SEGREGATED BROKERAGE COMPANY segregated accounts SEGREGATED BROKERAGE COMPANY

SEGREGATED BROKERAGE COMPANY (segregated accounts)

SEGREGATED BROKERAGE COMPANY Segregated Brokerage Company is a solution specially designed for separate registration of positions of a brokerage company (a brokerage company is a register section, or a group of register sections) and for separate safekeeping of its assets. MARKETS: FORTS, RTS Standard, RTS Money. MAIN FEATURES: q Collateral for positions of the Segregated Brokerage Company is calculated separately; q Assets of a Segregated Brokerage Company cannot be used in the process of mandatory liquidation of any positions but the positions of this Segregated Brokerage Company; q Assets of a Segregated Brokerage Company can only be withdrawn to accounts specifically indicated for the Segregated Brokerage Company’s sections; q. Assets of a Segregated Brokerage Company can only be withdrawn by the owner of the accounts specifically indicated for the Segregated Brokerage Company’s sections (or for the Clearing Member provided that the account owner has a power-of-attorney).

TARGET AUDIENCE The functionality of a Segregated Brokerage Company allows for providing access to RTS markets to clients who have small limits on Russian brokers or don’t have credit lines on them at all: q non-resident clients (including overseas brokers); q resident clients (asset managing companies of mutual investment funds and non-state pension funds, large non-financial companies). This enables Russian brokers to attract new large customers and offer a wider range of technologically advanced services.

SEPARATE REGISTRATION OF ASSETS q Collateral for positions of a Segregated Brokerage Company is calculated separately, i. e. there is no netting of the segregated brokerage company’s risks against the risks of the Clearing Member and its clients; q This means that a Segregated Brokerage Company can use its available funds to open new positions or withdraw such funds even if there is a debt at the Clearing Member’s level (including when the Clearing Center suspends the Clearing Member from trading. A ban on trading can only be invoked against a Segregated Brokerage Company provided that: §The Segregated Brokerage Company has run low on available funds; or §The Clearing Member has a debt which lead to mandatory liquidation of the CM’s positions and tapping into the Contingency Fund, finally causing the Clearing Center to apply the mandatory liquidation procedure to positions of the Segregated Brokerage Company.

SEPARATE SAFEKEEPING OF ASSETS q Separate safekeeping of securities is available within a standard depository services package (DCC sets up accounts for the owner of the securities); q Separate safekeeping of cash (including foreign currency) is available after assigning trading and delivery accounts for withdrawal of cash to the segregated brokerage company; q The accounts for withdrawal of cash can be owned either by the segregated brokerage company (relevant for resident legal entities), or by a Custodian (relevant for non-residents); q The owner of the accounts needs to sign an agreement with the Clearing Center.

RISK MANAGEMENT CM’s debt SBC’s debt no yes The Clearing Member interacts with the Segregated Brokerage Company as provided for in its regulations. The Clearing Center does not interfere yes The Clearing Center closes out positions of the Segregated Brokerage Company, the Clearing Member and other clients of this Clearing Member on equal terms as provided for in the Clearing Rules. As soon as the debt at the level of the Segregated Brokerage Company has been paid off, the Clearing Center stops the mandatory liquidation of the Segregated Brokerage Company’s positions. yes no The Segregated Brokerage Company continues to trade normally. In this case the Clearing Center can mandatorily close out the positions of the Segregated Brokerage Company if for the purpose of repaying the debt the Clearing Center had to use the Contingency Fund contribution of the Clearing Member-debtor, and the Clearing Member failed to replenish it within 2 settlement periods. The Segregated Brokerage Company can withdraw its available assets at any time. However, at the next stage of the project implementation (after technological and legal updates) it will be possible to transfer positions of the Segregated Brokerage Company to a different Clearing Member. Actions

LIQUIDITY MANAGEMENT q “Lending” cash during trading (a Clearing Member can establish a virtual limit for a Segregated Brokerage Company in the trading system if the Segregated Brokerage Company experiences a brief liquidity shortage, for example, when there is a limits expansion during a trading session. The virtual limit is set to zero during clearing); q Moving cash during clearing (a Clearing Member can change the status of the limit from virtual to actual, if the Clearing Member is sure that the Segregated Brokerage Company will credit cash later and/or to a different account).

CASH Crediting cash Transferring cash Withdrawing cash Anyone can credit cash to register sections of the Segregated Brokerage Company Cash can be transferred to register sections of the Segregated Brokerage Company either during trading without actual transfer of title (“lending” during trading) or by actually moving cash (“lending” during clearing) Cash can only be withdrawn to the bank accounts linked to the register sections of the Segregated Brokerage Company based on the application from the owner of these accounts and/or from the Clearing Member (if the accounts owner has issued a power-of-attorney to the Clearing Member) Cash can be transferred from register sections of the Segregated Brokerage Company only for the purpose of returning the “lent” amount The “lent” cash cannot be withdrawn

REGISTRATION OF A SEGREGATED BROKERAGE COMPANY Client (signs a Brokerage Services Agreement and a Custodian Services Agreement) Clearing Member (signs Agent Services Agreement with OJSC RTS) Application for opening register sections of a Segregated Brokerage Company Account owner [Custodian] (signs an agreement with the Clearing Center) Application for registration of a Segregated Brokerage Company is submitted to the Clearing Center establishes the accounts owner for the Segregated Brokerage Company accounts to be credited are registered for the SBC (cash withdrawal) + trading accounts are linked to sections of the SBC (delivery on RTS Standard) + delivery accounts are linked to sections of the SBC (delivery RTS Money)

CONTACT DETAILS +7 (495) 7059031 Svetlana Lyudinovskova, Head of New Products, Derivatives Market FORTS svetlana@rts. ru; Mikhail Ivanov, Head of Business Development, Derivatives Market FORTS mivanov@rts. ru; Karine Gabrielyan, Head of Foreign Institutions Relations, Derivatives Market FORTS karina@rts. ru; Alexander Lutkov, Deputy Director General of RTS Clearing Center lutkov@rts. ru.