Introduction
The development of capital markets is highly dependent on the activities of related securities market infrastructure institutes that include, inter alia, depository companies engaged in provision of the services for record-keeping of entitlements under securities (registration and transfer of rights to securities), collection of coupon and dividends (payable income) arising from the portfolios, facilitation of corporate actions processing (such as tender offer, proxy voting, buy-backs), and other services. This study focuses on the issues and relevant remediation steps applicable to depository companies being integral part of the stock market infrastructure.

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Recent volatility in the stock markets provided a positive impetus to change the business model of depository companies. Securities market participants seek to use the services of depository companies as an additional measure of protection for a significant amount of assets and portfolios. Moreover, the market is shrinking and brokerage houses are going bankrupt that also boosts customers desire to move their assets to specialized players in depository business by establishing direct relations. Nevertheless, the global turmoil has affected the research market segment resulting in rapidly decreasing value of assets under custody, reduction of on-exchange and OTC trading volumes, and redistribution of portfolios of assets by risk-averse investors seeking alternative strategies in times of crisis.
Keywords: capital market, strategic alternatives, competitive strategy, depository services.
The objective of the research paper is to identify the key strategic options that would increase economic profit of the depositories’ organizations amid ongoing financial crisis. Effectively, we would like to develop and propose different approaches towards the companies’ strategic options aimed at defining current condition, future growth factors and drivers for relatives companies of the market segment.
The findings section of the research paper describes most topical problems that depository companies are currently facing in Russia. The economic value drivers are identified and can be used to translate them into the economic profit model of depository companies. Furthermore, the main strategic options are identified to highlight client portfolio rebalancing opportunities in the market segment.
Methodology
The methodological base of the research paper is based on the analysis of data and information available in public sources, and made through desk study, along with the opinion expressed by the market experts. The following sources of information were used for different sections of the report:

Legal framework: federal laws on securities and custody operations, information on securities market volumes and other statistics was retrieved from the Russian National Association of Securities Market Participants (NAUFOR) and the Central Bank of Russia (CBR) official web-sites, the official publications and documents of the Federal State Statistics Service (Rosstat), and the Ministry of Economic Development;
The problems were identified through interviews conducted with securities market specialists in Russia;
Securities services sector development: the data was retrieved from annual NAUFOR “Russian Stock Market. Facts and Events” survey of 2014.

The research paper is represented by six chapters that include introduction, methodology, the main part – hypothesis, findings, conclusion, footnotes and bibliography.
Hypotheses
We suggests the following hypotheses to be tested in the course of empirical research:
Hypothesis 1: The growth strategic alternative (merger / acquisition, and integration / alliance) is winning in terms of achieving the objectives set by the company during crisis.
Criteria: Cost-saving through synergies with other small providers; introduction of new product offering.
Hypothesis 2: Companies that apply product expansion strategy instead of infrastructure needs can be more effective during crisis times, create competitive advantage and fulfill the objectives of the company.
Criteria: The presence / absence of the relation between the degree of product diversification of the company (interoperability with the Central Depository, Central Counterparties, communication standards) with product standardization.
Hypothesis 3: Depositories companies prone to invest in quality assurance (service organization), rather than implement cost reduction strategies.
Criteria: The presence / absence of large market players, including investment funds and wealthy individuals.
Characteristics of the research object
Object depository companies that provide services to broker / dealers, investment funds, private individuals and other depositories.
Characteristics and features of the market segment:
– Approximately 570 companies.
– From 15 to 80 employees.
– Revenue from 0.1 to 5 million dollars a year.
– Clients – local and foreign residents.
– Entry barriers – licensing requirements, IT technology, staff competencies.
– Large number of small companies with a small scope of operations and market share.
– Trend towards consolidation of businesses.
The market segment of the securities market industry has a number of distinctive features that influences application of discussed strategic alternatives in the crisis.
Findings
The current global financial crisis requires depository companies to respond quickly to all macro-environment changes and stay competitive player with large amounts of assets deposited. The securities services are fairly stable line of business, where the client portfolio (equities and fixed income instruments) size is crucial and steady income for the maintenance would facilitate the development of the company. However, the depositary companies are affected by unstable situation, which is observed in the stock market in recent years. Therefore, we would like to see new threats and opportunities that have emerged recently.
We analyze the strategies of corporate governance of companies affected by the financial crisis on this basis, the following assumptions that were designated for the research paper:
– We assume that all actions are undertaken in the interests of the stakeholders of the company or business.
– Set of strategic alternatives designated for the management in order to adjust the company’s goals, drivers and incentives. It should be aimed at achieving long-term stability and development of the company’s competitive advantages.
We offer three strategic alternatives focused on the development of depository companies.
Strategic integration opportunity is aimed at further increasing the scale of production for the purpose of reducing the share of the unit cost. The implementation of the strategic alternative is expected to be done either by improving production processes or acquiring other depositary companies of market segment for the purpose of achieving the economy of scale. The strategy also suggests the possibility of further acquisitions and development of the most profitable depositary companies of the group.
The strategy of product expansion in companies offering depository services promote the interests of customers and investors in attracting new portfolios. This strategy, however, requires a systematic approach and professional competence to be successful. The Russian capital market has grown rapidly over the last 15 years, but the securities market infrastructure could not keep up the pace. Effectively, depository companies that had specialized in improving the securities market infrastructure of the stock market, promoting new electronic document interchange, new product offering and interconnection services, can achieve success in the crisis. Given the opportunity to work with local authorities on the development of the securities market infrastructure in the long term they can lead to key roles in the value chain. These depositories companies has a fundamental knowledge and significant resources to identify and resolve discrepancies in connection with the accelerated development of the stock market.
The strategic alternative of the service organization if they can meet service level claimed by sophisticated investment funds, private individuals and global custodians forced by the credit crunch to hold their assets through depository companies using them as extra protection during the financial crisis. For depository companies, there are many opportunities to retain these customers and grow the business, if they can agree and guarantee services that their customers demand. Nevertheless, many questions arise when thinking about the possibility of service in the framework of this strategy, there is no innovation component. It may be difficult to implement such a strategy for large depository companies whose business models are based on cost reduction and unification of services provided. However, the innovative component cannot be a panacea for all the ills in the short term. The decisive role is played by the demand and requirements of the customers and investors, and also monitoring and control regulatory bodies.
Business model of depository companies are highly dependent on the cost of fees for safekeeping as a percentage of total assets in custody, as well as fees for each transaction in securities. Probably the situation could become worse, given the negative reaction from politicians and regulators in light of the financial crisis. One of the key areas which will have an impact on the financial services sector is information transparency.
Stagnation of business activity in the stock market has provided many opportunities for depository companies, and put some pressure on the volume of investment and resources management companies. Business and operational models were tested under the conditions subject to increased demands of customers in the pursuit of improving the quality of service and flexibility of services provided. The rapid reduction in the value of client assets under custody put pressure on revenues and spending in order to remain profitable.
Conclusion
The practical conclusions of the study can be summarized as follows:
The specific strategic alternatives have been formulated for depository companies acting in a financial crisis. Each option describes opportunities and focus group, and is presented as optimal one for the company with certain level of expertise and specific client types.
Each of the strategic alternatives is aimed at selected market participants and shall provide opportunities to survive, improve operational activities, and also to strengthen their position in the market segment.
In conclusion, we notes that at the present time, when the whole world is deepening the financial crisis, more and more companies risk losing their ability to pay. Accordingly, it is necessary to pay more attention to the anti-crisis strategy of corporate governance.
Bibliography

Rubcov B.B. Modern Financial Markets – M.: Alpina Business Books, 2007. – 926 p.
Clearnet. Rules & conditions for clearing house membership. Paris, 2000.-p. 114
Group 30. Report of Committee on Interbank Netting Schemes of the Central Banks of 2005
www.cbr.ru/sbrfr CBR – legal framework, financial market participants, market statistics
www.naufor.ru NAUFOR – Russian Stock Market Fact Book 2014
www.gks.ru – Federal State Statistics Service.
www.ved.gov.ru – The Ministry of Economic Development of the Russian Federation.