement, order and (or) the timing of the provision of information about the agreement, including the provision of incomplete and (or) inadequate information is subject to an administrative fine for private citizens in the amount of 1,000 to 2,500 rubles; for officials – from 20,000 to 30,000 rubles; for legal entities – from 300,000 to 500,000 rubles.
According to the position of FFMS of Russia (Information letter dated November 8, 2012, No. 12-SKH-01/48238), since clause 6 of Article 51.5 of the Law “On the Securities Market” does not provide exceptions from the rules for the provision of information on agreements to any of the Parties of the agreement, it is, therefore, the responsibility of both Parties to provide the specified information, even if one of the Parties is a non-resident.
The specified registration of agreements in the repository is mandatory for all Parties of the above transactions including foreigners. Registration of agreements can also be conducted by third Parties, only if expressly authorized by the Parties of the specified transaction.
Currently, the NSD is the only organization that has stated its intention to provide registration of the specified transactions.
The terms of the NSD repository servicing procedure are posted on the NSD’s official website and involve payment for each registered material agreement (single contract) in the amount of 40 to 1,400 rubles per agreement and for the registration of information for each REPO/derivative agreement (including those signed within the framework of a material agreement (single contract)) in the amount of 60 to 2,700 rubles per agreement (collected from each Party of the material agreement). Registration of any changes and (or) amendments to the specified agreements, as well as registration of their termination is also performed for additional payment. The corresponding fee is in the amount of 40 to 1,700 rubles per change, amendment or termination of the agreement.
In conclusion, it should be noted that the introduction of the order of mandatory registration of the transactions on the OTC derivatives market was agreed upon at the international level at the summit of the G20 held in September, 2009, and is aimed at improving transparency and reducing the systemic risks of the OTC derivatives market.