Sberbank, BC Region and NSD enter into repo deal using blockchain

Maria Nikolova

The deal had three parties: the seller – Sberbank, the buyer – BC Region, and the settlement agent – the NSD.

Russian bank Sberbank Rossii PAO (MCX:SBER) and Brokerage Company Region, along with the National Settlement Depository (NSD) have entered into a repo deal using blockchain technology.

The deal involved a RUB-denominated OTC repo secured by federal loan bonds (OFZs). From a legal point of view, the deal is governed by Russian law and is a binding financial contract that was signed electronically using a smart contract and e-signatures via the collateral management system (CMS) of the NSD.

The deal had three parties: the seller – Sberbank, the buyer – BC Region, and the settlement agent – the NSD. Interaction between the parties was fully automated and took place on a blockchain network. Each participant submitted an instruction to its node in the network, after which the smart contract concluded the deal and submitted settlement instructions to the NSD’s clearing system. The NSD’s CMS platform was used to carry our settlements, which allowed the participants of the repo deal to automate the execution of margins, settlement functions and repository reporting.

Alina Akchurina, Managing Director for Collateral Management Systems at the NSD, commented:

“Integrating the NSD’s CMS into distributed blockchain networks is part of our development strategy. Using blockchain to service repo deals is one of the few examples that justify the use of this technology. The combination of independent settlements carried out in smart contracts and the neutral position of the NSD as a collateral management agent create an extremely flexible and progressive mechanism for performing OTC deals. During this pilot deal, the NSD not only acted as the settlement depository, but also provided collateral management services to its participants, and supplied the market data used for the settlement of the smart contract.”

In November this year, Sberbank, NSD and MTS summed up the results of their deal to issue commercial bonds using blockchain. The nominal cost of MTS’s RUB 750 million commercial bonds, organised and purchased by the corporate and investment banking business of Sberbank, was redeemed. A security deal using smart contracts – from issue to full execution of issuer’s obligations to the investor – was successfully carried out.

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