Rules for Trading Securities of the Kyrgyz Republic in the Secondary Market through the Automated Trading System of the National Bank of the Kyrgyz Republic

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Date of creation: 2023-07-19

APPROVED by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic No. 10/17 dated March 28, 2013

Rules for Trading Securities of the Kyrgyz Republic in the Secondary Market through the Automated Trading System of the National Bank of the Kyrgyz Republic (As amended by Resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated April 26, 2017 No. 17/3, August 30, 2017 No. 2017-P-09/39-7-(DCP), October 25, 2017 No. 2017-P-09/45-9-(NPA), and December 14, 2022 No. 2022-P-09/78-14-(NPA))

1. GENERAL PROVISIONS

2. These Rules for Trading Securities of the Kyrgyz Republic in the Secondary Market through the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - the Rules) define the procedure for conducting securities transactions in the secondary market of the Kyrgyz Republic through the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - ATS). (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

3. These Rules were developed by the National Bank of the Kyrgyz Republic (hereinafter - the National Bank) to promote the development of an active, efficient, reliable, transparent and liquid secondary securities market in the Kyrgyz Republic through the functioning of the ATS. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

4. The conditions and rules established by the Regulation on the Operation of the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - ATS Operation Regulation) apply to these Rules.

5. These Rules regulate the procedure and principles of conduct of Trading Participants when concluding securities transactions in the secondary market through the ATS, based on the principles of fair competition and ensuring equal rights for Trading Participants. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

6. Trading Participants in the ATS are commercial banks of the Kyrgyz Republic meeting the requirements of paragraph 15 of these Rules. By decision of the Board of Directors of the National Bank, other financial institutions may be admitted to securities trading in the secondary market through the ATS. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

7. A Trading Participant may conduct the following types of securities transactions through the ATS in its own name and at its own expense, or in its own name on behalf of clients:

• outright purchase and sale of securities;
• repurchase (repo) purchase and sale of securities. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

7. A transaction concluded through the ATS, by agreement of Trading Participants, does not require mandatory execution of a written contract for such transaction, and the fulfillment of obligations under the transaction is carried out in accordance with the provisions of these Rules. Trading Participants may conclude separate bilateral agreements governing detailed settlement conditions for transactions.

8. When concluding transactions through the ATS, a Trading Participant must be guided by the provisions of these Rules.

9. DEFINITIONS AND TERMS For the purposes of these Rules, in addition to those specified below, definitions and terms established in the ATS Operation Regulation shall apply:

10. Transaction Date – the trading day on which a transaction is concluded in the ATS.

11. Settlement Date – the trading day on which the actual purchase/sale of securities occurs through the corresponding debit/credit of funds and the transfer of ownership rights to the securities. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

12. Outright purchase and sale of securities (purchase and sale transaction) – the conclusion of an agreement between the seller and buyer of securities, whereby one party agrees to sell and the other to buy securities at an agreed price and under agreed conditions. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

13. Repurchase (repo) purchase and sale of securities (repo transaction) – the conclusion of an agreement for the purchase and sale of securities with an obligation to repurchase/buy them back on a specified future date (repo transaction completion date) at a pre-agreed price. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

14. Repo transaction term – the time interval calculated in calendar days starting from the day following the settlement date of the repo transaction, including the repo transaction completion date.

15. ACCESS TO TRADING

16. The relationship between Trading Participants regarding the depository accounting of securities is governed by a corresponding bilateral agreement. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

17. To obtain access to securities trading in the ATS, a commercial bank must submit a letter of intent for access to securities trading in the ATS to the National Bank and meet the following requirements: (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

• hold a license from the National Bank for conducting banking operations in national and/or foreign currency and have no restrictions on issuing, purchasing, selling, servicing securities, as well as depository services; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated August 30, 2017 No. 2017-P-09/39-7-(DCP))
• hold a correspondent account in national currency at the National Bank;
• hold a "depository" (depot) account at the Depository;
• submit to the National Bank a Trading Participant undertaking, as per Appendix 1 to these Rules;
• submit to the National Bank a power of attorney for dealers authorized to conclude transactions in the ATS, as per Appendix 2 to these Rules;
• meet the technical requirements necessary for connection to the ATS;
• not be in processes and/or procedures stipulated by the Law of the Kyrgyz Republic "On Banks and Banking Activity" (Temporary Administration, Bank Liquidation). (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated December 14, 2022 No. 2022-P-09/78-14-(NPA)) By a separate decision of the Board of Directors of the National Bank, Participants undergoing processes and/or procedures stipulated by the Law of the Kyrgyz Republic "On Banks and Banking Activity" may be admitted to securities operations. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated December 14, 2022 No. 2022-P-09/78-14-(NPA))

16. The Trading Participant undertaking and the power of attorney for dealers are signed by the head of the executive body of the Trading Participant, who has first signature authority.

17. The power of attorney for dealers is provided by the Trading Participant at the beginning of each new calendar year and remains valid until the end of that year. In case of changes to the dealer composition, the Trading Participant must submit a new power of attorney for dealers.

18. GENERAL PROCEDURE FOR CONCLUDING TRANSACTIONS

19. The schedule of trading sessions for securities purchase and sale transactions and repo transactions is established in accordance with the ATS Operation Regulation. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

20. The settlement procedure for securities purchase and sale transactions and repo transactions is established in accordance with the ATS Operation Regulation.

21. Securities available for concluding transactions in the ATS are determined by the National Bank. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

22. A Trading Participant may conclude transactions in the ATS using the following trading mechanisms:

• negotiation module;
• anonymous trading module.

22. The negotiation module ensures the conclusion of transactions based on bilateral negotiations between seller and buyer. Orders may be submitted in the negotiation module with the following order types:

• "Negotiation" order type, which implies discussion of transaction conditions and requires approval by both Trading Participants. The initiating Trading Participant ultimately approves the order, and the transaction is considered concluded;
• "Transaction" order type, which expresses a firm intention of the order initiator to conclude a transaction under the specified conditions and does not imply further discussion of transaction conditions. Approval by the order initiator is not required. A Trading Participant expressing a desire to fulfill this order concludes the transaction by selecting the "conclude transaction" menu command.

23. The anonymous trading module ensures transactions are concluded in anonymous trading mode, and the ATS automatically concludes received orders on a "buy lower, sell higher" principle. Orders are always anonymous and do not contain information about the Trading Participant that posted them. The transaction does not require approval by both Trading Participants.

24. The price of a security on the transaction date is automatically recalculated by the ATS according to formulas in Appendix 3 to these Rules. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

25. In the negotiation module, Trading Participants may select the settlement date for a transaction. The ATS allows selection of a settlement date equal to or later than the current trading day date.

26. In the anonymous trading module, all settlements are carried out on the current trading day.

27. A Trading Participant may modify and/or cancel a submitted order in the ATS only if no transaction has yet been concluded for that order.

28. PROCEDURE FOR CONCLUDING SECURITIES PURCHASE AND SALE TRANSACTIONS (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

29. To conclude a securities purchase and sale transaction in the ATS, a Trading Participant may submit orders through the Negotiation Module and the Anonymous Trading Module. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

30. To conclude a securities purchase and sale transaction in the ATS, a Trading Participant must submit an order (for sale or for purchase) specifying the following information:

• securities issue number; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• type of securities sub-account; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• yield (specified to two decimal places and automatically recalculated when the security price is specified); (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• security price (specified to two decimal places and automatically recalculated when the yield is specified); (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• quantity of securities; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• nominal value (automatically recalculated);
• actual value (automatically recalculated);
• settlement date.

6. PROCEDURE FOR CONCLUDING REPO TRANSACTIONS

7. To conclude a repo transaction in the ATS, a Trading Participant may submit orders only through the negotiation module.

8. Ownership rights to securities subject to a repo transaction transfer: (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

• upon execution of the initial part of the repo transaction – from the original seller to the original buyer;
• upon execution of the final part of the repo transaction – from the original buyer to the original seller.

32. Securities purchased under repo terms may be sold under repo terms to another Trading Participant. In this case, the completion date of the new repo transaction must be earlier than the completion date of the previously concluded repo transaction. In this case, the seller of securities must notify the buyer of securities in writing about existing obligations related to such securities. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

33. In case coupon payments are made during the term of a repo transaction for securities subject to the repo, such coupon payments are made to the holder of securities at the time of making the coupon payments. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

34. To conclude a repo transaction in the ATS, a Trading Participant must submit an order (for sale or for purchase) specifying the following information:

• securities issue number; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• type of securities sub-account; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• repo transaction interest rate (specified to two decimal places);
• repo transaction term (specified in calendar days);
• quantity of securities; (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• security price (specified to two decimal places and automatically recalculated); (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))
• nominal value (automatically recalculated);
• actual value (automatically recalculated);
• settlement date;
• completion of settlement date (automatically recalculated).

35. The repo transaction completion date cannot be earlier than or equal to the settlement date of the transaction.

36. The ATS automatically calculates interest based on the term of the concluded repo transaction.

37. On the repo transaction completion date, the ATS automatically performs the reverse transfer of securities and funds in national currency based on delivery versus payment. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

38. A Trading Participant may modify the following conditions of a previously concluded repo transaction before the period in which the ATS automatically completes the repo transaction, and requires approval of the modified conditions by both Trading Participants:

• early completion;
• extension.

39. Upon early completion of a repo transaction, the ATS automatically recalculates interest taking into account the early completion.

40. Upon extension of a repo transaction, the ATS automatically recalculates interest taking into account the extension term.

41. A Trading Participant may replace securities for a repo transaction only for the entire quantity of securities of that repo transaction. The replacement operation requires confirmation by both Trading Participants. In this case, the amount of funds for the final part of the repo transaction remains unchanged. (As amended by Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated October 25, 2017 No. 2017-P-09/45-9-(NPA))

42. In cases where the settlement/completion date is declared a non-working day, execution of the repo transaction takes place on the next working day. In this case, recalculation of the funds amount for the final part of the repo transaction is not performed.

43. PRINCIPLES OF CONCLUDING TRANSACTIONS

44. A Trading Participant concludes transactions strictly based on posted orders.

45. Trading Participants are prohibited from:

• colluding to manipulate prices;
• exerting direct or indirect pressure on other Trading Participants to change their market behavior;
• disseminating knowingly false information among other Trading Participants to exert pressure on the market situation;
• using non-standard vocabulary, expressing insults towards Trading Participants, providing comments on transactions.

45. A Trading Participant bears full responsibility for the correctness and confidentiality of transactions concluded by dealers/dilator controllers of that Trading Participant.

46. In case of a violation by a Trading Participant of paragraph 44 of these Rules, the ATS Administrator sends them a warning notice.

47. Repeated violations by a Trading Participant of paragraph 44 of these Rules constitute grounds for suspension of trading access.

48. In case a Trading Participant intentionally fails to conclude transactions for posted orders and, thus, hinders the transaction conclusion process in the ATS, any other Trading Participant has the right to apply to the ATS Administrator via the ATS negotiation system with a statement regarding such Trading Participant. The ATS Administrator, via the ATS negotiation system, sends a warning notice to the hindering Trading Participant regarding the necessity of concluding a transaction or canceling the order. Failure by such Trading Participant to comply with the warning notice constitutes grounds for suspension of its trading access in the ATS.

49. RIGHTS, OBLIGATIONS AND LIABILITY

50. The rights and obligations of Trading Participants and the National Bank are determined in accordance with these Rules and the ATS Operation Regulation.

51. A Trading Participant, by