Moscow Exchange, Interfax automate classification of securities for retail investors
The Moscow Exchange and Interfax Group have officially announced the launch on October 1 of a solution for marking financial instruments that will enable brokers to automatically divide securities into those intended for qualified investors and those intended for unqualified investors without testing and after testing.
The marking is intended to delimit the access of various groups of investors to securities depending on the level of risk in line with the changes to federal law 39-FZ that went into effect on October 1.
The new service was battle tested for two months in trials that concluded last week.
The solution was developed on the basis of the RU Data (Reference United Data) platform, a joint project of the Interfax Group and National Settlement Depository (NSD), and integrated into the Moscow Exchange's trading system. The platform brings together all available information on the Russian securities market, including benchmark data confirmed by the accounting system; and information from issuers and registrars, including real-time information. RU Data maintains a unified and reconciled database on 80,000 financial instruments.
The new service will make it possible to mark all Russian securities, as well as all foreign ones represented in RU Data. The service includes a system to control and update data. For example, within 24 hours it will take into account all regulatory changes.
The "marking of complex financial instruments is done directly in the Moscow Exchange's trading system, which makes it possible to include information on the status of securities in the business processes of market participants and eliminate the chance of errors," Moscow Exchange Equity Market Director Boris Blokhin said.
"A field has been added to the system's Interfax that indicates the category of the instrument: accessible to all investors without restriction; for qualified investors or for investors on the condition they successfully passed testing with the specification of the test number. This way, professional participants can on their side automate the demarcation of investors' access to purchasing securities depending on their status. Data on marking go into the settings of broker systems and in the event of an attempt to activate orders to conduct transactions with instruments to which access requires testing from clients who have not undergone this test, such orders are automatically declined by the broker with the system," Blokhin said.
"The uniqueness of the technological solution that we have implemented lies foremost in the development of an elegant algorithm that reflects the text of the federal law as precisely as possible and makes it possible to use an expanded collection of data on an instrument to determine its status, for example, check the issue prospectus if this involves procedure or the formula for determining return," Interfax Group Director of RU Data Development Anatoly Chernov said, adding that "before the development of the service, serious methodological work was done, regulations were translated into machine-readable form, and approaches were agreed with the Moscow Exchange, the NFA and NAUFOR."
"In the process of practical work on marking and associated services, questions naturally arose, for example among Russian issuers of bonds with structured income. Therefore, sending questions to the regulator to clarify certain interpretations became part of the work on developing marking of complex financial instruments and this work is continuing," Chernov said.
The successful implementation of the marking project was assured by the existence of RU Data's high-quality, verified database with the most detailed data on financial instruments, which virtually all professional participants already use in their work, Chernov said. The platform, which has become a benchmark for the Russian securities market, is being continually improved and is checked daily by experts.
For issuers who are preparing securities for issue, the new service has a "marking calculator" that makes it possible to preliminarily assess in what category they belong, Chernov said. In order to increase the transparency of the system, Interfax and the Moscow Exchange are now developing an expanded version of the calculator that makes it possible to see the history of instruments' marking changes and the rationale for their inclusion in a given category.