Financial Market Infrastructure
Financial market infrastructure means special institutions that support transactions involving financial assets, carry out control and settlement on such transactions, record and transfer rights to financial assets, as well as collect, store and provide the information necessary for the efficient functioning of the financial market.
Trade infrastructure means the platforms where transactions with financial assets are conducted according to certain rules. Usually, it also includes a settlement infrastructure where the mutual obligations of traders are defined, which helps to effect settlements based on the results of trading. Settlement infrastructure also supports over-the-counter transactions.
Trade infrastructure includes exchanges and other organisers of trade in currencies, securities and derivative financial instruments.
Payment infrastructure is a high-technology system for faster funds transfers between market participants. Payment infrastructure includes commercial payment systems, the Bank of Russia payment system, and financial messaging systems.
An accounting system is the link between the issuer of securities and their holder. Today, most securities are dematerialised, that is, they exist only in the form of account records, and therefore specialised organisations that enter and maintain these records are needed. These organisations confirm holders’ rights to securities and transfer them to new buyers upon the holders’ orders. They are also responsible for assisting securities’ holders in the exercise of their rights (voting on shares, receiving income and payments on securities).
The following institutions are included in the accounting infrastructure:
Repositories collect and store data on repo agreements and derivatives contracts concluded over-the-counter (outside of exchanges).
Registrars maintain registers of holders of securities under an agreement with the issuer.
Depositories hold securities, act as intermediaries between issuers and investors, keep records of transactions with securities and of the transfers of rights to these securities.
Clearing houses are intermediaries between market participants which guarantee the fulfilment of their mutual obligations: they generate information on existing obligations and new transactions, securities netting following their delivery and settlement.
Information infrastructure provides various information and analytical services required by economic agents to efficiently conduct business and make investments on an informed basis.
The information infrastructure includes the following institutions.
Rating agencies analyse the activities of those economic entities that are interested in attracting market debt financing (ranging from real sector companies and banks to entire regions) and assign ratings to them. Credit ratings are an important means for investors, borrowers, issuers and the government to make informed investment and financial decisions.
Credit bureaus store information on the loans granted to individuals and legal entities and the fulfilment of obligations thereunder. Based on these data, lenders analyse the level of borrowers’ debt load and their discipline.
Price centres provide market participants with services for determining the value of financial instruments not traded on exchanges. This helps the parties to a transaction to be sure that it is concluded on fair terms.
Administrators calculating financial indicators confirm the terms of transactions and the prices of instruments for transactions with financial instruments containing additional conditions, such as interest rate levels or foreign exchange rates.
Financial infrastructure is expanding significantly owing to IT companies specialising in finance. For example, platform solutions for raising capital for investment projects and high-technology access points for financial products and services, as well as to technologies for their network distribution (crowdfunding platforms, marketplaces), are currently appearing.
All financial market participants are dependent on the smooth functioning and stability of the infrastructure, therefore, infrastructure institutions operate under special regulation and supervisory requirements, the implementation of which is monitored by the Bank of Russia.
Reliable and efficient infrastructure facilitates the preservation and strengthening of financial stability and the smooth operation of all financial institutions, and stimulates the development of the economy as a whole.