St. Petersburg Exchange carried out settlements with trading participants on transactions with foreign securities concluded in early November. Kommersant’s sources confirm that the calculations have been made, but note that it is not yet possible to withdraw suspended funds from the accounts. Clients may not even see money in their accounts due to “manual” operations by the broker. Investors expect permission to resume transactions with frozen assets in accordance with the issued OFAC license until January 31, 2024. However, most of the blocked resources are unlikely to be returned before the end of the year.
On the evening of November 21st St. Petersburg Exchange announced, that the day before “carried out settlements with trading participants on transactions with foreign securities concluded since November 1.” Earlier in the day, four Kommersant sources also reported that the exchange had carried out settlements for transactions concluded on November 1 and 2. St. Petersburg Exchange suspended trading on November 2 at 18:00 after it was included in the American SDN List. Later, the trading platform announced that settlements would begin on November 17, but the process was delayed.
The exchange explains that transactions with foreign securities and funds in foreign currency were suspended due to restrictions on the movement of assets by foreign settlement institutions in relation to its settlement and clearing infrastructure. Therefore, the transfer of these assets is not carried out from the exchange infrastructure “to other credit and depository organizations until November 27.”
By this date, “SPB Exchange plans to assess the volume of assets that are not subject to restrictions, and, together with market participants, establish mechanisms for the distribution and return of these assets to clients,” the press release notes. The exchange did not answer additional questions from Kommersant.
As Dmitry Alexandrov, managing director of Ivolga Capital, explained, initially the transaction is concluded in the trading terminal, but formally the change of ownership occurs the next day or every other day in T+ mode. “Accordingly, sanctions were imposed when the investor clicked on the “buy” button, but it was no longer possible to carry out the calculation, because the operation on the St. Petersburg Exchange was blocked,” he added.
According to the exchange data, the average daily trading volume in October was $0.14 billion. Accordingly, the turnover for two days can be estimated at $0.5 billion (taking into account purchase and sale transactions).
According to independent financial analyst Andrei Barkhota, we are talking about blocking client funds worth several billion rubles.
Market participants interviewed by Kommersant attribute the delay to protracted negotiations with other parties to the process. Dmitry Lesnov, head of the client service development department of Finam Financial Group, believes that a lot of time was spent consulting with legal providers to understand the possibilities of making settlements. In addition, according to Mr. Lesnov, after receiving approval, additional checks and settings were required, since the calculations were not carried out in accordance with the standard business process of the exchange.
At the same time, as Kommersant’s source in a large brokerage company says, although the frozen settlements have passed, investors are not yet able to withdraw funds. That is, the transactions were completed, this was reflected in the depository and internal accounting systems, he added.
And the money, according to him, has formally appeared, but remains blocked for now.
Kommersant’s interlocutor at another brokerage company notes that “since the calculations were carried out in a non-standard mode, the period for reflecting funds in client accounts has increased.” “The back office practically manually reflects these calculations on clients’ accounts,” he explained. Andrey Barkhota believes that we are talking about the possibility of returning client funds in rubles at a fixed rate. One of Kommersant’s interlocutors notes that part of the exchange’s funds was placed in Russian banks.
The main expectations of clients are related to obtaining permission from counterparties to resume transactions with blocked assets in accordance with the OFAC license before January 31, 2024, Mr. Lesnov believes. At the same time, risks remain that most of the blocked resources will not be returned to investors before the end of the year, Mr. Barhota believes: “Then the exchange will have to use additional financing to level out the negative consequences.”