NYSE owner to remove Russian, Belarusian debt from indexes

[NEW YORK] Intercontinental Exchange (ICE), owner of the New York Stock Exchange (NYSE), joined a swath of global counterparts in removing Russian and Belarusian debt from its fixed-income indexes in the wake of the invasion of Ukraine and the implementation of wide-ranging sanctions.

The debt will be deleted from indexes on Mar 31 at a price of 0, the firm said in a Friday (Mar 18) statement. The move comes after similar decisions by providers of various fixed-income and equity indexes, including JPMorgan Chase & Co, S&P Dow Jones Indices, MSCI and Bloomberg LP, which is also the parent of Bloomberg News.

These announcements by benchmark providers come as market liquidity dries up for many Russia-related securities after the US and its allies imposed a wide array of sanctions in response to the Ukraine war.

ICE's decision also comes at a time when investor attention is keenly focused on whether coupon and principal payments will be made on a suite of different Russian instruments.

Any reintroduction of Russian or Belarusian debt into the indexes will be subject to applicable laws and regulations and subject to future consultation, ICE said. "These changes are being made in accordance with the letter and spirit of the sanctions, as well as the rules and regulations that govern our business," the company said.

On Friday, some holders of Russia's dollar-denominated sovereign bonds said they had received a US$117 million coupon payment that was due Wednesday. It was a relief to investors who feared the nation would resort to settling the debt in roubles. Still, S&P Global Ratings said Thursday that future attempts to pay foreign-currency debt may face similar technical difficulties in the coming weeks.

The index removals are a long-term hurdle for the nation's assets and risk undoing decades of progress of financial integration. Prices on the sovereign external bonds from Russia and Belarus have sunk as sanctions left both countries facing increasing economic isolation.

As index providers continue to exclude the nations' assets, it could take longer for trading to recover even after the war in Ukraine ends.

"Passive investors will trim those positions even if they could be invested in Russia, assuming sanctions, liquidity and the rest returns to normal," said Cristian Maggio, head of portfolio strategy at Toronto Dominion Bank in London. BLOOMBERG