Reform of the registration, clearing and settlement system ... · PDF file3 Reform of the registration, clearing and settlement system and adaptation to T2S 1. CURRENT STATUS . IBERCLEAR

Reform of the registration, clearing and settlement system and its adaptation to Target 2 Securities.

2 Reform of the registration, clearing and settlement system and adaptation to T2S

1. CURRENT STATUS

2. PRINCIPLES OF THE REFORM

3. PRINCIPLES OF T2S

4. FINAL SETUP

5. TIMETABLE

AGENDA


1. CURRENT STATUS

IBERCLEAR – Spanish Central Securities Depository Formally established on 1st April 2003 Handles the functions formerly handled by SCLV and CADE Registration, Clearing and Settlement:

Equity Trades Alternative Equity Market Latibex Market Public Debt Market AIAF Fixed Income Market


1. CURRENT STATUS

IBERCLEAR – Spanish Central Securities Depository Manages two technical platforms

Equity Trades Alternative Equity Market Latibex Market

Public Debt Market AIAF Fixed Income Market

SCLV Platform

(Multilateral system)

CADE Platform

(Bilateral system)


1. CURRENT STATUS

IBERCLEAR – Spanish Central Securities Depository

Settlement: T+3

Multilateral cycles: 9:00 am, 1:00 pm and 3:00 pm Bilateral cycles: Corporate Actions Specific cycles for OTC transactions: 10:30 am, 11:30 am and 2:00 pm

Gross securities settlement and net cash settlement Real-time communication from 7:00 am to 7:15 pm

SCLV Platform


1. CURRENT STATUS


Assurance of delivery

SCLV Platform

GUARANTEE

Securities

Centralised loan

Buy-in: T+4

Cash

Credit line

Replacement sale

Excluding OTC transactions


1. CURRENT STATUS


Real-time settlement system

Real-time settlement between 7:00 am and 4:15 pm

Two additional batch processes:

Overnight End of day

Gross securities settlement and gross cash settlement

CADE Platform

8

settlement

SUPERVISION

TRADING

SETTLEMENT

1. CURRENT STATUS


1. CURRENT STATUS

Trading Platforms

Participant Entities

Participant Entities

S.I.B.

M.U

.L.

Data- bases: - ISIN - Participants - Rules - Proced. - Calendar - etc…

Settlement - FoP - DvP - Bilateral

Securities Accounts

REPORTING THIRD-PARTY INFORMATION

CORPORATE ACTIONS

CADE PLATFORM


Settlement - FoP - DvP - Bilateral

Securities Accounts

REPORTING RRs CORPORATE

ACTIONS

SCLV PLATFORM

V.U

.C.

S.U

.C.

BREAKDOWNS AND CONFIRMATIONS

GUARANTEES

A.U

.D.

Cash accounts


2. PRINCIPLES OF THE REFORM BASIC FEATURES: 1. Introduction of a central counterparty (CCP) and modifying the moment of

finality in the central securities depositary (CSD) and the principle of assurance of delivery.

2. Settlement by balances and dismissal of Registry References. 3. Modifications to the Registration System.


2. PRINCIPLES OF THE REFORM MAIN CHANGES: 1. Registration system 2. Clearing and settlement of trades 3. Supervision of second-level registration accounts

4. Handling of Corporate Actions


2. PRINCIPLES OF THE REFORM 1. Registration system Single System: Same system for Equity and Fixed Income Two-level registry: Registry will be kept by IBERCLEAR (central register) and by its

participating entities (second-level register) Based on balances: Evidence of ownership will be definde by the balance of

securities recorded in each case in the accounts kept by IBERCLEAR or in the second-level accounts kept by Participant Entities


2. PRINCIPLES OF THE REFORM 1. Registration system

IBERCLEAR will keep records of the following accounts: a) Entities’ proprietary accounts: IBERCLEAR will maintain, for each Participant and

with reference to each type of security, one or more accounts reflecting the balance held by the Participant

b) General third-party accounts: IBERCLEAR will maintain, for each Participant Entity

authorised to maintain third-party accounts and with reference to each type of security, one or more accounts reflecting the overall balance of the securities that the authorised Entities have registered on behalf of their third-parties (clients)

c) Individual third-party accounts: Accounts opened in the name of a single account holder, being it an individual or a legal entity, may be maintained directly at the Central Registry. Accounts may be kept either directly (IBERCLEAR) or indirectly (Participant Entities)


2. PRINCIPLES OF THE REFORM 1. Registration system

Participating entities authorised to keep third-party registries will be responsible for keeping accounting records of: Detailed third-party accounts: Participating entities will keep the accounting records

of each account holder's accounts, showing at all times, and with reference to each type of security, the balance of the securities belonging to the account holder


2. PRINCIPLES OF THE REFORM 1. Registration system Account codification:

Central Registry:

Securities accounts: Alphanumeric code with 35 positions identifying the Participant Entity and the type of account

Detailed Register: Customer accounts: Customer account code (CCV)


2. PRINCIPLES OF THE REFORM 2. Trades clearing and settlement Three clearly differentiated areas are defined: Trading, Clearing and Settlement &

Registration The CCP's participation in clearing and settlement is required for multilateral

Equity transactions (Stock Market and MTFs), and optional for Fixed Income securities transactions (public and private debt) and bilateral transactions

Transaction settlement is always bilateral This is a single settlement-by-balances system


2. PRINCIPLES OF THE REFORM 2. Trade clearing and settlement

Client

Trader

Clearing

Settlement

Client

STOCK MARKET

CCP

CSD


2. PRINCIPLES OF THE REFORM 3. Supervision of detiailed accounts

IBERCLEAR will supervise the keeping of detailed accounts by Participant Entities

4. Handling Corporate Actions

Corporate actions are to be harmonized in accordance with international standards


2. PRINCIPLES OF THE REFORM 4. Handling Corporate Actions

IBERCLEAR will be the go-between in the preparation of Corporate Actions

between Participant Entities and issuers Corporate Actions are to be harmonized in accordance with international

standards


3. PRINCIPLES OF T2S A EUROSYSTEM INITIATIVE: T2S will perform basic, neutral, cross-border settlement services for European CSDs. The aim is to attain harmonised DvP settlement in central-bank currency (EUR and also other currencies) for nearly all securities in Europe. T2S will constitute a step forward in creating a single securities market, removing many of the Giovannini barriers to cross-boundary clearing and settlement and serving as a catalyst of additional harmonisation processes in post-trading services. T2S will be able to leverage considerable economies of scale by concentrating securities settlement in a single technical platform, resulting in more cost-effective settlement services. The ultimate objective is for cross-border settlement to be identical – in costs, risks and technical processing – to domestic settlement.


3. PRINCIPLES OF T2S BASIC FEATURES:



The aim of T2S is to put domestic settlement on the same level as cross-border settlement. Nevertheless, it is based on establishing bilateral links between CSDs. T2S will handle settlement and is a service offered to the CSDs, but will it not be a CSD per se. CSDs will continue to be responsible for their legal and business relationships with their own participants. T2S will be a multi-currency platform, and its scope will extend beyond the euro area. In T2S, securities may be settled in any of the available currencies. T2S will allow direct connectivity not only for CSDs and NCBs but also for their participants and also for CCPs. These entities may issue settlement instructions directly in T2S and receive information on results if the involved CSD allows so, in accordance with the rules applicable to their participants. For services not available in T2S, these entities will have to maintain their connection with the CSD involved.



T2S will ensure real-time DvP and cross-border settlement using the “integrated model”: securities accounts and cash accounts will be integrated into a single technical platform. T2S will settle in EUR according to the TARGET2 calendar, and settlement in other currencies will be performed according to the opening times of the central bank responsible for the currency involved. Closing times will be harmonized for the different types of transactions (expected times: against payment, 4:00 pm and free of payment, 6:00 pm).


3. PRINCIPLES OF T2S BASIC DOCUMENTATION: URD (User Requirements Document): Describes the features of T2S as they have been required by CSDs and market participants. Participants, users and CSDs have evaluated the impact of T2S at a very senior level, considering all relevant issues: instruction matching and maintenance, settlement, collateral management, custody, issues, etc. UDFS (User Detailed Functional Specifications): Describes the interactions with T2S from a user's perspective, providing the information needed to allow users who will connect directly to T2S to design and construct their interfaces. It therefore focuses on A2A (application-to-application) processes, i.e. connection through messaging. Access to this documentation in the T2S official site:

http://www.ecb.eu/paym/t2s/about/keydocs/html/index.en.html

http://www.ecb.eu/paym/t2s/about/keydocs/html/index.en.html�


3. PRINCIPLES OF T2S GOVERNANCE:


3. PRINCIPLES OF T2S CURRENT STATUS: As set in the plan, the project is in the development phase, having been entrusted by the Eurosystem to the 4CB (Bundesbank, Banque de France, Banca d’Italia and Banco de España). The Framework Agreement (FA), which will govern the relationship between the Eurosystem, as the service provider, and the CSDs, has already been released, along with a similar agreement with non-euro area national central banks (Currency Participation Agreement). In November 2011, after two years of negotiations, the Governing Council formally invited the CSDs to sign the FA. In May 2012, a first group of nine CSDs, including Iberclear, ratified their incorporation into the T2S project by signing the FA. In June 2012, after 15 additional CSDs have signed the FA, participation in the T2S finally included nearly all eurozone CSDs.


3. PRINCIPLES OF T2S IMPLICATIONS OF T2S: 1. Registration system • At a Central Registry level, accounts structure established in the T2S as well as their

codification will have to be taken into consideration

• All matters related to keeping a detailed register will be outside of the purview of T2S: Accounts and movements codification

Supervision


3. PRINCIPLES OF T2S T2S IMPLICATIONS: 2. Transaction clearing and settlement

With the incorporation of the single platform, cross-border transactions and those coming from direct participants will necessarily have to be matched in T2S

For indirect participants, IBERCLEAR will establish: Matching procedure compatible with that of T2S Instructions maintenance compatible with T2S, allowing features such as

hold and release, modify and cancel

Previously matched transactions may be cancelled bilaterally


3. PRINCIPLES OF T2S IMPLICATIONS OF T2S: 2. Transaction clearing and settlement

Settlement instructions will be the available ones in T2S:

Free of payment (FoP) Delivery versus payment (DvP) Delivery with payment (DwP) Payment free of delivery (PFoD)

T2S has tools for linking transactions (bilaterally and/or as a set of instructions) by using indicators such as After (AFTE), Before (BEFO) or With (WITH – for example, for several transactions which have to be settled “all or nothing” as a result of netting by the CCP)


3. PRINCIPLES OF T2S IMPLICATIONS OF T2S: 2. Transaction clearing and settlement

Settlement may take place in other currencies than EUR

Balances of securities or cash may be blocked/earmarked in order to settle one or more instructions

Settlement processes, cycles and schedules will have to be adapted to the single

platform For incident resolution, T2S foresees using partial settlement mechanisms and

recycling matched transactions


3. PRINCIPLES OF T2S IMPLICATIONS OF T2S: 3. Supervising the keeping of detailed accounts

Supervision of detailed accounts is outside the T2S scope 4. Handling Corporate Actions

Management of Corporate Actions is outside the T2S scope

Only settlement instructions resulting from movements of securities and cash derived from Corporate Actions will be managed in the T2S platform

Set schedules for settling Corporate Actions


4. FINAL SETUP

Dedicated cash accounts

C

omm

unic

atio

n

CAS

E S.

U.C

.

REPORTING

V.U

.C.

INTERFACE

Securities accounts

Dedicated accounts

Settlement: •FoP •DvP •Bilateral

Custody

SUPERVISION and CONTROL

Securities accounts

Corporate Actions REPORTING



IBERCLEAR PARTICIPANTS:

• RMs/MTFs

• CCPs

• Participant entities


5. TIMETABLE: REFORM A new system unifying the registration and settlement of Equity and Fixed Income and compatible with T2S is being developed. This Reform project is to be rolled out in two phases: 1. The first phase (Q4 2014) will entail releasing a new system for Equities incorporating

all the changes called for in the Reform, including the figure of a central Counterparty Clearing Platform in the transaction clearing and settlement process. The SCLV platform will be discontinued at that time.

The CADE platform will continue operating without any changes, and cash settlement will be handled, as it is now, in the cash accounts of TARGET2-Bank of Spain


5. TIMETABLE: REFORM

2. The second phase will take place when Iberclear connects to the T2S platofrm. When

this occurs, Fixed Income securities will be incorporated in the new platform, and as a result the CADE Platform will be discontinued and Equity and Fixed Income securities registration and settlement will be unified.


5. TIMETABLE: T2S

36

Tramontana, 2 Bis - 28230 Las Rozas Madrid, Spain

www.iberclear.as

Reform of the registration, clearing and settlement system ... · PDF file3 Reform of the registration, clearing and settlement system and adaptation to T2S 1. CURRENT STATUS . IBERCLEAR

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