From regulation to development: how the Commission’s role in capital markets is changing

Capital markets should serve the economy. For a company, this is an opportunity to raise funds for growth; for a community, to finance an important project; and for an individual, to preserve and grow their savings. Today, the Ukrainian market does not yet fully fulfill this role: government bonds account for about 85% of the securities market. Therefore, the Commission’s task is to create conditions for a wider selection of financial instruments, easier access to them, and the inflow of long-term capital into the economy.

This also changes the regulator’s approach to its work. NSSMC Chairman Oleksii Semeniuk urges that markets not be evaluated solely based on legislative amendments or the number of new rules. It is important that these amendments yield practical results: more capital flowing into business and more citizens willing to invest.

“Our goal is to turn capital markets into an effective driver of the economy, where everyone can find the financial instrument they need,” explains Oleksii Semeniuk.

Removing barriers

If a company cannot easily and quickly raise funds through capital markets, financial instruments themselves lose their purpose. Therefore, the Commission is reviewing the procedures that professional participants must follow to issue and register securities. One of the priorities is to significantly reduce the time required for issuance. Currently, the process can take 4–5 months. The Commission aims to reduce this timeframe to 10–14 days.

The process of interacting with the regulator is also changing. Registration documents are submitted through electronic accounts in the Commission’s information system. For local bonds, for example, if certain documents — such as resolutions of a local council or budget reports — have already been published on the local community’s website, you can simply reference them.

This July, the Commission also updated the rules for issuing local bonds. Now, a local community can register a base prospectus (a document containing key information about the local community and the main terms of the bond issuance) once and subsequently issue new series within its scope without having to go through the entire procedure again. In certain cases, the document review period has been reduced to seven business days.

Another area is investment funds. In October, the Commission approved draft amendments designed to simplify the preparation and submission of documents by asset management companies and funds and to clarify certain registration procedures.

The logic behind these changes is simple: the regulatory process should protect investors and ensure order in the market, but it should not create unnecessary obstacles to raising capital.

Creating new opportunities

Another area of focus is providing the market with more ways to raise and invest funds. One of these is the previously mentioned municipal bonds. For local communities, this is an opportunity to attract investor funds for infrastructure development and other long-term projects. Most often, local communities consider three areas for this: housing for people who have lost their homes due to the war, small-scale infrastructure projects, and specific energy projects not covered by government programs.

The Commission continues to engage in direct dialogue with local communities. Similar meetings have already taken place with the cities of Odesa and Mariupol, as well as with communities in the Ivano-Frankivsk region. This work with the city of Lviv has been ongoing since spring. The goal is to make capital markets a practical source of funding for community recovery and development projects.

Another tool is securitization. In September, the Verkhovna Rada passed a law on securitization and covered bonds. Its goal is to create a legal framework in Ukraine for instruments that make it possible to convert future cash flows from assets into a source of new financing.

For the economy, this means the ability to use already raised capital more efficiently. For example, a financial institution can pool loans, raise funds from investors against that pool, and direct the freed-up resources toward new loans. In other words, the same capital can successively support several financing cycles.

The Commission is also working on personal investment accounts. The idea behind them is to create a tax incentive: provided certain conditions are met and the investment is kept intact for a period of three years or more, the income from such investments may qualify for tax exemption.

“I would like to see as many Ukrainians as possible become owners of capital — so they can not only earn and save money, but also manage their savings and multiply them by using market instruments,” says Oleksii Semeniuk.

Another area is the development of investment funds and other forms of collective investment. These allow the funds of many investors to be pooled and directed toward various assets.

This is important for a market where government bonds currently dominate. The more transparent financial instruments investors and companies have, the broader the range of financing sources in the economy will be. Oleksii Semeniuk identifies the creation of such competition among financial instruments as one of the conditions for the market’s full-fledged development.

Building trust

No new instrument will function without trust in the rules, market participants, and the regulator itself. Therefore, in developing capital markets, the Commission pays particular attention to strengthening investor protection, transparency, and international cooperation.

In July, Ukraine officially joined the IOSCO Multilateral Memorandum — an international system for cooperation and information exchange among capital market regulators. The signing was preceded by many years of work by the Commission and an assessment of its ability to exchange information, conduct investigations, and protect confidential data.

At the same time, the Commission is aligning Ukrainian regulations with EU and international standards. This applies to new instruments, regulatory practices, and requirements for market participants.

An important principle is to ensure that these changes are not made in isolation from the market. In September, the Commission held a meeting with business representatives to discuss simplifying companies’ access to financing and approaches to new financial instruments. Oleksii Semeniuk emphasized that a capital market cannot be built by a single regulator alone — it must be created jointly by the government and the business community.

This approach already goes beyond the scope of traditional regulation. In early October, the Commission signed an agreement with the IFC, with support from SECO, on the development of digital capital market instruments, including tokenization and securitization. The goal is to build a regulatory and operational framework for modern financial products.

A market that works for the economy

For the Commission, the outcome of this work is not measured by the number of documents adopted. Oleksii Semeniuk articulated this criterion clearly: the indicator should be new cash, tools, and opportunities for businesses and citizens in Ukrainian capital markets.

In this model, the regulator must view the market in a broader context than that of a single procedure or regulatory act. A company must have a viable alternative to a bank loan. A local community — the opportunity to raise funds for a long-term project. An average citizen — a straightforward way to invest savings. And for foreign investors, it means seeing rules that are consistent with international standards and understanding how they work.

This is exactly what the Ukrainian capital market should become: deeper, more technologically advanced, and more attractive to capital. And the Commission’s role is to create the rules and infrastructure necessary for this, enabling the market to grow.