The NBU Updates Legal Framework for Derivatives Operation

The National Bank of Ukraine brings a range of regulations in line with the Law of Ukraine On Capital Markets and Regulated Commodity Markets that takes effect on 1 July. The amendments include as follows:

• Adoption of a new procedure for approving specifications of derivative contracts in the money market. 

At present, the central bank approves the standard forms of derivatives circulated at the stock exchanges. 

According to the requirements of the amended law, if the derivative contracts of the money market are concluded in line with the specifications, the regulated market operator shall agree with the NBU in advance (before the registration in the National Securities and Stock Market Commission) the specifications for each type of derivative contract. 

The new procedure for approving these documents is established in theRegulation on procedure of approving by central bank of specifications of the money market derivative contracts. The provisions of this document establish in particular: 

• minimal requirements to the set of documents submitted by the regulated market operator to the NBU 
• terms for its review and grounds for rejection in approving specifications of a derivative contract
• actions of the regulated market operator if after approval of the derivative contract specification, the NBU introduced new safeguard measures according to the Law of Ukraine On Currency and Currency Operations.

• Inclusion of settlements under derivative contracts to the list of transactions performed on current accounts of nonresident legal entities and individuals in domestic and foreign currencies and on the correspondent accounts of the EBRD and nonresident banks in domestic currency opened with the banks of Ukraine.
• Bringing the terms and certain definitions in the NBU regulations in line with the Law On Capital Markets; namely the definitions of "swap foreign currency transactions", "forward foreign currency transaction", and "forward agreement" were updated.

Besides, to bring the NBU regulations into compliance with the UN Convention On the Privileges and Immunities of the United Nations, the regulator has defined that the operation of current accounts opened for the UN is not restricted by any financial control, rules or moratorium of any kind. 

According to the NBU, the respective changes will ensure the updating of the legal framework for the derivative financial instruments operation in Ukraine.

The respective amendments were approved by NBU Board Resolution No. 63 On Approval of the Regulation on Procedure of Approving by the NBU of Specifications of the Money Market Derivative Contracts and Amendments to Certain Regulations of the National Bank of Ukraine dated 29 June 2021. They  take effect on 1 July 2021.