Launch of the new Settlement Agent Model
The Settlement Agent for Securities Clearing and Settlement Model has been launched in Azerbaijan securities market as of August 2, 2019. The new model is aimed to improve clearing and settlement in the securities market of Azerbaijan in line with international practice, more efficient management of market’s liquidity and further development of country’s securities market as a whole.
Under the new model, commercial banks are allowed to make cash settlements on the securities market, while securities settlement is still carried out by the National Depository Center of the Republic of Azerbaijan (NDC) acting as a clearing organization. The settlement agent model has advantages such as eliminating the need for pre-blocking assets, improving guarantee mechanisms and applying a real DVP mechanism on cash settlement. At the same time, it provides banks’ involvement in the capital market and ensures investment companies with new financial opportunities.
Furthermore, the new model enables the transition from T+0 to T+1 regime for settlements involving not only equities and government securities, but corporate bonds secondary market transactions in order to optimize the settlement regimes. In its turn, this innovation is significant for attracting foreign investors to the local market, promoting their presence in the market, as well as expanding the investment opportunities for local investors.
The “Joint agreement on clearing and settlement of securities and derivatives” on application of the Settlement Agent Model was concluded on May 27, 2019 among NDC, Central Bank of the Republic of Azerbaijan, Azer Turk Bank OJSC, PASHA Bank OJSC, Xalq Bank OJSC, Yapı Kredi Bank Azerbaijan CJSC and 8 investment companies currently operating in the market.