is your investment to the Victory and future of Ukraine


Ruslan Magomedov, the Chairman of the NSSMC, told about the old new: building a stock market and securities that don’t exist.

The existing stock market infrastructure is unacceptable for the international market, so a new model is needed.

The National Securities and Stock Market Commission (NSSMC) has a clear plan of what to do and where to go. It is reflected in the approved strategy of the Financial Stability Council.

In addition to pension reform, the launch of capital markets, the development of financial instruments and fundraising are the things that can help the stock market to take off. But first and foremost, it is a reform of the NSSMC itself – reducing the number of staff while increasing the salaries and qualifications of those who will remain in the team, digitalizing all processes within the NSSMC, and abolishing the review of regulations.

Investment accounts need to be introduced so that financial instruments can compete by their nature, not by taxation.

The situation with EXANTE and the liquidation of Mono Invest is not about lost trust. It’s about the risk that investors and servicing brokers took when working abroad.

In addition, in an interview with, Ruslan Magomedov, Chairman of the NSSMC, told us where corporate bonds have gone, why the law on virtual assets adopted by the Parliament in 2021 did not keep pace with the market development? And what is the new draft law on the regulation of the turnover of virtual assets in Ukraine, which the NSSMC has been working on?

«To open up to the international stock market, we need a new model…»

– Prime Minister Shmyhal says that it is necessary to create a stock market infrastructure. According to some experts, this infrastructure already exists. So what needs to be done? Destroy the existing infrastructure and start building again? Or perhaps the existing infrastructure lacks some components? Which ones? And how to create them? What steps should be taken? What steps have been taken?

We have the infrastructure: exchanges, the Settlement Center and the National Depository, but these activities are aimed at domestic investors. The modern world shows us that we can open up to the international market, but we need a new model. As external investors are accustomed to operating under rules that are clear to them, we should propose something similar within the Ukrainian context. Why? Because it is about trust in the system, security of payments, speed and convenience of processes.

Building a modern powerful infrastructure is not a day’s work. But today we have to create a profitable business model of an exchange clearing holding in Ukraine, so that it becomes a way for comfortable capital flow conditions for Western and domestic investors. We want to involve an international partner and its experience in this process to design such a technological model in Ukraine. Also, we, as a state, must build favorable conditions, primarily legislative and regulatory, to make it profitable and interesting to create and operate an exchange in Ukraine. We should consider reducing the state’s share in the National Depository of Ukraine and the Settlement Center to attract private capital that will be interested in developing these institutions. It is extremely important to start all the processes now. And the Government understands this.

– How many working meetings did the Cabinet of Ministers have regarding the creation of the stock market?

Working communications and meetings are ongoing, and recently there was a constituent meeting on the strategic vision, which was attended by the Ministry of Economy, the President’s Office, the National Bank, the State Property Fund and others, during which we agreed to hold such meetings on a regular basis. And this is important. I believe that this dialog was resumed in a timely manner and our productive meeting was useful for all participants.

– How different is the vision of the participants in the meetings of this process? In what ways? What common ground have you already reached?

In the NSSMC we have a clear plan of what we need to do and where we need to go. Most of our plans are already reflected in the approved strategy of the Financial Stability Council. But we all understand that only by working together can we speed up the implementation of projects, so we work together. After all, the main task is to stimulate investment in the development of the country’s financial system and economic recovery.

– What, in general, can the stock market do, step by step? Can pension reform contribute to its development? How can it do so?

Pension reform and capital market reform are interconnected. As the experience of many European countries shows, building a proper pension system is a trigger for capital markets and attracts investments in it. Now Ukraine and its citizens need a second level of the funded pension system, and we at the NSSMC have been working hard on this for years. A draft law on funded pensions has already been registered in the Verkhovna Rada (draft law 9212 – Ed.). Therefore, the NSSMC, as the main stakeholder and key regulator of this segment, has analyzed the document in detail and prepared conclusions. In general, we at the NSSMC support the adoption of this draft law, subject to the finalization of a number of important provisions that will determine the success of the reform.

For our economy, pension reform means long-term investment money that can be used to finance infrastructure projects, develop businesses, and other sectors. And the capital market, in turn, will receive an increase in liquidity in the capital markets, as pension funds invest their accumulated funds in various financial instruments. But for this to happen, the domestic market must have reliable issuers and instruments, because currently, other than government bonds, other instruments are either too risky or do not offer sufficient yields to compete with the same domestic government bonds.

This is the case with pension reform. But there are other levers of influence on the launch of capital markets. The key is the development of financial instruments and fundraising. And we have a number of worthy projects in this regard. For example, the introduction of investment accounts, thanks to which we can also count on long money in the economy. First of all, this is draft law 5865, which provides for the reform of the NSSMC itself – reducing the number of staff while increasing the salaries and qualifications of those who will remain in the team, digitalizing all processes within the NSSMC, and abolishing the legal review of regulations. All of this is interconnected, and these processes should go hand in hand and complement each other at certain stages.

– How is the new capital market development strategy being prepared? What will be the key points in it?

The goal of the strategy is to provide liquidity to the capital markets for Ukraine’s recovery. It is about raising funds, creating financial instruments, and the ability of both the regulator and the state to implement all this.
We have focused on certain projects that are in our focus right now: infrastructure, financial instruments, pension reform, European integration, securitization, investment accounts, virtual assets, and NSSMC reform. We are at different stages in these areas, but all of them have been launched and are being actively worked on.

«There is no demand, so there is no supply…»

– What securities are currently available on the market? How does the market function? How do you assess the work of exchanges?

Currently, our market consists only of domestic government bonds. The rest are small transactions that do not have a significant impact on liquidity. As you know, during the full-scale war, the government started issuing so-called military bonds, and they are still in demand and bring investments from both individuals and businesses. Why is this so? Why only bonds? Investors in securities set the pace. If there is no demand, there is no supply. However, we are also currently working on a range of financial instruments – securitization, agricultural receipts, derivative contracts are relevant today, but at different stages of implementation. In my opinion, we need to synchronize with market participants and move in unison in the direction of the relevance of what the market needs for its viability.

– Do you have an understanding of how to restore the lost confidence of Ukrainian and foreign investors in our stock market? Do you think the investor protection mechanism is working now? What is needed to make it work?

Trust can be restored. And we need to do everything comprehensively – there is no single point. We have to work on all fronts in parallel, creating financial and hedging instruments, making public offerings, building modern infrastructure, showing practical experience of trust and creating a social contract in the market. All of this should be done with the understanding that it is necessary not only for the market but also for the recovery of our economy. Yes, it’s not possible in one day and not in one project, but we need to work hard.

– Hasn’t the situation with the broker EXANTE, which fell under sanctions, become another blow to investors’ trust? Please comment on the liquidation of Mono Invest, which worked with this broker, and the future of the Sence investment instrument. When can we expect to be allowed to invest in shares of foreign companies?

Not at all, this is not about lost trust. This is about the risk that investors and service brokers took on when working abroad. Even before this EXANTE story began, we warned that trading there is not a controlled risk in other jurisdictions. In general, I am sure that we will find a way out so that our investors can return their assets and transfer them to Ukraine.

– JSC «Market Operator» (a state-owned company that administers the electricity trading exchange on the day-ahead and intraday markets) claims that it is waiting for a license from the NSSMC to start trading electricity on the bilateral contracts market. Why doesn’t the NSSMC grant them a license?

Yes, indeed, JSC «Market Operator» cannot trade on the bilateral contracts market without a license issued by the NSSMC. However, we do not have any documents from the company to obtain a license.

– What happened to corporate securities and where to get them?

They do exist. Some «technical papers» have been cleaned up and withdrawn from trading on exchanges. But frankly speaking, there are almost no market instruments other than government bonds. This is because it is difficult for businesses to compete with the government in the domestic borrowing market. That is why it is necessary to give investors an incentive to invest in corporate securities and other financial instruments for the long term. The main mechanism for creating such an «incentive» is investment accounts.

– How challenging is it for the corporate sector to compete with government securities at the moment? What needs to be done to make the corporate sector competitive? When might this be achievable?

Yes, it is not a competition on equal terms. There is no tax on government securities. That is why we want to introduce investment accounts so that financial instruments can compete by their nature, not by taxation issues.

Investment accounts are about creating an institution of «long money» in the real sector of the economy within the Ukrainian financial system. A Ukrainian can open a personal account – a medium-term (up to 3 years) or long-term (up to 7 years) account to invest his or her own savings. An investment firm will provide account opening, maintenance, and act as a tax agent.

The key difference is the tax advantages Given compliance with all account requirements, the owner is exempted from income taxation on profits obtained from operations conducted through these accounts. Funds on individual accounts will actively work for the country, as the investment firm will be able to invest them in capital market instruments – municipal and corporate bonds, listed stocks, bank certificates of deposit, and open-ended investment funds – in the interests of the owner.

– Has an assessment of the pilot project for credit note registration been completed? What are the chances of success for this financial instrument? What other new instruments do you see on the horizon? How can the range of srcurities be expanded?

This is a good instrument that has good prospects and will be implemented at the right time for the country. They deserve special attention in conditions where there is uncertainty or certain risks. After all, the holder has the right to receive payments on the debt instrument and to redeem such securities if the credit risk is realized. As such instruments have emerged from the financial engineering of various models, there are many configurations of their use.

So far, this is the only case, but we hope that this experience will be successful and the results will help popularize credit notes to attract the necessary resources. Based on the results of this experience, we will perform an internal procedural analysis and assessment, and than plan to develop a universal document on the procedure for issuing, circulating and redeeming such securities.

Speaking of new instruments in the capital markets, there must be a request from the business itself. Companies know and understand what is necessary for their operations and should address these needs to the NSSMC, which will help to implement the launch of financial instruments on the market. We cannot tell them how to do business. But we can help create the right conditions for doing it.

«First, we need to transform the NSSMC itself…»

– What hinders the work of the NSSMC? What challenges does the NSSMC face?

Today, the NSSMC is quite limited in terms of resources, we do not have flexibility and are restrained in many ways. The aforementioned draft law No. 5865 is about internal changes in the organization. After all, we have to start with ourselves, adjust everything internally for our efficiency and productivity in market development. End-to-end automation of many internal processes, abolition of proofreading of our documents, proper qualification of specialists in various fields and their decent salary are the priorities of our changes.

– The NSSMC has been working on a draft law to regulate the turnover of virtual assets in Ukraine. Is it intended to completely override the law on virtual assets adopted in 2021? How much does it differ from the document adopted by the Ukrainian parliament? What are the key points in the draft law? What novel elements does it introduce that were absent in both the previous law and the European MiCA regulations for crypto-assets? For instance, will NFTs be regulated according to your draft law? In your opinion, how long might it take for your draft law to become an enacted piece of legislation and come into effect? Is there a possibility that it might become outdated, much like its predecessor?

Law No. 3637 did not come into effect due to several significant factors. This technological market did not wait for us but rapidly evolved. Consequently, the content of the law no longer met the demands of the time. If we talk about our internal processes, the implementation required parallel changes to the Tax Code and the Civil Code. Another factor is Ukraine’s path towards European integration. Therefore, for the development of the virtual asset industry, we chose the direction of implementing the European MiCA regulation.

So we took the European MiCA rules, adapted them to our realities, and set them out in the text of the draft law. Together with international partners, we have done everything comprehensively this time – these are changes to the Tax Code, a new version of the Law on Virtual Assets, and changes to other legislative acts.

Our draft law on the Regulation of the Turnover of Virtual Assets in Ukraine is ready. What is happening with it now? We have completed an important stage – we have gathered professional expertise, heard from all stakeholders in this process, and worked through a large array of key issues. The text has been sent to the relevant authorities for approval. We are waiting for prompt feedback from our colleagues so that we can submit the draft to MPs in the relevant committee as soon as possible.

– At what stage is the commodity market developing? What is the NSSMC doing to make it fully operational?

We see good dynamics of the commodity market development, it is pulsating. Of course, we plan to increase liquidity in this market, because it has powerful resources and prospects. But the war is still ongoing, so there are certain limitations to our ability to do so.

– How do you assess the level of interaction between the NSSMC and market participants?

We are always in favor of open and transparent communication at all levels of our interaction. The war has affected the mood of some participants. Some simply took up arms and went to the front, while others suspended their activities due to the war.

Together with those who are here and working, we have to unite and look clearly at the future of our market. We are pleased that there are market participants who see this future, build new promising projects for their business, and constantly communicate with the NSSMC and join our initiatives.

– What is the most tiring part of your job? Is there anything that makes you want to give up and quit? What resolutions/processes that took place during the Great War are you proud of?

Fatigue exists and it is not a secret. Now, during the war, there are a lot of challenges and tasks, and we have to work constantly. But on the other hand, all this is extremely inspiring, because this is our front and we have to defend it. This is what I am doing with my team.

I am proud and believe that we at the NSSMC have done a decent job since the beginning of the full-scale war. We saved our country from devaluation and protected it from fraudulent actions with assets.

On the first day, we made an uncompromising decision and blocked all transactions in the capital and commodity markets. This enabled us to resist panic actions that could have brought down the markets and prevented them from functioning properly in the future. We preserved data and property rights. Freezing the market allowed us to find assets associated with the aggressors – the russian federation and the republic of belarus – and limit the ability of such companies to do business in Ukraine.

The markets were functioning, but in a manual mode, and we made individual Resolutions on each person who applied to us. For example, the NSSMC allowed us to make payments to pensioners and to conduct investment activities in construction in regions where there were no hostilities.

We worked 24/7 and, despite the full-scale war, we managed to make a number of improvements to the market in our regulation. For example, we simplified the procedure for purchasing government bonds for non-residents and the mechanism for identifying individuals, allowed general meetings to be held remotely, extended the validity of certificates for professional participants and simplified registration procedures, extended the deadlines for meeting our regulatory requirements for the market, and transferred document flow to an electronic format with the use of an electronic digital signature (EDS).

Five months later, we lifted almost all restrictions and launched the markets after assessing all the risks. After all, capital and commodity markets have a significant impact on the foreign exchange market, attracting investments through government bonds, and supporting the economy as a whole. That is why our country needed this link to be restored and work. And again, we worked in a coordinated and efficient manner.

– How do you want to see the result of your work?

I want Ukraine to have a modern technology market that will be filled with liquidity and have a high-quality infrastructure. But first, the NSSMC itself needs to be transformed in order to implement the planned projects quickly and efficiently. This is my goal, I am working on it and believe that everything is possible.


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