Stock Exchanges and Post-Trade Information Systems
The exceptionally high degree of fragmentation is the most fundamental impediment to the future development of the equity market in Ukraine. To address this issue, the first priority is to ensure that the existing exchanges should be assessed by the regulator and evaluated with respect to activity, rules, trading systems and information dissemination systems.

Second, post-trade transparency of OTC trading should be established through a set of regulations on reporting obligations for traders and through the establishment of a dissemination system for this information (time, price and quantity). In the short term, daily reporting and dissemination would constitute a major progress.

Central Securities Depository (CSD) & Clearing & Settlement systems
For the government bonds, NBU operates a CSD system with fully dematerialized instruments and Delivery Versus Payment (DVP) settlement. As other segments of the bond market development, the need for a unified CSD system facilitating netted settlement of arbitrage trades across bond types will emerge.

Second impediment is the very weak connectivity between the MFS Depository and the registrars. A well-functioning electronic message system would seem suitable to resolve this issue. With around 1000 fully registered issues in the MFS, it would also seem advisable to license the MFS as a registrar – and perhaps even as the mandatory registrar for all listed companies.

Concerning international connectivity, MFS had contacts with EuroClear (mainly related to Eurobonds) and Polish depository KDPW, but no formal agreements have been signed.

Registrars&Custodians
The present fragmentation of registrars cannot provide a guarantee of independent and proper governance among shareholders. There is a need to restructure the industry so that registrars reach a minimum size allowing them to be economically independent of individual clients and can afford more efficient operations and systems.

Based on the above, CMP has and is providing assistance to the PFTS Stock Exchange, MFS Depository, Professional Association of Registrars and Depositories (PARD) and regulator (SSMSC) in actions needed to be taken to correct major deficiencies in market infrastructure:

• Improve the functionality of PFTS Stock Exchange and existing exchanges with respect to activity, rules, trading and information dissemination systems; encourage voluntary mergers between exchanges
• Improve post-trade transparency of OTC trading through a set of regulations on reporting obligations for traders and through establishing a dissemination system for this information, preferably reporting through the exchanges, supplemented over time by best execution rules
• Establish regulations to strengthen market self regulatory organizations (SRO) to push for consolidation of securities traders and registrars (strengthening of professional standards, independence, minimal capital requirements and systems etc.)
• Consolidate CSD systems through improving SSMSC regulations and strengthening operations of MFS Depository, in particular by developing reliable guarantee mechanism for the DVP transactions, reviewing capital requirements to make sure that they reflect the higher settlement risk of FOP vs. DVP, licensing MFS as a registrar, revising legislation to facilitate MFS to establish foreign links
• Prohibit insider trading (with a clear definition of insider trading) and improve regulatory monitoring of trading activity and identifying violations to be able to protect client assets or limit potential disruption to the market.