KOMMERSANT. The Federal Service for Financial Markets (FSFM) plans to come out with an initiative of providing Russian companies with more opportunities for equity offerings abroad, the financial market watchdog’s head Vladimir Milovidov told the paper.
Nowadays Russian issuers, depending on their places in quotation lists, are entitled to place abroad up to 25% of their shares as depositary receipts. “Trading in Russian depositary receipts is a mature market, which enlarges our local market. This prompts FSFM to ponder over the need of the current restrictions," Milovidov says noting the restrictions could be banned at the beginning of 2012. It will be sufficient for the financial market watchdog to amend its order to make this happen. However, in this case this measure will not concern issuers classified as strategically important, whose stock offerings abroad are regulated by the special law.
According to information fr om BNY Mellon, the market of Russian depositary receipts is the second biggest worldwide by capitalization, trailing the UK, and, moreover, Russia ranks second after India by the number of depositary receipt programs, Milovidov points out. The turnover of local shares on Russian exchanges accounts for 60—70% of receipts trading on the London Stock Exchange (LSE), even despite the existing restrictions.
FSFM believes that lifting the restrictions imposed on receipt offerings abroad will not cause any liquidity run to foreign markets. “Clearing and insider laws were adopted, in addition, in the near future a unified central depositary could appear on the market following the consolidation of two largest Russian exchanges," Milovidov thinks.
FSFM plans to remove the restrictions in a gradual manner. “To begin with, we propose cancelling the restrictions for receipt offerings in the countries with whose regulators FSFM signed information exchange memoranda," Milovidov says. To date, FSFM signed such memoranda with the financial regulators of 14 countries, but this group excludes the UK regulator (FSA) and the American one, although the bulk of operations with Russian companies’ depositary receipts falls to their exchanges. Instead FSFM signed the memorandum with the German Federal Financial Supervisory Authority (BaFin). Receipts of a number of Russian issuers, e.g. those of Bank Vozrozhdenie and Sberbank, are listed on Deutsche Boerse.
FSFM has been unable to come to an agreement to sign the memorandum with the UK regulator for several years. FSFM’s way out of the deadlock could be to join the multilateral memorandum of understanding of the International Organization of Securities Commissions (IOSCO) wh ere FSFM is a full member. However, the Russian financial market regulator has so far failed to join the memorandum, as under international standards it has too few powers, e.g. FSFM has no right to request information about clients’ accounts from banks. “We’re taking efforts both to join the multilateral memorandum and enter into bilateral agreements with the British and American regulators," Milovidov says.
