European Bank for Reconstruction and Development (HQ)

Ukraine: Upgrade and Optimise of Capital Market Infrastructure

Last update: Sep 4, 2019 Last update: Sep 4, 2019

Details

Location:Ukraine
Ukraine
Category:Consulting services
Status:Awarded
Sectors:Standards & Consumer Protection, Trade
Contracting authority type:Government agency
Eligibility:Organisation
Budget: EUR 100,000
Date posted: Dec 27, 2017

Attachments 3

Associated Awards

Project cycle timeline

STAGES
EARLY INTELLIGENCE
PROCUREMENT
IMPLEMENTATION
Cancelled
Status
Programming
Formulation
Approval
Forecast
Open
Closed
Shortlisted
Awarded
Evaluation

Description

Country: Ukraine

Business sector: Financial institutions

Project number: 72127

Funding source: SFEBSF - EBRD Shareholders SF

Contract type: Consultancy Services

Notice type: Invitation for expressions of interest (CSU)

Issue date: 21 Dec 2017

Closing date: 12 Jan 2018   at  23:59   London

Project Description:

The National Securities and Stock Market Commission (the Client or NSSMC) has requested the European Bank for Reconstruction and Development (the EBRD or the Bank) to provide technical assistance for the advice on the Strategic Approach for the Set-up, Licensing and Supervision of the Capital Market Infrastructure with focus on Exchanges (the Project).

The Ukrainian Capital Market Infrastructure (CMI), including trading venues and post trade infrastructure, is heavily fragmented and partly inefficient, necessitating a comprehensive review of the CMIs. Currently five licensed stock exchanges, hundreds of commodity exchanges, two CSDs, and one settlement centre exist. In addition, some of the exchanges offer clearing services for derivatives.

Currently, the NSSMC, as being the securities market regulator, focuses on consolidation of the trading infrastructure for better price discovery, control, trade execution and countering the price manipulation and defragmentation by the regulator, and transfer from local level of stock exchange competition to the international. The NSSMC recognises that shortcomings exist, and will support this Technical Cooperation (TC) project in defining the strategic approach for the set-up, licensing and supervision of the CMI, which would improve the governance, operational efficiencies and business structure for the CMI. It is intended that the TC is especially focusing on the Trading Infrastructure (TI) such as stock exchange and other trading facilities not only for securities and derivatives but also for other asset classes like commodities and electricity. The outcome of this TC project is expected to lead to an upgrade of the supervisory and operational environment for TI in accordance with the reform agenda of the Ukraine Government.

Assignment Description

The Bank now intends to engage a consulting company (the Consultant) to provide the support to the capital market development and reform efforts of the NSSMC and the Government of Ukraine, and to align them with EU standards to the appropriate degree in the field of CMI.

It is expected that the consultant will define the strategic approach for the trading infrastructure in Ukraine, covering stock exchanges and other trading facilities not only for securities and derivatives but also for other asset classes like commodities and electricity.

The selected Consultant is expected to provide the following activities as detailed below:

Activity 1: Review/assess the operations of the trading infrastructure and interdependencies with the post-trade environment

Activity 2: Draft recommendations to improve the efficiency of the trading layer

Activity 3: Identify/develop guidelines, standards and requirements that need to be incorporated into the regulatory framework to ensure proper operation of the trading infrastructure

Activity 4: Prepare Final Report and organise stakeholder workshops.

  1. Review/assess the operations of the trading infrastructure and interdependencies with the post-trade environment

The Consultant will review and assess the current requirements for licensing, supervision and operations of the trading infrastructure entities, especially exchanges (including potential/existing clearing functionalities) in comparison with international standards, best practices and EU regulations. In addition the assessment should also include as fare as there are any inter-dependencies: operations, licensing and oversight of intermediaries which currently provide OTC price formation in certain asset classes; and post trade financial infrastructure entities (i.e. CSD, Settlement Centre (SC), relevant financial and commodity exchanges, NBU…).

Among others the assessment should cover:

  • current licensing and operational requirements for organized trading and clearing activities;
  • applied licensing, enforcement and supervision standards and their compliance with PFMI, EU standards as well as with international best practices;
  • the co-existence of stock exchange activity with licensed intermediaries who undertake OTC price formation and trading;
  • systems / processes on stock exchanges regulations which are applied in the EU countries;
  • current post-trading efficiency and risk management / certainty standards;
  • compliance level of the obliged reporting entities in relation to reporting requirements.

The assessment should identify the existing obstacles and challenges for NSSMC in order to carry out its supervision and regulatory functions effectively, as well as to determine the levers of potential improvement on the base of these obstacles and challenges. The assessment will help NSSMC to identify improvement levers to carry out its obligations of market licensing and oversight in an effective manner, as it should be defined by the new legislature.

  1. 2. Draft recommendations to improve the efficiency of the trading layer

The aim of Activity 2 is to prepare – based on the findings of the assessment carried out in Activity 1 - a report containing recommendations and a roadmap outlining steps to improve the efficiency of the trading layer. The recommendations should cover a consolidation strategy, improved ownership structure, upgraded corporate governance, technical and operational requirements for exchanges in line with upgrade of the post trade layer), and potential expansion of the trading layer to cover new financial instruments and commodities.

It is expected that the Consultant will base its recommendations on (a) the assessment carried out in Activity No. 1, (b) relevant European standards and international best practices taking into consideration also the various asset classes covered or to be covered by the TI, (c) identified improvement levers, and (d) feedback/input received from NSSMC and the key capital market stakeholders.

The specific tasks of Activity 2 should among others include:

  • Prepare recommendation for consolidation, ownership and governance of the existing trading facilities and the possibility of creating a consolidated infrastructure holding entity which include relevant trading entity/entities, National Depository Centre (CSD) and SC (potentially in form of a “light” CCP).
  • Prepare recommendations for operational requirements for exchanges and other trading venues in order to improve the price discovery process, especially concerning the possibility to provide the best execution of clients’ orders by market participants
  • Develop business, functional and technical requirements for the trading system(s) that should be used by exchanges in order to ensure full straight-through-processing (STP), security and compatibility with other market participants (in particular clearing and settlement) in line with international standards and practices.
  • Prepare recommendations for clearing functionalities which needed to be provided by SC within the consolidated infrastructure for different asset classes considering current state of and planned developments by the relevant securities and commodity markets.
  • Recommend actions for creation of effective post-trade4 operations to the extent that the post-trade infrastructure has an inter-dependency with trading including, cooperation of market infrastructural elements (stock exchange with the central counterparty, settlement centre, depository, trade repository,…).
  • Prepare recommendations for listing of financial instruments and trading requirements including the methods for opening price/continuous market prices, closing price formation of trading financial instruments and pre-, at- and post-trade transparency requirements.
  • Prepare specifications for the conditions required by an exchange to be licensed as an official “price formation mechanism” (e.g. mark to market, taxation compliance)

The detailed recommendations should also include: conditions and guidelines for organization of effective spot, futures, options and repo markets for the following asset classes: FX currency, interest rate, domestic government bonds, commodity (electricity, natural gas, grain).

  1. Identify/develop guidelines, standards and requirements that need to be incorporated into the regulatory framework to ensure proper operation of the trading infrastructure

Based on the activities performed under this project develop guidelines, standards and requirements that need to be incorporated into regulatory framework through first and second tier legislation in order to ensure proper oversight of the capital market infrastructure elements (in particular exchanges) relevant to the functioning of the capital and commodity markets.

The tasks of the Activity 3 will include:

  • Outline relevant principles, standards, methodology and requirements that the regulator need to impose to oversee clearing entities and exchanges (and OTC environment relevant in the process of price formation and risk management) in order to ensure proper functioning.
  • Outline operational and technological standards and requirements (with specifications) that need to be incorporated into licensing and oversight regulations in order to ensure implementation of the underlined principles by the relevant market participants
  • Propose relevant methodologies and automated solutions for evaluation of operational and technological performance by clearing entities and exchanges (and OTC environment) which should be is performed by the regulator in order to mitigate systemic risks and distortions of the price formation process.

The recommendations have to be based on international and especially EU standards such as CPSS-IOSCO Principles for Financial Market Infrastructures (PFMI)[1], European Market Infrastructure Regulation (EMIR)[2], Prospectus Regulation (PR)[3], Markets in Financial Instruments Directive 2/ Regulation (MiFID2/MiFIR)[4], Market Abuse Directive/Regulation (MAD/MAR), Directive on Investor Compensation Schemes[5] and relevant European regulation regarding organised commodity (in particular electricity and natural gas) markets, as well as relevant draft legislation and framework agreements which formulate reform policies in the Ukrainian financial and energy sectors. With the purpose to issue high level practical and implementable recommendations it is expected that the Consultant will consult with NSSMC and the key capital market participants on a regular basis to ensure a high level of interaction among the stakeholders.

4: Prepare Final Report and organise stakeholder workshops

The tasks of the Activity will include:

  • Prepare the Final Report and Action Plan comprising the findings/recommendations of all activities
  • Present the findings and recommendations in form of up-to three workshops to NSSMC and key capital market stakeholders.

Status of Selection Process: Interested firms or groups of firms are hereby invited to submit expressions of interest.

Assignment Start Date and Duration: The Assignment is expected to start in Q1 2018 and has an estimated overall duration of 6 months.

Cost Estimate for the Assignment: EUR 100,000 (exclusive of VAT). Subject to availability of funding, the performance of the selected Consultant and the specific needs of the Bank the Assignment may be extended beyond the current scope.

The Consultant must determine whether any VAT would be chargeable on the services and the basis for that determination, without taking into consideration the special status of the Bank as an IFI and state this to the Bank in their response to the Invitation for Expressions of Interest. To the extent that a Consultant incurs input VAT on goods and services purchased in connection with the provision of services (e.g. VAT on airline ticket) which is not otherwise recoverable by the consultant from the local tax authority, the gross cost to the consultant of such expenses shall be treated as a reimbursable expense.

Funding Source: It is expected that the Assignment will be funded the EBRD Shareholder Special Fund. Please note selection and contracting will be subject to the availability of funding.

Eligibility: There are no eligibility restrictions.

Consultant Profile: Corporate services are required. The Consultant will be a company or a group of companies which is specialised on capital markets development, especially the trading environment. The Consultant must have a proven track record of working with market operators, authorities and participants on similar consulting assignments. In-depth knowledge of market structures with special focus on exchanges and trading facilities and understanding of new regulatory and technological developments as proven in previous assignments is required. The Consultant has to propose a team of highly specialised experts who will carry out the assignment. The provided expertise should cover all areas as defined in the scope of work.

The Consultant’s expert team is expected to include key experts as follows:

(a) Team Leader / Capital Markets Infrastructure and Trading Expert

  • Preferably 10 years’ Consultancy experience related to capital markets development covering trading, clearing and settlement;
  • Preferably 5 years of project management experience including acting as Team Leader on similar assignments;
  • Excellent knowledge of international standards (i.e. PFMI) and EU Directives (especially CSDR, EMIR, CRD IV/CRR, Settlement Finality Directive, MiFID2/MiFIR);
  • Experience in the design, management and/or implementation of capital market infrastructures (i.e. Exchanges, trading platforms, CSDs, clearing houses);
  • In-depth knowledge of trading, clearing and settlement;
  • Acted as a team leader/capital markets expert in minimum 3 similar projects;
  • Previous experience on trade level is preferred;
  • Practical experience in the securities market projects, preferably in transition economies
  • Excellent communication, analytical, report writing and presentation skills;
  • Proficiency in written and spoken English language.

(b) Capital Markets Expert(s)

  • Preferably 5 years’ consultancy experience related to capital market infrastructures, especially trading platforms/exchanges;
  • Preferably more than 3 years’ experience in capital market operations (i.e. trading, clearing, settlement);
  • In-depth understanding of current trends and developments in capital market operations;
  • Good knowledge about trading platforms and newest IT developments;
  • Excellent knowledge of international standards (i.e. PFMI) and EU Directives (especially CSDR, EMIR, CRD IV/CRR, Settlement Finality Directive, MiFID2/MiFIR);
  • Experience in the design, management and/or implementation of capital market infrastructures (i.e. Exchanges, trading platforms, CSDs, clearing houses);
  • Acted as an expert in at least 2 similar project;
  • Proficiency in written and spoken English language.

If one expert can cover various expert roles this has to be clearly stated in the Expression of Interest and reflected in the CV(s) and the proposed work plan accordingly. It is important that at least one expert has knowledge of the Ukrainian capital market.

Submission Requirements: In order to determine the capability and experience of Consultants seeking to be selected for this Assignment, the information submitted should include the following:

  1. Company/group of firms’ profile, organisation and staffing (max. 2-4 pages).
  2. Details of previous project experience or similar assignments particularly undertaken in the previous five years, including information on contract value, contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided (if different from duration) , main activities, objectives.
  3. CVs of key experts who could carry out the Assignment detailing qualifications, experience in similar assignments, particularly assignments undertaken in the previous five years, including information on contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided, assignment budget, main activities, objectives.
  4. Completed Consultant Declaration Form and Contact Sheet, the template for which is available from the following web-link:

http://www.ebrd.com/pages/workingwithus/procurement/notices/csu/contact_sheet.doc.

The above information should not exceed 25 pages excluding CVs and contact sheet.

The complete expression of interest (including CVs, Consultant Declaration and Contact Sheet) should be submitted, in English electronically through e-Selection, to reach the Bank not later than the closing date. The expression of interest shall be one file (pdf). The EBRD reserves the right to reject applications of firms submitting more than one file. Only if the permissible file size is exceeded (4MB), the Consultant may split the expression of interest into further files.

Bank Contact Person:

Larissa Gosling

Technical Co-operation

European Bank for Reconstruction and Development

One Exchange Square

London EC2A 2JN

Tel: + 44 20 7338 6338

e-mail: goslingl@ebrd.com (submissions should be sent through eSelection and NOT to this email address)

Notes:

  1. The selection will normally be made from responses to this notification only. Consultants will not be asked to submit a proposal. The highest-ranked Consultant will be selected from a shortlist and be invited to negotiate the contract, subject to availability of funding.
  2. The shortlist criteria are:

(a) Firm’s previous project experience in commodity and capital markets operation and development projects as well as warehouse receipt systems (50%)

(c) CV of Key Expert No (50%)

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