Russian central bank puts brakes on sale of shares converted from GDRs

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A law that came into effect this month requires Russian companies to delist their depositary receipts from foreign bourses and convert them into local securities in a bid to reduce foreign control.

Citing the need to support financial stability, the central bank said it had told Russian depositories to account separately for shares issued through GDR conversion, and to limit sales on any given day to 0.2% of the amount converted.

The new rule applies both to transactions on the Moscow Exchange and to over-the-counter deals, the central bank said.

As trading in Russian GDRs had already been suspended on Western bourses, investors from “unfriendly countries” – meaning those that have subjected Russia to sanctions – may have preferred to offload their GDRs to Russians rather than risk trying to recoup their value amid Moscow’s capital controls.

The bank, which is also Russia’s securities regulator, said it had acted after noticing that Russian residents were buying GDRs from these investors and hoping to sell the shares after they were converted.

It said such deals could trigger price falls on the Russian stock market and undermine the stability of the financial sector.

The rule will not apply to shares converted from GDRs bought before March 1, or if a government commission grants a waiver.

Western bourses halted trading in the GDRs of major Russian companies including Rosneft, Sberbank, and Gazprom (MCX:GAZP) when their price crashed after Russia sent troops into Ukraine on Feb. 24.

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