A statement from the regulator clarified that the Central Bank has limited trading in foreign securities and in stock markets that are blocked by international depository institutions since May 30. The notification did not specify the exact papers involved. The Central Bank emphasized that the move aims to protect investors and minimize risk exposure.
Currently blocked foreign securities, including a small amount circulating on the St. Petersburg Stock Exchange, are not flagged in the trading and clearing system. The plan is to distribute these assets evenly among trading participants and their clients, taking proportionality into account and excluding accounts with only small client portfolios from the distribution, according to the Bank of Russia.
As stated by the Central Bank, the owners retain property rights to these foreign securities even while restrictions exist. Organized trading will continue as before once restrictions are lifted, and owners will still be able to realize income from these papers, which has been difficult due to actions by international depositories, the central bank noted.
The Central Bank and the St. Petersburg Exchange did not respond to inquiries from this publication.
What does the restriction mean for investors?
Economist Tatyana Kulikova explained that private investors will lose the ability to buy and sell certain foreign stocks and bonds on the market for the time being.
She added that the move is designed to shield investors, noting that the central bank is likely concerned about potential Western actions that could affect the assets of Russian investors, including partial confiscation or cancellation of assets.
Dmitry Lesnov, head of customer service development at Finam, agreed on the protective aim. He observed that the disruption stems from a broken chain among the National Settlement Depository, the international Euroclear system, and the Best Efforts Bank. Finam estimates that the impact will touch a small portion of investors, roughly 12 to 15 percent.
Andrey Salashchenko, deputy managing director at Otkritie Investments, noted that the restriction effectively forced all participants with foreign securities in their accounts to recognize that those securities remain blocked. The proportional distribution rule means a portion of holdings will be set aside and cannot be sold, which may affect many clients.
Why this action is considered necessary
The measure is intended to give the Bank of Russia a clear framework so that not every customer who buys foreign paper today ends up with assets partially blocked. It helps establish a known status quo, clarifying which parts of a client’s portfolio are blocked on the NSD and which are free from restrictions, Salashchenko said.
Aleksey Timofeev, chairman of the National Association of Stockbrokers, highlighted that the order targets brokers who must block shares that are already blocked in Euroclear. He added that the blocking will usually be applied proportionally among the clients who hold these securities.
Potential consequences for markets
Pavel Mitrofanov, managing director of Expert Business Solutions, argued that investors can no longer transact with the securities blocked through Euroclear. Trading volumes are expected to shrink with the new restrictions. Mitrofanov suggested the regulation aims to prevent conflicts when sanctions are lifted by creating a uniform framework for all investors who hold these assets.
Lesnov predicted a decline in exchange trading volumes as a direct result of the regulator’s decision. At the same time, he noted that the policy provides stronger protection for investors against unforeseen events and could dampen the appeal of foreign stock investments for some clients. This shift may push more attention toward Russian issuers, benefiting local markets and companies.
Timofeev stated that the consequences for the St. Petersburg Exchange are likely minor since the measure does not affect the vast majority of securities traded there. He added that while the ability to transact is temporarily restricted for holders of these securities, ownership remains intact.