On 20 January 2012, the Ministry of Justice of Ukraine registered Resolution of the Board of the National Bank of Ukraine No 456 of 15 December 2011 “On Introduction of Amendments to the Regulation on Depository Activity of the National Bank of Ukraine”, which will come into effect from 21 May 2012.
This document ensures that stock market participant have access to modern technologies based on net settlements of transactions on purchase-sale of securities, including Internet trading.
Looking back, the set of instruments used by the government for domestic borrowing was expanded at the end of last year. In particular, instruments with indexed value and foreign currency-denominated government securities were introduced (in addition to traditional T-bills).
The approval of the amended Regulation on Depository Activity of the National Bank of Ukraine is of strategic importance for the development of the domestic stock market and ensuring macroeconomic stability. On the other hand, the increased liquidity in the government T-bill market will enable the National Bank of Ukraine to conduct the monetary policy more efficiently. The stock market plays an important role in the monetary transmission mechanism, especially, when it comes to the efficiency of interest-rate levers of the monetary regulation.
Firstly, professional market participants will benefit from new mechanisms for operation of the government T-bill market. They will be able to increase the number of agreements concluded in the T-bill government market, which will enhance their capacity for implementing their own investment strategies. Simplification of the procedure for concluding stock-exchange agreements will result in expanding the circle of investors in this market, including households. Therefore, liquidity in the government T-bill market will increase.
Secondly, the state will reap a direct benefit from it: the more liquid the government T-bill market is, the more possibilities the state has to use domestic borrowing to finance the state budget deficit. The terms and conditions for such funding will improve.
Thirdly, it is very important that new mechanisms for operation of the stock market will enable its professional participants to introduce mechanisms for investing funds in the government securities, which will be more convenient for a wide circle of investors. There will be more opportunities for households to invest their funds in this segment of the market. Funds raised from households are the main internal reserves for ensuring the appropriate state budget deficit financing.
According to the Ukrainian legislation, the National Bank of Ukraine exercises its functions of depository servicing of circulation of government securities and in cooperation with the Government takes measures to develop it. The approval of the amended Regulation was a final stage of work aimed at improving technical facilities for carrying out transactions in government T-bills. This regulation was elaborated by the national financial regulators in close cooperation with professional stock market participants.
The National Bank of Ukraine expresses its readiness to consider all constructive proposals put forward by the market participants, which are aimed at improving mechanisms for operation of the stock market. It will enhance financial mechanisms for ensuring macroeconomic stability and achieving high rates of economic growth.