BAKU, Azerbaijan, April 13. The National
Depository Center (NDC) is in talks to expand cooperation with
depositories in other countries and open accounts, Chairman of the
Board of the National Depository Center, Elchin Alizade, told
Trend in an exclusive
interview.
In the interview, he discussed cooperation with global
depositories, exchange trading, a unified settlement model and risk
management, international integration, and new partnerships, as
well as strategic prospects.
Cooperation with global depositories boosts confidence in the
capital market.
The Chairman noted that establishing custody mechanisms with
global depositories has a positive impact on the capital market in
several qualitative aspects:
“First, it increases financial institutions’ confidence in
depository services. Thus, ensuring compliance with legislative and
technical requirements in international depositories demonstrates
that the domestic infrastructure meets international standards.
This creates conditions for more effective and transparent risk
management for both foreign and domestic investors.”
The second factor is investor account management and cost
optimization. Having accounts with international depositories
eliminates the need for investors to use additional intermediaries
and alternative structures. As a result, transaction costs are
reduced, and investors’ access to the market is expanded.
Taken together, these factors contribute to increased liquidity
in the capital market and a broader investor base.
Cooperation with Kazakhstan and the Automation of
Operations
Alizade emphasized that the main institutional and legal steps
within the framework of cooperation with Kazakhstan’s central
securities depository have already been completed:
“Mutual accounts have been opened between the two depositories.
This creates the technical capacity for the transfer and custody of
securities. Currently, some operations may be performed manually.
At the same time, technical work is continuing to ensure direct
connectivity and integration between the depositories. The goal is
to fully automate securities transactions and execute them in
accordance with international standards via the SWIFT platform. The
aim is to complete this technical work by the end of this year and
transition operations from a manual process to a fully automated
one.”
Trading on the exchange is a priority
According to the chairman, trading on the regulated market via
the Baku Stock Exchange platform remains a priority:
“The main goal of both the regulatory authority and market
participants is to concentrate liquidity on the exchange platform,
and work is underway in this direction. At the same time, the
over-the-counter market is also a natural and necessary component
of the capital market. Work is currently underway to improve the
internal infrastructure to accelerate and facilitate securities
transactions in the over-the-counter market. The goal is to
implement electronic settlements and create more efficient
mechanisms for investors.”
Unified Settlement Model and Risk
Management
In an interview discussing the unified settlement model and risk
management, Alizade noted that trading limits in the capital market
are currently set through clearing agencies. According to him, this
in some cases hinders the full and effective implementation of
collateral mechanisms (guarantees) and complicates unified risk
management: “Therefore, the National Depository Center plans to
implement collateral mechanisms within the framework of a unified
settlement model. This approach will allow for the more accurate
application of financial collateral mechanisms and the systematic
and transparent management of liquidity and credit risks. This will
result in faster transactions, reduced risks, and optimized
costs.”
International Integration and New
Partnerships
In response to a question about new partnerships, the Chairman
noted that expanding cooperation with international depositories
remains a strategic priority: “We have already established
reciprocal accounts with the Central Securities Depository of
Kazakhstan and the Central Securities Council of Türkiye, which
strengthens regional integration.
At the same time, work continues on opening accounts on global
depository platforms, such as Clearstream. The main goal is to
ensure compliance with international requirements, as well as the
implementation of standards to combat money laundering and
terrorist financing. This compliance is one of the main conditions
for integration with international organizations.
In addition, the National Depository Center is a member of the
Eurasian Depository Association. This year, another depository is
expected to join the association, and negotiations are underway
toward this end. Events and conferences held within the framework
of the association create additional opportunities for expanding
international ties. As the National Depository Center, we are also
negotiating the expansion of relations with a depository in another
country and the opening of accounts.”
Investment funds contribute to market
development
Alizade considers the transfer of the function of providing
depositary services for the custody of investment fund assets to
the National Depository Center to be an important institutional
step for the market. He emphasized that investment funds are
considered a more reliable financial instrument because they
operate based on professional management: “Involving the National
Depository Center in this process strengthens asset protection and
control mechanisms and boosts confidence among both local and
foreign investors. At the same time, investment funds provide
access to diversified portfolios with small amounts of capital,
which positively influences the development of a collective
investment culture and the expansion of the investor base.”
Strategic Vision and the Technological
Future
As part of the “Development Strategy for 2024–2026,” the
National Depository Center is gradually advancing in the areas of
institutional development, technological modernization, and the
expansion of international cooperation. “The main goal is to create
an integrated platform that provides modern solutions for both
local and foreign investors, which will contribute to the further
integration of the Azerbaijani capital market into the global
financial system,” the chairman noted.
Alizade concluded that discussions are currently underway among
central depositories regarding the application of distributed
ledger technology (DLT): “Blockchain technology is also an integral
part of this approach. The issuance of securities as digital assets
through tokenization increases demand for these technologies.
Although the use of DLT technology reduces settlement times and
improves operational efficiency, the fact that the legal and
regulatory framework at the international level is not yet fully
established creates certain difficulties in conducting monetary
settlements.”
