Prospects and limitations in the modernization of securities settlement operations in Ukraine

Abstract

The article points to the critically insufficient compliance of Ukraine's stock market infrastructure with the relevant international recommendations, first of all in the segment of securities settlements. The author states that despite the creation of market infrastructure in Ukraine and the possibility to avoid problems related to the evolutionary errors, the market participants face numerous difficulties, such as risks in legal empowerment and in the activities of key infrastructure actors, limited competition, excessive transaction costs, ongoing defragmentation of the system of depository accounting, as well as inconvenience and limitations of the existing risk management systems. The study on the evolution of securities settlement models in Ukraine revealed that the radical reform of infrastructure in 2013 led to contradictory consequences, in particular, the abuse by the settlement bank and the central counterparty of its monopolistic positions, active participation of this monopolist in high-profile market abuse, stagnation in clearing and settlement technologies, and a slowdown in the development of the derivatives market. It was found that, despite lengthy discussions, the updated legislation in the field of organized capital markets, which is designed to implement a number of EU laws and should enter into force in 2021, does not really rectify the problems in the existing infrastructure, in particular due to a rather dubious proposed procedure of securities settlement and conservation for a few more years of the monopoly in the field of settlement and clearing services. It is substantiated that Ukraine has constructive practical experience and skills that can allow to implement the best international standards for building a system of cash settlements in "central bank money", organically integrated into Ukrainian payment system and able to adapt to European payment systems.