CORPORATE ACTIONS BUSINESS PROCESS DESCRIPTION

Transcription

1 CORPORATE ACTIONS BUSINESS PROCESS DESCRIPTION TS Programme Office Reference: 0.0.0/0/000 Date: 0 April 0 Version:. Status: Draft 0

2 TABLE OF CONTENTS Introduction. Objective and Scope. Structure of the Document. References Distributions. Cash Distributions.. Process Diagram.. Process Description.. TS Service Description. Securities Distributions.. Process Diagrams.. Process description.. TS Service Description. Distributions with options Reorganisations. Mandatory Reorganisations with options.. Process Diagram.. Process Description.. TS Service Description. Mandatory Reorganisations.. Process Diagram.. Process Description 0.. TS Service Description. Voluntary Reorganisations.. Process Diagram.. Process Description.. TS Service Description Transaction Management. Market Claims Page: of 0

3 0 0.. Process Diagram.. Process Description.. TS Service Description. Transformations.. Process Diagram.. Process Description.. TS Service Description. Buyer Protection 0.. Process Diagram 0.. Process Description 0.. TS Service Description Annex A - Methodology and drafting principles. Principles of Business Process Modelling.. First Level Diagram Process Layer.. Second Level Diagram Activity Layer.. Third Level Diagram Task Layer 0. Drafting Methodology. Diagram Conventions and Standards.. Basic diagramming concepts.. Advanced diagramming concepts 0 Page: of 0

4 Objective and Scope Introduction. Objective and Scope This document s objective is to describe how TS instructing parties (CSDs, CCPs, other) interact with TS for settling corporate actions (CA) entitlements in TS. The document s scope covers for each CA: the definition; the business actors; the business process diagrams of those process which are relevant for the interaction with TS; the business process description of the above processes; the TS service description relevant for these processes. The document s scope does not cover: the TS instructing party s internal processes (e.g. details of calculations of entitlements process); the TS instructing party s external interactions (e.g. CSD interaction with its participants); the external to TS service level descriptions (e.g. between the CSD and its participants) However, the business process descriptions and diagrams include, for reasons of completeness, certain steps in the CA management chain (e.g. the capturing of the CA announcement details) which take place outside TS. These descriptions have been kept short. The description of the CA management entities interactions outside TS is not part of the scope of this documentation. In line with the CAJWG standards, the document covers the two categories of CA events Distributions, Reorganisations as well as Transaction Management processes. Each category includes the following subcategories: Distributions Cash Distributions (e.g. cash dividend, interest payment) Securities Distributions (e.g. stock dividend, bonus issue) Distributions with Options (e.g. optional dividend) Reorganisations Mandatory Reorganisations with Options (e.g. conversion) Mandatory Reorganisations (e.g. stock split, redemption) Voluntary Reorganisations (e.g. tender offer) Transaction Management Page: of 0

5 Structure of the Document Market Claims (Distributions) Transformations (Reorganisations) Buyer Protection (Reorganisations with options, Voluntary). Structure of the Document 0 Section : Introduction Section : Distributions Section : Reorganisations Section : Transaction Management Annex : Methodology Annex : Glossary. References 0 This document draws heavily in the work already conducted in other forums and TS and industry deliverables: CA issues for CASG (published working document: CASG standards (published final, CAJWG standards. Final and published in October 00 TS Schedule of the settlement day. Published in the URD and GFS. A more detailed draft version has been published in October 00 ( TS Service Description Document ISSA global corporate actions principles, published on May, 00 Page: of 0

6 Cash Distributions Distributions Distribution is a CA event whereby the issuer of a security delivers particular proceeds to the holder of the underlying security without affecting the underlying security.. Cash Distributions In cash distributions, the proceeds of the CA consist only of cash. Capital gains, cash dividends, interest payments and share premium dividends are typical examples of such events. This section covers the standard steps in a cash distribution within the context of a CSD. It covers both the domestic and the cross CSD scenarios... Process Diagram 0 Figure.- Business Process Cash Distribution (Process Layer) Receipt of CA Details CA DETAILS ENTITLED HOLDERS AND POSITION DETAILS CSD CAPTURE CA [TS.BP.CORP.CSHD.00] NOTIFY CA [TS.BP.CORP.CSHD.00] Current Date = Record Date CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS [TS.BP.CORP.CSHD.00] Until Record Date.. Process Description Capture CA TS.BP.CORP.CSHD.00 This process (see Figure. ) captures the cash distribution details received by the CSD (CA announcement). Underlying security is the security that is the subject of the corporate action. CSD refers to both issuer CSD and investor CSD, unless specifically mentioned otherwise. Page: of 0

7 Cash Distributions 0 0 Notify CA TS.BP.CORP.CSHD.00 Business Actors: CSDs, CSD participants, TS Business Object: - CA details - Securities positions - TS Settlement instructions TS Service Class Name: Information Services (TS.SD.INF) TS Use Case Name: - Send Query (see TS UDFS, Chapter ) and/or - Receive Report (see TS UDFS, Chapter ) Trigger. - CSD captures CA announcement ; Preconditions - Current date is on or before the CA record date This process (see Figure. ) identifies the eligible recipients based on the CA details and the TS information. This process runs until the record date of CA for identifying: participants obtaining a new holding in the underlying security after the announcement, but before the record date; and participants creating a new open position (pending instructions) in the underlying security after the initial announcement. It includes new CA, amend or cancel CA. These are settlement instructions which do not have a status with value settled or cancelled. In a typical DVP/FOP transaction, two pending and matched instructions refer to one pending transaction. Page: of 0

8 Cash Distributions Figure.- Decomposition of the process Notify CA into activities (Activity Layer) 0 0 The process Notify CA consists of the following two activities (see Figure. ):. Obtain securities positions and pending instructions details. Identify and inform eligible recipients Obtain Securities Positions and Pending Instructions Details (Activity ) TS.AC.INF.00 The CSD has the option to: either receive these details through predefined reports generated by TS at close of business of settlement day (End of Day reporting) [ see Task, Task below] or query TS specifying the underlying ISIN as a filter criterion [See Task, Task below] This activity consists of the following four tasks (see Figure. ): CSD queries TS for securities positions related to the underlying ISIN (Task ) CSD queries TS for pending settlement instructions related to underlying ISIN (Task ) based on its report subscription set up in TS, the CSD can receive periodically statement of holdings, delta statement of holdings, statement of pending instructions and delta statement of pending instructions reports (Task ) CSD filters the reports in order to extract details relevant to the underlying ISIN (Task ) In the cross-csd scenario, both the issuer and the investor CSDs will run the process of obtaining positions and pending instructions from TS. See section on TS Services Description for details about TS Report Generation Services and TS Query Services Page: of 0

9 Cash Distributions Figure.- Decomposition of the activity Obtain Securities Position and Pending Instruction into tasks (Task Layer) NOTIFY CA CSD OBTAIN SECURITIES POSITION AND PENDING INSTRUCTION DETAILS QUERY SECURITIES POSITIONS FOR UNDERLYING ISIN [ ] QUERY PENDING INSTRUCTIONS FOR UNDERLYING ISIN [ ] RECEIVE REPORTS - POSITION AND PENDING INSTRUCTIONS [ ] FILTER REPORTS FOR UNDERLYING ISIN DETAILS [ ] Query Request Query Request Query Response - Securities Positions Query Response - TS Settlement Instructions TS Reports - Securities Positions and TS Settlement Instructions TS SECURITIES BALANCE QUERY SETTLEMENT INSTRUCTION QUERY REPORT GENERATION SERVICES QUERY SERVICES [TS.SD.INF.00] [TS.SD.INF.00] 0 Identify and Inform Eligible Recipients (Activity ) TS.AC.CORP.00 CSD informs eligible recipients (received/queried in the previous activity Obtain Securities Positions and Pending Instruction Details) about the CA details (see Figure. ). Calculate, Instruct and Settle CA proceeds TS.BP.CORP.CSHD.00 Business Actors: CSDs, TS Business Object: - CA details - TS settlement instructions - TS Status Advice and Settlement Confirmations TS Service Class Name: Settlement Services (TS.SD.SETT) Page: of 0

10 Cash Distributions 0 TS Use Case Name: - Send Settlement Instruction (see TS UDFS, Chapter ) Trigger: - The CSD receives information on final holdings in the underlying ISIN Precondition: - Current date is record date of the CA - Necessary cash proceeds are available to the CSD CSD calculates CA entitlements based on securities positions at the close of business of the CA record date and sends settlement instructions to TS. The CSDs will handle the CA entitlements on the pending settlement instructions as market claims. See section. on market claims processing in the context of TS. In certain registered markets, the paying agent does the calculation of entitlements. Page: 0 of 0

11 Cash Distributions Figure.- Decomposition of the process Calculate, instruct and settle CA proceeds into activities (Activity layer) CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS CSD CALCULATE CA ENTITLEMENTS [TS.AC.CORP.00] INSTRUCT AND SETTLE IN TS [TS.AC.SETT.00] Status Advices and Settlement Confirmations Settlement Instructions TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] LINKED INSTRUCTIONS SERVICE [TS.SD.SETT.0] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] CORPORATE ACTION CASH SERVICE [TS.SD.LIM.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Settlement Confirmations Liquidity transfer information CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE SETTLEMENT CONFIRMATIONS 0 NCB / PAYMENT BANKS (TS DIRECTLY CONNECTED PARTIES) RECEIVE LIQUIDITY TRANSFER INFORMATION The process Calculate, Instruct Entitlements and settle consists of the following two activities (see Figure. ):. Calculate CA Entitlements. Instruct and Settle in TS Calculate CA Entitlements (Activity ) TS.AC.CORP.00 The CSD calculates the entitlements based on the securities positions held at the close of business of the record date and based on the CA details. Page: of 0

12 Cash Distributions 0 Instruct and Settle in TS (Activity ) TS.AC.SETT.00 As per the CAJWG and CASG standard, cash payments resulting from corporate action events should be paid via the same payment mechanism as any standard DVP activity (i.e. TS dedicated cash accounts - DCA). At the latest by the start of business on the payment date (prior to NTS settlement sequence ), the CSD creates and sends to TS the settlement instructions for crediting the cash to the entitled position holders (See section.. on TS Settlement Services). The CSD sends to TS, already matched payment free of deliveries settlement instructions (PFOD). The indicative instruction type (from CSD s/ PA s perspective) is Proceeds type Instruction Type ISIN Quantity Amount Cash DVP Underlying ISIN Zero Cash proceeds 0 Typically, a matched PFOD consists of the following two legs: - RVP instruction for delivery of cash - DVP instruction for receipt of cash The instructions should contain the following information (non-exhaustive list of details); the DCA of the CSD or any other TS party distributing the cash proceeds; the DCA of the CSD participant (receiving the cash proceeds); the Securities account of the CSD or the TS party distributing the cash proceeds; the Securities account of the CSD participant which receives the cash proceeds; the underlying securities (i.e. ISIN); the (securities) settlement quantity as zero; the cash amount During this process, the CSD receives the status advices and settlement confirmations from TS. If the CSD participant s payment bank has set up a standing instruction to move cash proceeds to an RTGS account (outside TS), TS will create an immediate liquidity transfer. The relevant NCB and the payment bank will receive the status advices for this liquidity transfer. In case of currencies not eligible in TS, cash payments will take place outside TS. If DCA is not specified in the settlement instruction.ts will use the default DCA linked to the securities account. As per ISO 00, the delivering or receiving securities account is a mandatory field in the settlement instruction Page: of 0

13 Cash Distributions In a link arrangement (cross-csd settlement), both the issuer CSD and the investor CSD will perform this process in order to generate the cash entitlements for their respective CSD participants. For distribution of cash to its participants, the issuer CSD sends settlement instructions to TS. TS debits the dedicated cash account of the paying agent (issuer agent, CSD) and credits the CSD participants cash accounts. (see step in Box. ) The investor CSD being a participant of the issuer CSD receives the cash proceeds in its DCA. In turn, the investor CSD should ensure that these proceeds are distributed within its own books to the DCAs of its own participants (see step in Box. ) 0 The CSD has the possibility to send all cash-distribution settlement instructions to settle on an All or none basis in TS. Box.-Cash distribution in the context of TS TS NCB A (Issuer CSD A) NCB B (Investor CSD B) CSD A (PA) DCA CSD B DCA CSD B DCA Participant B DCA Participant A DCA 0 Participant C DCA 0 Participant D DCA 0 () Step : An issuer Agent A (or the CSD A itself) is responsible for distributing the cash entitlements in the environment of the issuer CSD A. The payments are made in the DCA in the issuer CSD A. The investor CSD B may be using a settlement bank (SB) for managing its liquidity in the environment of issuer CSD A (SB receives EUR0 for investor CSD B). () Step : The investor CSD B has received EUR 0 in its DCA operated by its SB (presumably, but not necessarily, the same SB used in step ). Cash distributions in the form of cash payments are made towards the participants (B, C and D) of investor CSD B (movement ) Page: of 0

14 Cash Distributions.. TS Service Description Information services Status management service TS Service Name TS Service TS Service Class Trigger Status management Services TS.SD.INF.00 Information Services Any change of the status of the TS instructions Status management service communicates the status of the instructions to the authorised TS actors. The TS actors must have subscribed in advance to the status management service in order to receive the advice messages. Report Generation Service TS Service Name TS Service TS Service Class Report Generation Services TS.SD.INF.00 Information Services 0 Trigger Automatic initiation at a specific time based on the report subscription set up in TS This TS business service facilitates the Notify CA process by generating and sending to CSD statement of holdings, delta statement of holdings, statement of pending instructions and delta statement of pending instructions reports after the close of daytime settlement (or at any other time as specified by the CSD in its report subscription). Statement of Holdings This report includes details of all securities positions of all ISINs held in the respective CSD securities accounts. Delta statement of holdings This report includes changes in the quantity of securities positions, i.e. the net quantity which has been debited or credited on the reported positions since the creation of the previous Statement of Holdings. Statement of Pending Instructions - This report includes details of all pending instructions related to the respective CSD s securities accounts, that TS has accepted. Page: of 0

15 Cash Distributions Delta Statement of Pending Instructions - The report lists instructions created/amended since the creation of the previous Statement of pending instructions. This report covers: new pending settlement instructions; pending settlement instructions which were modified; settlement instructions which were formerly pending but are now cancelled; settlement instructions which are partially settled. Query Service TS Service Name TS Service TS Service Class Query Services TS.SD.INF.00 Information Services 0 Trigger Receipt of a query request from the CSD for securities positions or settlement instructions The TS Settlement-Related Queries Service component of the Query Service facilitates the Notify CA process by providing information of the securities positions (current and history) and pending settlement instructions in the underlying ISIN. Settlement services TS Service Name Business Validation Service Linked Instructions Service Settlement Sequencing Service Settlement Posting Service TS Service TS Service Class TS.SD.SETT Settlement Services Trigger Receipt of a pre-matched settlement instruction from the CSD 0 0 Depending on the business model of each market, TS parties other than the CSD may instruct the cash distributions in TS. Page: of 0

16 Cash Distributions 0 0 This TS business service facilitates the settlement of cash distribution instructions sent to TS from the CSD. TS processes these settlement instructions by using one or more component services (listed below) in the Life Cycle Management Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). Business Validation Service (TS.SD.SETT.00) This TS service validates the settlement instructions relating to the securities distribution and ensures the fulfilment of defined rules pertaining to the content of the fields on the settlement instructions. In addition to the validation, this service creates two instructions from the already matched settlement instruction (i.e. one for the deliver leg and one for receive leg of the transaction) sent by the CSD to TS. The TS generated instructions are created using the details in the settlement instruction sent by the CSD. Linked Instructions Service (TS.SD.SETT.0) This TS service creates TS associations/links amongst the settlement instructions as grouped by the CSD using a common reference. Settlement Sequencing Service (TS.SD.SETT.00) This TS service extracts all eligible settlement instructions related to CA on stock and proposes for settlement in NTS sequence one (cycle ). Any settlement instructions which are either received after NTS sequence or could not be processed in sequence are proposed for settlement in the subsequent sequences. Settlement Posting Service (TS.SD.SETT.00) This TS service performs the provisioning and booking of the settlement instructions. Liquidity management services Corporate action cash service TS Service Name TS Service TS Service Class Trigger Corporate action cash services TS.SD.LIM.00 Liquidity Management Services Cash Credit due to corporate action into the dedicated cash account of TS actors Page: of 0

17 Cash Distributions The Corporate action cash service component, of the Liquidity management service facilitates TS actors to manage the CA generated liquidity they receive in their TS DCAs. The TS actors can decide if this liquidity should: stay in the TS DCA, or be moved to an RTGS account outside TS The service facilitates the creation of a standing instruction to specify this option, and executes the instruction by creating an immediate liquidity transfer order. Page: of 0

18 Securities Distributions. Securities Distributions In a securities distribution, the proceeds of the CA consist of securities. Stock dividends and bonus issues are typical examples of such events. This section covers the standard steps in a securities distribution within the context of a CSD. It covers both the domestic and the cross-csd environment... Process Diagrams Figure.- Business Process Model of a CA Securities Distribution 0.. Process description Capture CA TS.BP.CORP.SECD.00 This process captures the securities distribution details received by the CSD (CA announcement). Notify CA TS.BP.CORP.SECD.00 This process Notify CA identifies the eligible recipients based on the CA details and the TS information. This process runs until the record date of the CA. For the process description of Notify CA see section.. Page: of 0

19 Securities Distributions 0 0 Calculate, Instruct and Settle CA proceeds TS.BP.CORP.SECD.00 Business Actors: CSDs, TS Business Object: - CA details - TS settlement instructions TS Service Class Name: Settlement Services (TS.SD.SETT) TS Use Case Name: - Send Settlement Instruction (see TS UDFS, Chapter ) Trigger: - The CSD receives information on final holdings in the underlying ISIN Precondition: - Current date is record date of the CA. - Necessary securities proceeds are available to the CSD CSD calculates CA entitlements based on securities positions at the close of business of the CA record date and sends settlement instructions to TS. The CSDs will handle the CA entitlements on the pending settlement instructions as market claims. See section. on market claims processing in the context of TS.. Calculate CA Entitlements. Instruct and Settle in TS Calculate CA Entitlements TS.AC.CORP.00 The CSD calculates entitlements based on the securities positions held at the close of business of the record date and based on the CA details. Instruct and Settle in TS TS.AC.SETT.00 In certain registered markets, the paying agent does the calculation of entitlements In case the outturn ISIN is not eligible in TS, the distribution of proceeds will be handled outside TS(applicable for all types of CAs). Page: of 0

20 Securities Distributions At the latest by the start of business on the payment date (prior to NTS settlement sequence ) the CSD creates and sends to TS the settlement instructions for crediting the securities to the entitled position holders (See section on TS Settlement Services). The indicative instruction type (from CSD s perspective) is Proceeds type Instruction Type ISIN Quantity Amount Securities DFP Outturn ISIN Securities proceeds of the participant - During this process, the CSD receives status advices and settlement confirmations from TS. Figure.- Decomposition of Calculate, Instruct and Settle CA Proceeds process CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS CSD CALCULATE CA ENTITLEMENTS [TS.AC.CORP.00] INSTRUCT AND SETTLE IN TS [TS.AC.SETT.00] Settlement Instructions Status Advices and Settlement Confirmations TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] LINKED INSTRUCTIONS SERVICE [TS.SD.SETT.0] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Settlement Confirmations 0 CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE SETTLEMENT CONFIRMATIONS In a link arrangement, both the issuer CSD and the investor CSD perform this process in order to generate entitlements for their participants: Page: 0 of 0

21 Securities Distributions 0 The issuer CSD sends to TS settlement instructions for issuance and distribution of additional underlying securities. Depending on the issuer CSD s account structures, securities are typically created by the usage of an Issuance and a Distribution (or off-set ) account. The Distribution account is debited and participants accounts are credited (steps and in Box. ) The investor CSD being a participant of the issuer CSD receives the proceeds of the securities distribution in its omnibus account in the issuer CSD. In its turn, the investor CSD should ensure that these proceeds are distributed within its own books to the securities accounts of its own participants (step in Box. ) The CSD has the possibility to send all settlement instructions related to a specific securities distribution event to settle on an All-or-none basis. The CSD also has the option to send the securities issuance and all the securities distribution settlement instructions related to a specific CA, to settle on an All or none basis. Box.- Securities distribution in the context of TS TS Issuer Issuer CSD CSD A Investor CSD CSD B Mirror a/c B Distribution/ Issuance Off-set Participant B Participant C Part. A Inv CSD B () Step : The issuer CSD A initiates the issuance process of a EUR 00 securities distribution. The procedure resembles a primary market operation. Securities are created by the usage of an Issuance and a Distribution (or off-set ) account. () Step : The issuer CSD A distributes the securities entitlements to its own participants. The distribution account is debited and participants accounts are credited accordingly. Investor CSD B does not differ from a standard CSD A participant. Investor CSD B receives in its omnibus account in the CSD A, the proceeds of the securities distribution (EUR 0). Page: of 0

22 Securities Distributions () Step : Investor CSD B distributes the securities entitlements to the two relevant participants (EUR each). Mirror account is debited and investor CSD B participants accounts are credited accordingly. In TS, like in cross-csd CA processing today, movements and are not dependant upon the checking of a central mechanism. Investor CSD B like any other participant of issuer CSD A, may or may not wait for the final settlement of movement before initiate movement in its own books. Movement is not a prerequisite of movement. 0.. TS Service Description Information Services Status management service Refer section.. Report Generation Service Refer section.. Query Service Refer section.. Settlement Services TS Service Name TS Service TS Service Class Trigger Life Cycle Management Services TS.SD.SETT Settlement Services Receipt of a pre-matched settlement instruction from the CSD 0 This TS business service facilitates the settlement of securities distribution instructions sent to TS from the CSD. TS processes these settlement instructions by using one or more component services (listed below) in the Life Cycle Management Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (Information Management Service Class, TS.SD.INF). Life Cycle Management Services - Components Business Validation Service (TS.SD.SETT.00) Page: of 0

23 Securities Distributions 0 Refer section.. Linked Instructions Service (TS.SD.SETT.0) Refer section.. Settlement Sequencing Service (TS.SD.SETT.00) Refer section.. Settlement Posting Service (TS.SD.SETT.00) This TS service performs the provisioning and booking of the settlement instructions. For securities issuance process, it allows the securities positions in the Issuance securities account to become negative. It considers the technical netting effect during provision check and proposes all relevant settlement instructions for settlement on an All or None basis. Page: of 0

24 Distributions with options. Distributions with options 0 Distributions with options are distribution events which provide the investor with a choice of proceeds. An example of such an event is an optional dividend (e.g. with options for receiving cash and/or securities). This section covers the standard steps within the context of a CSD settling distributions with options in TS. It covers both the domestic and the cross-csd scenario. According to the CAJWG standards, the CSD should treat distributions with options as two separate CA events: the distribution of the interim ISIN; the mandatory reorganisation with option event (i.e. the option) on the interim ISIN. For the business process description of the first event (the securities distribution) see section.. For the business process description of the second event (the mandatory reorganisations with options) see section.. For the TS service description, see section.. Page: of 0

25 Mandatory Reorganisations with options Reorganisations A reorganisation is a CA event whereby the underlying security is replaced with proceeds.. Mandatory Reorganisations with options A mandatory reorganisation with options event is a mandatory reorganisation, where the investor has a choice of proceeds. A conversion is an example of a mandatory reorganisation with options event (whereby the investor has a choice of receiving e.g. cash and/or securities as proceeds). This section covers the standard steps within the context of a CSD settling a mandatory reorganisation with options in TS. It covers both the domestic and the cross CSD scenarios. 0.. Process Diagram Figure.- Business Process Mandatory Reorganisations with options (Process Layer) Page: of 0

26 Mandatory Reorganisations with options Process Description Capture CA TS.BP.CORP.RGOP.00 This process (see Figure. ), captures the mandatory reorganisation with options details received by the CSD (CA announcement). Notify CA TS.BP.CORP.RGOP.00 Business Actors: CSD, CSD Participants, TS Business Objects: - CA details - Securities positions - TS settlement instructions (pending) TS Service Class Name: Information Services (TS.SD.INF) TS Use Case Name: - Send Query (refer Chapter of TS UDFS) and/or - Receive Report (See Chapter of TS UDFS) Trigger: - CSD captures CA announcement Preconditions - Current date is on or before the CA market deadline date This process (see Figure. ) identifies the eligible recipients based on the CA details (ISIN, market deadline date etc). This process runs until the market deadline of reorganisation event, for identifying: participants obtaining a new holding in the underlying security which is valid after the reorganisation announcement, but before the market deadline; and participants creating a new open position (pending instructions) in the underlying security after the initial announcement Page: of 0

27 Mandatory Reorganisations with options Figure.- Decomposition of the process Notify CA into activities (Activity Layer) 0 0 The process Notify CA consists of the following two activities (see Figure. ):. obtain securities positions and pending settlement instructions details;. identify and inform eligible recipients Obtain securities positions and pending settlement instructions details TS.AC.INF.00 The CSD has the option to: either receive these details through predefined reports generated by TS at close of business of settlement day (End of Day reporting) [ see Task, Task below] or query TS specifying the underlying ISIN as a filter criterion [See Task, Task below] This activity consists of the following tasks (see Figure. ): the CSD queries TS for securities positions related to the underlying ISINs (Task ) the CSD queries TS for pending settlement instructions details related to the underlying ISINs (Task ) based on its report subscription set up in TS, the CSD can receive periodically statement of holdings, delta statement of holdings, statement of pending instructions and delta statement of pending instructions reports (Task ) the CSD filters the reports in order to extract details relevant to the underlying ISINs (Task ) Refers to the underlying security which is subject to a CA See section on TS Services Description for details about TS Report Generation Services and TS Query Services Page: of 0

28 Mandatory Reorganisations with options Figure.- Decomposition of the activity Obtain Securities Positions and Pending Instructions Details into tasks (Task Layer) NOTIFY CA CSD OBTAIN SECURITIES POSITIONS AND PENDING INSTRUCTIONS DETAILS QUERY SECURITIES POSITIONS FOR UNDERLYING ISIN [ ] QUERY PENDING INSTRUCTIONS FOR UNDERLYING ISIN [ ] RECEIVE REPORTS - POSITION AND PENDING INSTRUCTIONS [ ] FILTER REPORTS FOR UNDERLYING ISIN DETAILS [ ] Query Request Query Response - Securities Positions Query Request Query Response - TS Settlement Instructions TS Reports - Securities Positions and TS Settlement Instructions Specific Time TS SECURITIES BALANCE QUERY SETTLEMENT INSTRUCTION QUERY REPORT GENERATION SERVICES QUERY SERVICES [TS.SD.INF.00] [TS.SD.INF.00] 0 Identify and inform eligible recipients TS.AC.CORP.00 The CSD informs eligible recipients (received/queried in the previous activity TS.AC.INF.00) about the CA details (see Figure. ). In the cross CSD context, both issuer CSD and investor CSD execute this process to identify their entitled CSD participants. The investor CSD identifies and informs the entitled position holders after it receives the CA details from issuer CSD (or any entity depending on their business model). Page: of 0

29 Mandatory Reorganisations with options 0 0 Receive CA elections TS.BP.CORP.RGOP.00 Business Actors: CSD, CSD Participant, TS Business Objects: - CA details - CA election - Settlement restrictions (i.e. Intra-position movements) TS Service Class Name: - Settlement services (TS.SD.SETT) TS Use Case Name: Send Settlement Restriction on Securities Position (see Chapter of TS UDFS) Trigger: - CSD receives of CA election Precondition: - CA details are available to the CSD This process (at CSD) captures the participant s CA election based on which the CSD attempts to separate the elected securities positions accounting-wise (e.g. by blocking the securities positions, or by moving the securities positions from the participant account to the PA s account, or moving the securities positions to an escrow account set up by the issuer agent for the event). The CSD may facilitate CA elections on pending instructions, if it offers an automated buyer protection service (Documented in the process Transaction management - Buyer protection ). The process Receive CA elections consists of the following two activities (see Figure.-):. Receive CA election. Block securities positions in TS Receive CA election TS.AC.CORP.00 Paying Agent (PA) is appointed by the issuer of the ISIN, for distribution of CA proceeds to the eligible holders, and for the management of elections made. Page: of 0

30 Mandatory Reorganisations with options 0 The CSD receives the CA elections from the CSD participants based on which it creates settlement instructions in TS. Block securities in TS TS.AC.SETT.00 The CSD creates and sends to TS intra-position movements for moving the elected securities positions from the available securities position type to the blocked for CA securities position type, in the participant s account. During this process, the CSD receives status advices and settlement confirmations from TS (see TS Use Case Send Settlement Restriction on Securities Position in Chapter of TS UDFS). Alternatively, the CSD may send settlement instructions to TS for moving elected securities positions from CSD participant s securities account to PA s securities account. In a cross-csd environment, the investor CSD communicates the CA elections to the issuer CSD/ PA after successful blocking of the elected securities positions. Blocked for CA is a securities position type created by the respective CSD to manage certain reorganisations. CSD will have to create all their securities position types using the TS settlement restrictions model. Page: 0 of 0

31 Mandatory Reorganisations with options Figure.- Decomposition of the process Receive CA Election into activities (Activity Layer) CSD RECEIVE CA ELECTIONS RECEIVE CA ELECTION [TS.AC.CORP.00] BLOCK SECURITIES IN TS [TS.AC.SETT.00] Settlement Restrictions Status Advices and Settlement Confirmations TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] EARMARKING, BLOCKING AND RESERVATION SERVICE [TS.SD.SETT.0] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] SETTLEMENT SERVICES Create Outturn Securities Reference Data TS.BP.CORP.RGOP.00 This process captures and creates new outturn securities if the mandatory reorganisation involves distribution of securities. Refer section.. 0 Calculate, Instruct and Settle CA proceeds TS.BP.CORP.RGOP.00 Business Actors: CSD, CSD Participants, TS Business Object: - CA elections - Settlement instructions TS Service Class Name: Settlement Services (TS.SD.SETT) TS Use Case Name: Send Settlement Instruction (refer See Chapter of TS UDFS) Trigger: Page: of 0

32 Mandatory Reorganisations with options Payment date is reached Precondition: - Necessary proceeds are available to the CSD CSD invokes this process on or after payment date. CSD initiates the distribution of proceeds (cash amount and/or securities quantity) by instructing TS for settlement in function of the instructions received from the PA. The process Distribute CA proceeds consists of the following activities (see Figure. ):. Calculate CA Entitlements. Instruct and Settle in TS Calculate CA Entitlements (Activity ) TS.AC.INF.00 The paying agent calculates the entitlements based on the securities positions that have been segregated accounting-wise and the related instructed options of the electing participants. Instruct and Settle in TS (Activity ) TS.AC.SETT.00 CSD creates and sends to TS the settlement instructions based on the instructions received from the paying agent to distribute the CA proceeds. - For cash proceeds, CSD creates versus payment instructions, for moving the underlying securities positions from the CSD participant to CSD/PA, and for moving cash amount from CSD s/pa s DCA to participant s DCA - For securities proceeds, CSD creates two Free of payment transactions (four instructions). One for moving underlying securities positions from participant s account to CSD s/pa s account, another for moving outturn securities positions from CSD s/pa s account to participant s account. CSD may link the four FOP instructions as all or none If payment date is not market deadline date + business day, CSD instructs debit of underlying securities, credit of cash and/or outturn securities on different dates, to TS. In case securities positions in the underlying ISIN are already debited earlier, CSD instructs TS for credit of outturn securities or cash only Page: of 0

33 Mandatory Reorganisations with options In the settlement instruction sent to TS for debiting the underlying ISIN from participant s account, CSD must specify the reference of the blocked securities positions (as obtained via status advice in the process receive CA elections ). The indicative instruction types (from CSD s/ PA s perspective) are Proceeds type Instruction Type ISIN Quantity Amount Cash RVP Underlying ISIN Securities positions of the participant Cash proceeds of the participant RFP Underlying ISIN Securities positions - Securities of the participant DFP Outturn ISIN Securities proceeds - for the participant RVP Underlying ISIN Securities positions Cash proceeds of Cash and of the participant the participant securities DFP Outturn ISIN Securities proceeds - for the participant None DFP Underlying ISIN Securities positions of the participant - 0 The CSD can optionally send all settlement instructions related to a reorganisation CA to settle on an All or none basis. Alternatively, if the CSD has segregated the participant s elected positions by moving them to a different account (PA s or Escrow), the CSD creates instructions to deliver cash and/or securities to participant. The indicative instruction types (from CSD s/ PA s perspective) are Proceeds type Instruction Type ISIN Quantity Amount Cash RVP Underlying ISIN Zero Cash proceeds of the participant Securities DFP Outturn ISIN Securities proceeds for the participant - Page: of 0

34 Mandatory Reorganisations with options Proceeds type Instruction Type ISIN Quantity Amount Cash securities and RVP Underlying ISIN zero Cash proceeds of the participant DFP Outturn ISIN Securities proceeds for the participant - During this process, the CSD receives status advices and settlement confirmations from TS. Upon settlement of the settlement instructions, CSD sends confirmation of CA elections to its participants. In case of cash proceeds, if the payment bank has set up a standing instruction to move corporate action cash proceeds to RTGS account, TS will create an immediate liquidity transfer, and payment bank will receive liquidity transfer status advice. In case of a cross-csd scenario, investor CSD invokes this process after the receipt of CA proceeds from issuer CSD. In case of chain of intermediaries, investor CSD receives confirmations from technical issuer CSD. Page: of 0

35 Mandatory Reorganisations with options Figure.- Decomposition of the process Calculate, Instruct and Settle CA proceeds (Activity Layer) CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS TS.BP.CORP.RGOP.00 CSD CALCULATE CA ENTITLEMENTS TS.AC.CORP.00 INSTRUCT AND SETTLE IN TS TS.AC.SETT.00 Status Advices and Settlement Confirmations Settlement Instructions TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] LINKED INSTRUCTIONS SERVICE [TS.SD.SETT.0] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] CORPORATE ACTION CASH SERVICE [TS.SD.LIM.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Settlement Confirmations Liquidity transfer information CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE SETTLEMENT CONFIRMATIONS PAYMENT BANKS (TS DIRECTLY CONNECTED PARTIES) RECEIVE LIQUIDITY TRANSFER INFORMATION 0 Block ISIN TS.BP.CORP.RGOP.00 Business Actors: CSD, CSD Participants, TS Business Objects: - ISIN TS Service Class Name: Static data management services (TS.SD.INF) TS Use Case Name: Maintain SD (Refer Chapter of TS UDFS) Trigger: Page: of 0

36 Mandatory Reorganisations with options - Market deadline date is reached This process (see Figure. ) involves CSD sending request to TS for blocking 0 the underlying ISIN, and CSD receiving the response from TS. This process is optional, and may not be used in case the CSD initiates debit of the underlying ISIN from participants accounts at or before the market deadline, using settlement instructions. Figure.- Decomposition of the process Block ISIN (Activity Layer) BLOCK ISIN CSD TS.BP.CORP.RGOP.00 INSTRUCT TS TO BLOCK SECURITY TS.AC.STD.00 RECEIVE CONFIRMATION FROM TS TS.AC.STD.00 Securities maintenance request Securities maintenance status advice TS SECURITIES REFERENCE DATA SERVICE [TS.SD.STD.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES 0 The assumption is that the outturn security is different from the underlying security. Page: of 0

37 Mandatory Reorganisations with options 0 0 The process Block ISIN consists of the following two activities (see Figure. ):. Instruct TS to block ISIN. Receive confirmation from TS Instruct TS to block ISIN TS.AC.STD.00 The CSD invokes this process prior to the payment date of the reorganisation event. More specifically this process takes place prior to the start of sequence in the TS night-time settlement of payment date. The CSD sends to TS a securities maintenance request to block the underlying ISIN subject to the reorganisation. The request to block will affect only the relevant ISIN balances and pending instructions of the instructing CSD. Other CSDs with balances and pending instructions on the relevant ISIN will have to instruct TS separately, for blocking the ISIN. As an example, a request to block the relevant ISIN sent to TS from the issuer CSD will not result in a global freeze of all balances and pending instructions across all CSDs, for the ISIN under reorganisation. Receive confirmation from TS TS.AC.STD.00 The CSD receives confirmation message from TS, for blocking the ISIN. (see Figure. ). Transform settlement instructions TS.BP.CORP.RGOP.00 This process involves the CSD initiating the cancellation of the pending settlement instructions in TS and sending the transformed settlement instructions on the outturn security to TS. (See business process Transformations ).. TS Service Description Information services Refer section.. Settlement services Refer section.. Liquidity management services Refer section.. Page: of 0

38 Mandatory Reorganisations with options Static data management services Securities reference data service TS Service Name TS Service TS Service Class Trigger Securities reference data service TS.SD.STD.00 Static data management services Instruction for blocking ISIN The Securities reference data service component, of the Static data management service facilitates blocking or unblocking of the ISIN. Page: of 0

39 Mandatory Reorganisations. Mandatory Reorganisations 0 Mandatory reorganisation is a reorganisation that affects in all cases the underlying security (e.g. stock split, redemption). This process replaces the underlying securities fully or partly with one or more resources (cash only, securities only, both cash and securities). This type of corporate action does not require any action on the part of holders of the underlying securities. This section covers the standard steps in a reorganisation within the context of a CSD settling mandatory reorganisations in TS. It covers both the domestic and the cross CSD environment. A cross CSD reorganisation is in fact two domestic reorganisations. One refers to the issuer CSD reorganising the securities and the other to the investor CSD reorganising the securities for its own participants (see Box. )... Process Diagram Figure.- Process diagram of Mandatory Reorganisation Page: of 0

40 Mandatory Reorganisations Process Description Capture CA TS.BP.CORP.MAND.00 This process (see Figure. ) captures the mandatory reorganisation received by the CSD (CA announcement). Notify CA TS.BP.CORP.MAND.00 This process Notify CA identifies the eligible recipients based on the CA details and the TS information. This process runs until the record date of the CA. For the process description of Notify CA see section.. Create Outturn Securities Reference Data TS.BP.CORP.MAND.00 Business Actors: CSD, TS Business Objects: - Securities TS Service Class Name: Static Data Management Services (TS.SD.SDMG) TS Use Case Name: - Maintain SD (See Chapter of TS UDFS) Trigger: - Mandatory reorganisation CA information received, with a new outturn security Preconditions - CA details are available to CSD - Availability of the ISIN code of the outturn securities This process captures and creates new outturn securities if the mandatory reorganisation involves distribution of securities. The issuer/issuer agent provides the details of the outturn security, including the ISIN code, to According to CAJWG standard of mandatory reorganisation, a new ISIN should be allocated to each outturn securities Page: 0 of 0

41 Mandatory Reorganisations 0 0 the issuer CSD. The issuer CSD uses the TS static data management services for setting up the new security in TS (see TS business process Maintain Securities for details). The issuer CSD must complete the process of creating the outturn securities (set up of outturn securities ISIN in TS prior to any distribution to account holders) before the close of business on the business day preceding the payment date of the CA. Calculate, Instruct and Settle CA proceeds TS.BP.CORP.MAND.00 Business Actors: CSD, CSD Participant, TS Business Objects: - CA details - TS Settlement Instructions - TS Status Advice and Settlement Confirmations TS Service Class Name: Settlement Services (TS.SD.SETT) TS Use Case Name: - Send Settlement Instruction (See Chapter of TS UDFS) Trigger: - The CSD receives information on final holdings in the underlying ISIN - Necessary CA proceeds are available to the CSD Preconditions - Current date is the payment date of the CA This process generates CA reorganisations based on securities positions in the underlying securities at the close of business of the CA record date and sends settlement instructions to TS. This process involves the removal of underlying securities and credit of outturn securities and/ or cash, depending upon the CA reorganisation event. CSD will handle the re-organisations on the pending settlement transactions as Transformations. Processing of transformations is documented in the business process Transformations. In case the issuer CSD is not in TS, the securities reference data is maintained by the CSD set-up as Securities maintenance CSD Page: of 0

42 Mandatory Reorganisations Figure.- Decomposition of the process Calculate, Instruct and settle CA proceeds into activities (Activity Layer) 0 The process Calculate and Instruct CA Reorganisation consists of the following three activities (see Figure. ):. Calculate CA entitlements. Instruct and settle in TS Calculate CA entitlements TS.AC.CORP.00 The CSD calculates the entitlements based on the securities positions held at the close of business of the record date and based on CA details. Instruct and Settle in TS TS.AC.SETT.00 By the start of business on the payment date (before the TS night time settlement sequence ) CSD creates and sends to TS the settlement instructions for removal of underlying securities and the crediting of outturn securities and /or cash to the entitled position holders (See to section on TS Settlement Services). The CSD sends to TS, already matched instructions. The indicative instruction types (from CSD s/ PA s perspective) for each type of CA proceeds is as below. In certain registered markets, the paying agent does the calculation of entitlements If payment date is not record date + business day, CSD instructs debit of underlying securities, credit of outturn securities on different dates, to TS Page: of 0

43 Mandatory Reorganisations Proceeds type Instruction Type ISIN Quantity Amount Cash only RVP Underlying ISIN Securities positions of the participant Cash proceeds of the participant RFP Underlying ISIN Securities positions - Securities only DFP Outturn ISIN of the participant Securities proceeds - for the participant Cash and RVP Underlying ISIN, Securities positions of the participant Cash proceeds of the participant securities DFP Outturn ISIN Securities proceeds for the participant - The CSD can, optionally, send all Reorganisation CA settlement instructions to settle on an All or none basis. During this process, the CSD receives status advices and settlement confirmations from TS (see Figure. ) Page: of 0

44 Mandatory Reorganisations Figure.- Decomposition of the activity Instruct and Settle in TS into tasks (Task Layer) CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS CSD CALCULATE CA ENTITLEMENTS [TS.AC.CORP.00] INSTRUCT AND SETTLE IN TS [TS.AC.SETT.00] Status Advices and Settlement Confirmations Settlement Instructions TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] LINKED INSTRUCTIONS SERVICE [TS.SD.SETT.0] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] CORPORATE ACTION CASH SERVICE [TS.SD.LIM.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Settlement Confirmations Liquidity transfer information CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE SETTLEMENT CONFIRMATIONS 0 NCB / PAYMENT BANKS (TS DIRECTLY CONNECTED PARTIES) RECEIVE LIQUIDITY TRANSFER INFORMATION CA reorganisation in a Cross CSD environment In a cross CSD environment wherein the CSDs are linked to each other, both the issuer CSD and the investor CSD perform this process in order to generate reorganisations for their respective CSD participants. The issuer CSD sends to TS settlement instructions either for the removal of the underlying securities, the issuance and distribution of outturn securities and/or credit of cash. Based on the market specific operational procedures, issuer CSD may define an account structure consisting of both an Issuance and a Distribution (or off-set ) account for creation and removal of securities. Page: of 0

45 Mandatory Reorganisations 0 o For issuance, issuer CSD instructs debit of Issuance account and credit of Distribution account. For distribution of CA proceeds, issuer CSD instructs debit of Distribution account and credit of Participants accounts (see Box. ) o For removal of underlying securities, issuer CSD instructs the debit of Participant s account and credit of Distribution account. Subsequently, issuer CSD instructs debit of Distribution account and credit of Issuance account. This results in the decrease of issued balance of underlying securities. The securities movements for removal of underlying securities occurs in a direction opposite to issuance of securities o For cash credit, issuer CSD instructs debit of cash from the TS dedicated cash account of the payment bank managing the payments on behalf of the issuer. The issuer CSD instructs the credit of cash to either the default TS dedicated cash account associated with the relevant securities account or to the TS dedicated cash account provided by the CSD participant (see Box. ) The investor CSD being a participant of the issuer CSD delivers underlying securities and receives the outturn securities proceeds in its omnibus account in the issuer CSD. In its turn, the investor CSD should ensure that these removals and credit of securities are reflected within its own books on the securities accounts of its own participants (see Box. ) and the credit of cash is reflected on the TS dedicated cash accounts provided by its Participants (see Box. ). Box.- Distribution of securities proceeds in the context of TS TS Issuer Issuer CSD CSD A Investor CSD CSD B Mirror a/c B Distribution/ Issuance Off-set Participant B Participant C Part. A Inv CSD B Step : The issuer CSD A initiates the issuance process of a 00 securities distribution. The procedure resembles a primary market operation. issuer CSD creates securities by the usage of an Issuance and a Distribution (or off-set ) account. Page: of 0

46 Mandatory Reorganisations Step : The issuer CSD A distributes the outturn securities to its own participants. issuer CSD A instructs the debit of distribution account and credit of participants accounts. Investor CSD B does not differ from a standard CSD A participant. Investor CSD B receives in its omnibus account in the CSD A, the proceeds of the securities distribution (0 securities). Step : Investor CSD B distributes the securities entitlements to the two relevant participants ( securities each). Investor CSD B instructs debit of Mirror account and credit of investor CSD B participants accounts. Box.- Credit of cash in the context of TS TS NCB NCB A (Issuer CSDA) NCB NCB B (Investor CSD CSD B) B) Issuer Agent A DCA CSD B/SB/DCA CSD B/SB/DCA Participant b /DCA Part. A/DCA 0 Participant c Participant d 0 0 () Step : Issuer Agent A is responsible for distributing the cash entitlements in the environment of the issuer CSD A. The payments are made between the dedicated cash accounts (DCA) in the issuer CSD A. Investor CSD B may be using a settlement bank (SB) for managing its liquidity in the environment of issuer CSD A (SB receives EUR0 for investor CSD B). () Step : The investor CSD B has received EUR 0 in its DCA operated by its SB (presumably, but not necessarily, the same SB used in step ). Cash distributions in the form of cash payments are made towards the participants (b, c and d) of investor CSD B (movement ) Page: of 0

47 Mandatory Reorganisations.. TS Service Description Information Services Refer section.. Settlement Services TS Service Name Business Validation Service Linked Instructions Service Settlement Sequencing Service Settlement Posting Service TS Service TS Service Class Trigger TS.SD.SETT Settlement Services Receipt of a pre-matched settlement instruction from CSD 0 0 This TS business service facilitates the settlement of securities reorganisation instructions sent to TS from the CSD. TS processes these settlement instructions by using one or more component services (listed below) in the Life Cycle Management Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). Business Validation Service (TS.SD.SETT.00) Refer section.. Linked Instructions Service (TS.SD.SETT.0) Refer section.. Settlement Sequencing Service (TS.SD.SETT.00) Refer section.. Settlement Posting Service (TS.SD.SETT.00) Page: of 0

48 Mandatory Reorganisations This TS service performs the provisioning and booking of the settlement instructions. For securities issuance process, it allows the Issuance securities account to become negative. It considers the technical netting effect during provision check and proposes all relevant settlement instructions for settlement on an All or None basis. Page: of 0

49 Voluntary Reorganisations. Voluntary Reorganisations A voluntary reorganisation is a reorganisation event in which participation is optional for the holder of the underlying security. A tender offer (an offer made to shareholders, offering them to sell (tender) or exchange their equities) is an example of a voluntary reorganisation event. This section covers the standard steps within the context of a CSD settling the outcome of a voluntary reorganisation in TS. It covers both the domestic and the cross CSD environment... Process Diagram 0 Figure.- Business Process Voluntary Reorganisation (Process Layer).. Process Description Capture CA TS.BP.CORP.VOLU.00 This process (see Figure.-) which takes place outside TS, captures the voluntary reorganisation event details as received by the CSD. Page: of 0

50 Voluntary Reorganisations 0 0 Notify CA TS.BP.CORP.VOLU.00 This process Notify CA identifies the eligible recipients based on the CA details and the TS information. This process runs until the market deadline of the CA. For the process description of Notify CA see section.. Receive CA elections TS.BP.CORP.VOLU.00 See section.. for description of Receive CA elections process Create outturn securities reference data TS.BP.CORP.VOLU.00 This process captures and creates new outturn securities if the voluntary reorganisation involves distribution of securities. Refer section.. Distribute CA proceeds TS.BP.CORP.VOLU.00 Business Actors: CSD, CSD Participants, TS Business Object: - CA elections - Settlement instructions TS Service Class Name: Settlement Services (TS.SD.SETT) TS Use Case Name: Send Settlement Instruction (see Chapter of TS UDFS) Trigger: - Receipt of CA election proceeds from the issuer or issuer s agent This process initiates the settlement instructions to TS to distribute CA proceeds (cash amount and/or securities quantity) for each CA election that resulted in a successful block or debit. The underlying security (and possibly cash) is booked out and depending upon the applicable CA election option, outturn securities and/or cash payments are made. The process Distribute CA proceeds consists of the following activity (see Figure. ): Instruct and Settle in TS (Activity ) Page: 0 of 0

51 Voluntary Reorganisations 0 TS.AC.SETT.00 At the start of business on the payment date (prior to NTS settlement sequence ), CSD creates and sends to TS the settlement instructions based on the instructions received from the paying agent to distribute the CA proceeds. - For cash proceeds, the CSD creates versus payment instructions, for moving the blocked securities positions from the CSD participant s securities account to CSD s/pa s securities account, and for moving cash amount from CSD s/pa s TS DCA to participant s TS DCA. - For securities proceeds, the CSD creates Free of payment instructions for moving underlying securities positions from participant s securities account to CSD s/pa s securities account and moving outturn securities positions from CSD s/pa s securities account to participant s securities account. The CSD may link the settlement instructions for booking-in of outturn securities and the booking-out of underlying securities to settle on an All-or-none basis. - Certain CA also require a debit of cash (e.g. rights subscriptions) The indicative instruction types (from CSD s/ PA s perspective) are Proceeds type Instruction Type ISIN Quantity Amount Cash RVP Underlying ISIN Securities positions of the participant Cash proceeds Securities RFP Underlying ISIN Securities positions of the participant DFP Outturn ISIN Securities proceeds for the participant - - Securities with cash RFP Underlying ISIN Securities positions of the participant - In case securities positions in the underlying ISIN are already debited earlier, CSD instructs TS for credit of outturn securities or cash only Page: of 0

52 Voluntary Reorganisations Proceeds type Instruction Type ISIN Quantity Amount debit DVP Outturn ISIN Securities proceeds Amount as per the for the participant elected positions RVP Underlying ISIN Securities positions Cash proceeds of Cash and of the participant the participant securities DFP Outturn ISIN Securities proceeds - for the participant 0 The TS reference of the blocked securities positions in the CSD participant s securities account is included in the settlement instruction for booking-out of the underlying securities. During this process, the CSD receives status advices and settlement confirmations from TS. Upon settlement of the settlement instructions, CSD sends CA election confirmation to its participants. Alternatively, if the CSD has segregated the participant s elected positions by moving them to a different account (PA s or Escrow), the CSD creates instructions to deliver cash and/or securities to participant. The indicative instruction types (from CSD s/ PA s perspective) are Proceeds type Instruction Type ISIN Quantity Amount Cash RVP Underlying ISIN Zero Cash proceeds of the participant Securities DFP Outturn ISIN Securities proceeds for the participant - Securities with cash debit DVP Outturn ISIN Securities proceeds for the participant Amount as per the elected positions Cash securities and RVP Underlying ISIN zero Cash proceeds of the participant DFP Outturn ISIN Securities proceeds for the participant - Page: of 0

53 Voluntary Reorganisations In case of cash proceeds, if the participant or the participant s payment bank has set up a standing instruction to move corporate action cash proceeds to RTGS account, TS will create an immediate liquidity transfer, and payment bank will receive liquidity transfer status advice messages. In case of a cross-csd scenario, the investor CSD invokes this process after the receipt of the CA proceeds from the issuer CSD. Page: of 0

54 Voluntary Reorganisations Figure.- Decomposition of the process Distribute CA Proceeds DISTRIBUTE CA PROCEEDS [TS.BP.CORP.VOLU.0 0] DISTRIBUTE CA PROCEEDS TS.BP.CORP.VOLU.00 CSD INSTRUCT AND SETTLE IN TS TS.AC.SETT.00 Status Advices and Settlement Confirmations Settlement Instructions TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] LINKED INSTRUCTIONS SERVICE [TS.SD.SETT.0] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] CORPORATE ACTION CASH SERVICE [TS.SD.LIM.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Settlement Confirmations Liquidity transfer information CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE SETTLEMENT CONFIRMATIONS NCB / PAYMENT BANKS (TS DIRECTLY CONNECTED PARTIES) RECEIVE LIQUIDITY TRANSFER INFORMATION Page: of 0

55 Voluntary Reorganisations.. TS Service Description Information services Refer section.. Settlement services TS Service Name Settlement Services TS Service TS.SD.SETT TS Service Class Settlement Services Trigger Receipt of settlement restriction, Receipt of a pre-matched settlement instruction from CSD This TS business service facilitates the settlement of settlement restrictions (i.e., intra-position movements) for blocking of securities positions and settlement instructions for 0 o o o debit of underlying securities and credit of outturn securities and/or credit of cash TS processes these settlement instructions and settlement restrictions by using one or more component services (listed below) in the Settlement Services. TS sends the results of the settlement services (status advices and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). 0 Settlement Services - Components Business Validation Service (TS.SD.SETT.00) Refer section.. Settlement Sequencing Service (TS.SD.SETT.00) Refer section.. Earmarking, Blocking and Reservation Service (TS.SD.SETT.0) Refer section.. Linked Instructions Service (TS.SD.SETT.0) Refer section.. Page: of 0

56 Voluntary Reorganisations Settlement Posting Service (TS.SD.SETT.00) Refer section.. Liquidity management services Refer section.. Page: of 0

57 Market Claims Transaction Management. Market Claims 0 Market claims is the process of reallocating the proceeds of a distribution to the contractually entitled party. According to the CAJWG standards, a market claim should be created as a separate (from the original) transaction in order to ensure that the proceeds of a distribution with or without options reaches the entitled party without changing the underlying transaction. In line with the above mentioned market standards, the following types of CA events trigger the market claims: Cash distributions; and Securities distributions.. Process Diagram Figure.- Process Diagram of CA Market Claims (Process Layer) IOC is Instruction Owning CSD Page: of 0

58 Market Claims.. Process Description Capture CA TS.BP.CORP.MKTC.00 This process (see Figure. ) captures the distributions CA details received by the CSD (CA announcement). Retrieve Instruction Details Business Actors: IOC, TS Business Objects: - CA Details TS.BP.CORP.MKTC TS settlement instructions TS Service Class Name: Information services (TS.SD.INF) TS Use Case Name: Send Query (See Chapter of TS UDFS) Trigger: This process is executed by the end of Record Date of the CA event and daily up to 0 TS business days from the Record Date Precondition: CA details are available to IOC This process (see Figure. ) retrieves the settlement instruction details from TS based on the CA details (i.e. one or more CAs having the record date as the current date). The IOC uses the settlement instruction details (e.g. trade date, intended and actual settlement date, ex and cum indicators, status) to identify the settlement instructions that require a market claims process. The Capture CA process is the same process as described in the business process description for Securities Distribution (see TS.CORP.SECD.00) or Cash Distribution (see TS.CORP.CSHD.00). This process has been included in this section to ensure completeness of the end-to-end description of the business process for CA market claims. Instruction Owning CSD is the CSD that provides the securities accounts on which the participant has sent an underlying instruction. IOC model is preferable for transaction management because in case of a cross CSD scenario, the intermediary CSD(s) between the two IOCs cannot cancel the TS generated realignment instructions in the intermediary CSD s books. In this model, in case the IOCs bilaterally cancel their respective settlement instructions, TS will cancel both the settlement instructions and all the TS generated realignment instructions. Page: of 0

59 Market Claims 0 The IOC runs this process at the end of record date of the CA event. The IOC runs this process at least daily. During the market claims detection period the IOC identifies any new matched settlement instruction input after the record date (e.g., a settlement instruction with trade date before the ex-date and the intended settlement date on or before the record date). The IOC has the option to either receive these details through - predefined reports generated by TS at close of business of a settlement date (End of Day reporting), - or query TS specifying underlying ISIN and/or trade date, settlement date, instruction status as a filter criteria (see TS Services Description below for details about TS Report Generation Services and TS Query Services). This process consists of a single activity Obtain Settlement Instruction Details (see Figure. ). Figure.- Decomposition of the process Receive Instruction Details into activities (Activity Layer) IOC RECEIVE INSTRUCTION DETAILS OBTAIN SETTLEMENT INSTRUCTION DETAILS [TS.AC.INF.00] 0 Obtain Settlement Instruction Details TS.AC.INF.00 The activity Obtain Settlement Instruction Details consists of the following tasks (see Figure. ) at the disposal of the IOC: The IOC queries TS for settlement instructions details related to each underlying ISIN The IOC receives statement of pending instructions, delta statement of pending instructions and statement of transactions (settled settlement instructions), delta statement of transactions report to be generated at fixed time/ event based on its report subscription set up in TS [e.g. after intraday DVP cut-off, currently at 0.00 p.m.; and/or after FOP cut-off currently at :00 p.m.]. Page: of 0

60 Market Claims The IOC filters the reports in order to extract details relevant to the underlying ISIN Figure.- Decomposition into tasks of the activity Obtain Settlement Instruction Details (Task Layer) RECEIVE INSTRUCTION DETAILS IOC OBTAIN SETTLEMENT INSTRUCTION DETAILS QUERY SETTLEMENT INSTRUCTIONS IN UNDERLYING SECURITIES [] RECEIVE REPORTS - SETTLEMENT INSTRUCTIONS [] FILTER REPORTS FOR SETTLEMENT INSTRUCTIONS IN CA UNDERLYING SECURITIES [] Query Request TS Reports - TS Settlement Instructions Query Response - TS Settlement Instructions TS SETTLEMENT INSTRUCTION QUERY QUERY SERVICES [TS.SD.INF.00] REPORT GENERATION SERVICES [TS.SD.INF.00] Specific time 0 Identify, Calculate and Instruct CA Market Claims TS.BP.CORP.MKTC.00 Business Actors: IOC, TS Business Objects: - CA Details - TS settlement instructions - TS status advice TS Service Class Name: Settlement services (TS.SD.SETT) TS Use Case Name: Send Settlement instruction (See Chapter of TS UDFS) Page: 0 of 0

61 Market Claims Trigger: The process of identifying market claims runs after the IOC receives the final reporting of settlement instructions in TS at the close of business on record date and everyday up to 0 TS business days from the record date Precondition: Latest settlement instructions data from TS is available at the close of business of the CA record date This process identifies, calculates and executes market claims based on the details of the settlement instructions consolidated in the process Receive Instruction Details. The process results in the IOC sending to TS, settlement instructions for processing of market claims for securities and cash distributions. Figure.- Decomposition of the process Identify, Calculate, Instruct and Settle in TS into activities (Activity Layer) 0 0 The process Identify, Calculate and instruct CA market Claims consists of the following three activities (see Figure. ):. Identify Market Claims. Calculate Market Claims. Instruct and Settle in TS Identify Market Claims TS.AC.CORP.00 The IOC will identify the underlying transaction eligible for market claims: after the close of business on the record date of the CA event and As per the CASG standards, the maximum period for claim detection will be 0 TS business days from the record date. Page: of 0

62 Market Claims during the rest of the market claims detection period for the matched settlement instructions sent to TS after the record date. The IOC will identify market claims based on a set of parameters corresponding to the attributes in a settlement instruction (see below). The identification of standard market claims is based on the following rules: Opt-out indicators 0 in the settlement instruction The IOC will exclude a settlement instruction from identification of market claims if the opt-out indicator is set to Yes Status of the settlement instruction The IOC will only include settlement instructions in matched status set to Yes and settlement status set to Unsettled or Settled for market claims detection process. Initiator of the settlement instruction TS generated settlement instruction for realignments should not be subjected to the market claims detection process. However, TS generated settlement instructions for reversal of client collateralisation will be subject to a market claims detection process. Trade Date and Intended Settlement Date of the settlement instruction Market Claims should be created, as a separate Transaction without changing the Underlying Transaction, by the (I)CSD or the CCP for all irrevocable settlement transactions (as defined in each market) as follows: a) For securities in units (e.g. shares); From the seller to the buyer, when trade date is before Ex Date and there is a Pending Transaction at close of business of Record Date; or From the buyer to the seller, when trade date is on or after Ex Date and Actual Settlement Date is on or before Record Date. b) For securities in nominal (e.g. bonds): From the seller to the buyer, if the Intended Settlement Date is on or before the Record Date but there is a Pending Transaction at close of business on Record Date. 0 TS will consider the opt-out indicator as additional matching criteria if specified in a settlement instruction by the TS instructing party. Page: of 0

63 Market Claims 0 0 The identification of market claims in case of special ex- and special cum- trading (for securities in units) is based the following rules: Special ex- indicator o The trade date is before the ex-date, the actual settlement date is before the record date and the ex indicator is set to yes, then the market claim is raised in favour of the seller o The trade date is before the ex-date and transaction is still pending and the ex indicator is set to yes, then no market claims will be raised Special cum- indicator o The trade date is after the ex-date, actual settlement date is after the record date and the cum indicator is set to yes, then the market claim is raised in favour of the buyer o The trade date is after the ex-date, and transaction is still pending and the cum indicator is set to yes, then market claim is raised in favour of the buyer Calculate Market Claims TS.AC.CORP.00 After the identification of settlement instructions that require market claims generation, the IOC will calculate the market claim quantity (i.e. securities positions) and the claim cash amount based on the CA event details and the securities settlement quantity in the underlying transaction. This activity also handles fractional market claims based on the information in the CA details. Instruct and Settle in TS TS.AC.SETT.00 At the start of business on the payment date (NTS settlement sequence ) the IOC / CCP creates and sends to TS the settlement instructions related to market claims. The IOC generates either free of payments (FOP) for transfer of securities or payment free of delivery (PFOD) for transfer of cash depending upon the outturn of the distribution CA event (i.e. distribution of securities only, distribution of cash only and distribution of both securities and cash). The indicative instruction types (from the perspective of the party receiving benefit in the claim) are Proceeds type Instruction Type ISIN Quantity Amount IOCs also send settlement instructions for market claims on behalf of their CSD participants who have direct technical connectivity to TS Page: of 0

64 Market Claims Proceeds type Instruction Type ISIN Quantity Amount Cash DVP Underlying ISIN Zero Cash proceeds of the participant Securities RFP Outturn ISIN Securities proceeds of the participant - Cash securities and DVP Underlying ISIN Zero Cash proceeds of the participant RFP Outturn ISIN Securities proceeds for the participant - During this process, the IOC receives the status advices and settlement confirmations from TS. Page: of 0

65 Market Claims Figure.- Decomposition into tasks of the activity Instruct and Settle in TS (Task Layer) 0 This activity consists of the following tasks (see Figure. ): a. Create market claims The IOC will create the market claims related settlement instructions with the following details: Special ISO Transaction Type Code This code ( CLAI ) is required to identify market claims related settlement instruction Reference of Underlying Settlement Instruction The IOC should specify the reference of the underlying settlement instruction Link indicator - According to the TS CA on flows standards the IOC should not link the market claim to the underlying settlement instruction. However, in case the IOC wants to ensure that the market claim settles after the underlying settlement instruction, the IOC may instruct the market claim related settlement instruction with a hold status set to Yes and release the this status upon receiving the settlement confirmation of the underlying settlement instruction Page: of 0

66 Market Claims 0 0 CA Event Reference Trade Date of the market claim will be the trade date of the underlying settlement instruction Intended Settlement Date of the market claim will be either the payment date of the corporate action or the current business date (if the market claim is generated after the payment date) Partial Settlement indicator is set to No for market claims in cash and for market claims in securities to be set to the same value as of the underlying settlement instruction. Cross CSD settlements and Market Claims In the cross CSD scenario, the issuer CSD will exclude the TS generated realignment instructions in the market claims identification process. The IOCs owning the underlying settlement instructions related to the TS generated realignment instructions will raise the relevant market claims for their participants. Following the matching of the two market claims instructions sent to TS by the IOCs, TS will create the relevant realignment instructions. Maintenance of Market Claims In case the instructing parties of the underlying settlement instructions cancel their respective settlement instructions bilaterally, the IOCs may also cancel the corresponding market claims. As per standard TS cancellation procedures, matched market claims instructions are subject to bilateral cancellation whereas unmatched market claims are subject to unilateral cancellation. IOCs can modify the process condition indicators on the market claims (if required) as per the standard TS procedures b. Send Instruction and receive status advices and settlement confirmations from TS This task results in IOCs sending settlement instructions to TS. Depending on the CA event (i.e. type of distribution) an IOC may send either Settlement instructions for credit of securities only; and / or Settlement instructions for credit of cash If the CSD specifies the settlement instruction (the market claim) as modifiable by its participant, participant may cancel the settlement instruction (the market claim), Refers to indicators affecting the processing of the instruction. e.g. partial settlement, priority indicator. Please note that the task Send Instruction and Receive status advices and settlement confirmations from TS is a common task across different activities in various CA processes that have been described in this document. Page: of 0

67 Market Claims This task also involves IOCs receiving acknowledgements, status advices and settlement confirmations of the settlement instructions sent to TS for securities reorganisations... TS Service Description Information services Status management service TS Service Name TS Service TS Service Class Trigger Status management Services TS.SD.INF.00 Information Services Any change of the status of the TS instructions 0 Status management service communicates the status of the instructions to the authorised TS actors. The TS actors must have subscribed in advance to the status management service in order to receive the advice messages. Report Generation Service TS Service Name TS Service TS Service Class Report Generation Services TS.SD.INF.00 Information Services Trigger Automatic initiation at a specific time based on the report subscription set up in TS This TS business service facilitates the Retrieve instruction details process by generating and sending to CSD statement of pending instructions and delta statement of pending instructions reports after the close of daytime settlement (or at any other time as specified by the CSD in its report subscription). Statement of Pending Instructions - This report includes details of all pending instructions related to the respective CSD s securities accounts, that TS has accepted. Delta Statement of Pending Instructions - The report lists instructions created/amended since the creation of the previous Statement of pending instructions. This report covers: new pending settlement instructions; Page: of 0

68 Market Claims pending settlement instructions which were modified; settlement instructions which were formerly pending but are now cancelled; settlement instructions which are partially settled. Query Service TS Service Name TS Service TS Service Class Query Services TS.SD.INF.00 Information Services Trigger Receipt of a query request from the CSD for securities positions or settlement instructions The TS Settlement-Related Queries Service component of the Query Service facilitates the Retrieve instruction details process by providing information of the pending settlement instructions in the underlying ISIN. Settlement services TS Service Name Business Validation Service Linked Instructions Service Settlement Sequencing Service Settlement Posting Service TS Service TS Service Class Trigger TS.SD.SETT Settlement Services Receipt of a pre-matched settlement instruction from the CSD 0 This TS business service facilitates the settlement of market claim related settlement instructions sent to TS from the CSD. TS processes these settlement instructions by using one or more component services (listed below) in the Life Cycle Management Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). Business Validation Service (TS.SD.SETT.00) This TS service validates the settlement instructions relating to the securities distribution and ensures the fulfilment of defined rules pertaining to the content of the fields on the settlement instructions. In Page: of 0

69 Market Claims 0 addition to the validation, this service creates two instructions from the already matched settlement instruction (i.e. one for the deliver leg and one for receive leg of the transaction) sent by the CSD to TS. The TS generated instructions are created using the details in the settlement instruction sent by the CSD. Linked Instructions Service (TS.SD.SETT.0) This TS service creates TS associations/links amongst the settlement instructions as grouped by the CSD using a common reference. Settlement Sequencing Service (TS.SD.SETT.00) This TS service extracts all eligible settlement instructions related to CA on flow and proposes for settlement in NTS sequence (cycle ). Settlement instruction related to CA on flow, which are either received after NTS sequence or could not be processed in sequence are proposed for settlement in the subsequent sequences. Settlement Posting Service (TS.SD.SETT.00) This TS service performs the provisioning and booking of the settlement instructions. Page: of 0

70 Market Claims Liquidity management services Corporate action cash service TS Service Name TS Service TS Service Class Corporate action cash services TS.SD.LIM.00 Liquidity Management Services 0 Trigger Cash Credit due to corporate action into the dedicated cash account of TS actors The Corporate action cash service component, of the Liquidity management service facilitates TS actors to manage the CA generated liquidity they receive in their TS DCAs. The TS actors can decide if this liquidity should: stay in the TS DCA, or be moved to an RTGS account outside TS The service facilitates the creation of a standing instruction to specify this option, and executes the instruction by creating an immediate liquidity transfer order. Page: 0 of 0

71 Transformations. Transformations 0 Transformation is a process by which the pending transactions (on or after record date/ market deadline) are cancelled and replaced by new transactions in accordance with the terms of the reorganisation. In line with the CAJWG market standards, the following types of CA events trigger the transformation of a pending transaction: Mandatory reorganisations; Mandatory reorganisations with options (with or without a valid buyer election) as a single event or as the second part of the distribution event with options; Voluntary reorganisations where a valid buyer protection has been agreed (if the service is offered by CSD)... Process Diagram Figure.- Process Diagram for CA Transformations (Process Layer) CA DETAILS PENDING INSTRUCTION DETAILS CSD CAPTURE CA [TS.BP.CORP.TRAN.00] Current Date = Record Date / Market Deadline (End-of-day in TS) RECEIVE INSTRUCTION DETAILS [TS.BP.CORP.TRAN..00] Current Date = Payment Date CALCULATE AND INSTRUCT CA TRANSFORMATION [TS.BP.CORP.TRAN.00].. Process Description Capture CA TS.BP.CORP.TRAN.00 This process (see Figure. ) captures the reorganisation CA details sent by the issuer and/or market data vendor(s) to the CSD (CA announcement). The Capture CA process is the same process as described in the business process description for Mandatory Reorganisation (without options). This process has been included in this section to ensure completeness of the end-toend description of the business process for CA transformations. Page: of 0

72 Transformations 0 0 Retrieve Instruction Details TS.BP.CORP.TRAN.00 Business Actors: Instruction Owning CSD (IOC) / Central Counter Party (CCP), TS Business Object: - CA details - TS Settlement Instructions TS Service Class Name: Information Services (TS.SD.INF) TS Use Case Name: Send Query (see Chapter of TS UDFS) Trigger: This process is executed by the IOCs /CCPs by the end of Record Date or by the end of market deadline of the CA Precondition: CA details are available to IOCs / CCPs This process (see Figure. ) retrieves the pending instruction details from TS based on the CA details. This process runs between the end of record date or the market deadline of the CA reorganisation event and the start of day of the next business day. Refer section.., for activity details. Calculate and Instruct CA Transformation TS.BP.CORP.TRAN.00 Business Actors: IOC / CCP, CSD Participant, TS Business Object: - CA details - TS Settlement Instructions - TS Cancellation Instructions TS Service Class Name: Settlement Services (TS.SD.SETT) TS Use Case Name: - Send Cancellation Instruction (see Chapter of TS UDFS) - Send Settlement Instruction (see Chapter of TS UDFS) As per CAJWG definition Page: of 0

73 Transformations 0 Trigger: The process runs after the IOCs / CCPs receive the final reporting of pending instructions in TS at the close of business on record date or market deadline date Precondition: Latest settlement instructions data from TS is available at the close of business of the CA record date or the CA market deadline date and the instruction is eligible for transformation. This process generates CA transformations based on the pending settlement instructions in the underlying securities at the close of business of the CA record/market deadline date. The process results in IOCs sending to TS: maintenance instructions (cancellations for settlement instructions) in the underlying securities and the new settlement instructions for the outturn securities and/or cash. Figure.- Decomposition of the process Calculate and Instruct CA transformations into activities (Activity Layer) CSD CALCULATE AND INSTRUCT CA TRANSFORMATION TS.BP.CORP.TRAN.00 CANCEL INSTRUCTIONS ON UNDERLYING ISIN [TS.AC.SETT.00] CALCULATE THE SETTLEMENT QUANTITY, CASH OF THE NEW SETTLEMENT INSTRUCTIONS [TS.AC.CORP.00] REINSTRUCT AND SETTLE IN TS [TS.AC.SETT.00] Cancellation instructions Status Advices and Settlement Confirmations Settlement Instructions and/or Settlement Restrictions Status Advices and Settlement Confirmations TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] INSTRUCTIONS CANCELLATION SERVICE [TS.SD.SETT.00] SETTLEMENT SEQUENCING SERVICE [TS.SD.SETT.00] SETTLEMENT POSTING SERVICE [TS.SD.SETT.00] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES The process consists of the following activities (see Figure. ):. Cancel instructions on the underlying ISIN. Calculate the settlement quantity, cash of the new settlement instructions. Reinstruct and Settle in TS Page: of 0

74 Transformations Cancel instructions on the underlying ISIN TS.AC.SETT.00 After the close of business on the record date or market deadline date (and before the TS night time settlement sequence ), IOCs/ CCPs sends cancellation instructions for the pending instructions in the underlying ISIN to TS. The table below lists the possible IOC / CCP actions in TS:. Table.- IOC / CCP Actions in TS Originator of TS status of settlement instruction settlement instruction TS Actor Unsettled and Unmatched Action in TS IOCs / CCPs can cancel the settlement instruction unilaterally TS Actor Unsettled and Matched Scenario - Both settlement instructions have the same IOC (Intra-CSD scenario) IOC can cancel the matched settlement instruction using an already matched cancellation instruction. Scenario - The matched pair of settlement instructions have different IOC (Inter-CSD scenario) Both IOCs can cancel their respective settlement instructions in matched status. TS executes the cancellation instructions for the pending settlement instructions only upon receipt of both cancellation instructions from IOCs Unmatched instructions have not been specified in the scope of CASG standards for transformations. IOC can choose to (i) cancel the instruction unilaterally, Or (ii) wait for the counter party to send settlement instruction in the underlying security, once matched cancel bi-laterally and transform the instruction (provided it is still within the transformation detection period). If the settlement instruction has references to blocked or reserved securities status, IOC / CCP perform CA on stock on the underlying securities and should attach the reference of the blocked / reserved outturn securities to the transformed settlement instruction. Page: of 0

75 Transformations Originator of TS status of Action in TS settlement instruction settlement instruction TS Actor Partially Settled Following partial settlement, IOC / CCP instructs TS for the cancellation of the pending quantity of the settlement quantity (which is not yet settled). TS Actor CoSD Hold Settlement Instruction on CoSD Hold can be cancelled only by the Administering Party TS Actor Party Hold / CSD Hold/ IOC instructs TS for the cancellation of the pending settlement instructions (on hold) CSD Validation Hold TS (settlement instructions for realignment in cross- CSD settlement scenarios) Same status as the corresponding underlying settlement instruction sent by TS Actor IOCs / CCPs cannot cancel the TS generated settlement instructions intended for realignment in cross CSD environment. TS cancels the realignment instructions when the IOCs / CCPs instruct cancellation of the corresponding business instructions. TS (settlement instructions generated for client collateralisation reimbursements) Party Hold IOC has to identify pending collateral reimbursement instructions in TS and instruct cancellation to TS. Calculate the settlement quantity, cash of the new settlement instruction TS.AC.CORP.00 The IOCs / CCPs perform the calculations depending upon the type of the following transformation events: Transformation into new securities with single or multiple outturn Based on the CA details (i.e. conversion ratios between the outturn securities and underlying securities) and the settlement quantity (underlying securities) of the pending settlement instruction, the IOCs/CCPs calculate the settlement quantity of the outturn. Administrating parties are identified by the CSDs, and are responsible for releasing the instructions that are identified as CoSD (that needs fulfilling an external condition). Page: of 0

76 Transformations Transformation into cash Based on the CA details (rates provided by the issuer) and the settlement quantity (underlying securities) of the pending settlement instruction, IOCs / CCPs calculate the cash outturn Treatment of fractions o If the settlement quantity (outturn securities) of the transformed settlement instruction results in fraction and the issuer does not compensate fractions in cash, then the IOCs / CCPs round down the settlement quantity (outturn securities) to the nearest whole number. o If the issuer compensates fractions in cash, then the IOCs / CCPs create an additional PFOD settlement instruction with the same characteristics as the underlying settlement instruction and sets the settlement quantity of the outturn securities to zero. The cash amount calculated equals the number of residual fractions multiplied by the compensation price as announced by the issuer. Reinstruct and Settle in TS TS.AC.SETT.00 After the close of business on the record date (before the TS night time settlement sequence ) 0 IOCs / CCPs create and send the settlement instructions in outturn ISIN and/or cash to TS During this activity, the IOCs / CCPs receive status advices and settlement confirmations from TS (see Figure. ) Transformation into new securities with single or multiple outturn For single outturns, IOCs/CCPs create settlement instructions (outturn securities) with the same characteristics (e.g. trade date, cash consideration) as those of the original settlement instructions (underlying securities). Only the following fields in respect with the terms of the reorganisation can change: the quantity of securities; the ISIN; the settlement date (SD) For multiple outturns (i.e. multiple new ISINs being generated by the transformation process), the IOCs and CCPs create multiple settlement instructions. The new settlement instructions do not settle as linked settlement in TS. The transformed instructions should retain the same characteristics (e.g. trade date) as the original settlement instruction (underlying securities). Only the following fields in respect with the terms of the reorganisation can change: 0 See Schedule of the TS settlement day Page: of 0

77 Transformations 0 0 the quantity of securities; the cash consideration should be allocated to the transformed transactions according to the securities ratios provided by the issuer The ISIN The settlement date (SD) Transformation into cash According to the TS CA standards on flows, IOCs/ CCPs should create the cash transfer(s) settlement instructions with the same characteristics as those of the original settlement instruction of the underlying securities. If the settlement instruction (underlying securities) was against payment, two new instructions (Payment Free of Delivery - PFODs), in opposite directions, will be created. o Settlement instruction for the settlement amount o Settlement instruction for the cash outturn IOCs / CCPs should not link the two settlement instructions. IOCs/ CCPs create only one transfer for the cash outturn, if the original settlement instruction (underlying securities) was free of payment. Treatment of fractions If the settlement quantity (outturn securities) of the reinstructed settlement instruction results in fraction and the issuer does not compensate fractions in cash, then the IOCs/ CCPs create the settlement instructions with the settlement quantity (outturn securities) rounded down to the nearest whole number. If the issuer compensates fractions in cash, then the IOCs/ CCPs create an additional settlement instruction with the same characteristics as those of the original settlement instruction (underlying securities) and set the settlement quantity of the outturn securities to zero. Page: of 0

78 Transformations.. TS Service Description Information Services Refer section.. Settlement Services TS Service Name Instruction Cancellation Service Business Validation Service Settlement Sequencing Service Settlement Posting Service TS Service TS Service Class Trigger TS.SD.SETT Settlement Services Receipt of a pre-matched settlement instruction from CSD 0 0 This TS business service facilitates the cancellation of pending settlement instructions (underlying securities) and settlement of CA transformation instructions (outturn securities and/or cash) sent to TS from the CSD. TS processes the cancellation instructions using the Instruction Cancellation Services and the transformed settlement instructions by using one or more component services (listed below) in the Life Cycle Management Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). Instruction Cancellation Service (TS.SD.SETT.00) This TS service cancels the pending settlement instructions unilaterally prior to matching or bilateral cancellations after matching. TS checks in case of bilateral cancellation of pending settlement instructions if the cancellation instruction from the counterpart exists and matches the two cancellation instructions. If the counterpart cancellation instruction does not exist, then the cancellation instruction remains pending until it matches with a valid counterpart cancellation instruction. TS also accepts cancellation instructions entered as already matched. Business Validation Service (TS.SD.SETT.00) Page: of 0

79 Transformations Refer section.. Settlement Sequencing Service (TS.SD.SETT.00) Refer section.. Settlement Posting Service (TS.SD.SETT.00) Refer section.. Page: of 0

80 Buyer Protection. Buyer Protection Buyer protection is a process whereby a buyer who has yet to receive the underlying securities of an elective CA, instructs the seller in order to receive the outturn of his choice. The business process description in this section covers the interaction of the CSD s offering BP service, with TS... Process Diagram Figure.- Business Process Buyer Protection (Process Layer) 0.. Process Description Capture CA TS.BP.CORP.BPRT.00 This process (see Figure. ) captures the CA events of type Distributions with options (as events, distribution, and mandatory reorganisation with options), Mandatory reorganisations with options, and Voluntary reorganisations. BP can also apply to bilateral securities lending and collateral management related activities Elective CA: Distribution with options, mandatory reorganisation with options or voluntary reorganisation In case the CSD does not offer a BP service, the counterparts of the trade should interact bilaterally to handle the BP process. Page: 0 of 0

81 Buyer Protection 0 0 Notify CA TS.BP.CORP.BPRT.00 This process Notify CA identifies the eligible recipients based on the CA details and the TS information. This process runs until the market deadline date of the CA. For the process description of Notify CA see section.. Receive BP instruction TS.BP.CORP.BPRT.00 Business Actors: CSD, CSD participant, TS Business Object: - CA details - Buyer protection (BP) instruction - TS settlement instructions TS Service Class Name: - Information Services (TS.SD.INF) - Settlement services (TS.SD.SETT) - Status management service (TS.SD.STD.00) TS Use Case Name: - Send Query (see TS UDFS, Chapter ) Trigger: - CSD receives BP instruction CSD validates the underlying settlement instruction reference in the BP instructions. This process is relevant only for the CSDs that offer the buyer protection facility to its participants. Page: of 0

82 Buyer Protection Figure.- Decomposition of the process Receive BP instruction into activities (Activity Layer) CSD RECEIVE BP INSTRUCTION TS.BP.CORP.BPRT.00 VALIDATE BP INSTRUCTION TS.AC.CORP.00 0 The process Validate BP instruction consists of the following activity (see Figure. ): Validate BP instruction (Activity ) TS.AC.CORP.00 The CSD performs a validity check for the BP instruction, which the buyer sends to the seller (e.g. CA reference, option number, and underlying settlement instruction). This activity consists of the following two tasks (see Figure. ): The CSD queries TS for relevant settlement instructions on the underlying ISIN (Task ) The CSD checks the status of the underlying settlement instruction that is identified in Task (Task ) Page: of 0

83 Buyer Protection Figure.- Decomposition of the activity Validate BP instruction into tasks (Task Layer) 0 Hold underlying settlement instructions TS.BP.CORP.BPRT.00 Business Actors: CSD, CSD Participant, TS Business Objects: - Settlement instruction TS Service Class Name: - Settlement services (TS.SD.SETT) - Status management service (TS.SD.STD.00) TS Use Case Name: Page: of 0

84 Buyer Protection 0 - Send Hold/Release Instruction (see TS UDFS, Chapter ) Trigger: - BP deadline is reached Precondition: - Existence of valid BP instruction linked The CSD sends the maintenance instructions to TS to hold the underlying pending settlement instructions, which are related to the BP instruction. The process Hold underlying instructions consists of the following activity (see Figure. ): Hold settlement instruction TS.AC.SETT.00 The CSD identifies the pending settlement instruction related to the BP. The CSD sends a maintenance instruction to TS, to put the underlying settlement instruction on hold. The CSD receives from TS the status advice messages for the underlying settlement instruction. In case the BP is not offered by the CSD, the buyer may send to the CSD/TS the cancellation of the underlying settlement instruction, as well as the transformed settlement instruction on the outturn ISIN, when relevant Page: of 0

85 Buyer Protection Figure.- Decomposition of the process Hold underlying settlement instructions into Activities (Activity Layer) HOLD UNDERLYING SETTLEMENT INSTRUCTIONS [TS.BP.CORP.BPRT.00] CSD HOLD UNDERLYING SETTLEMENT INSTRUCTIONS TS.BP.CORP.BPRT.00 HOLD SETTLEMENT INSTRUCTION TS.AC.SETT.00 Status Advices Maintenance Instructions TS BUSINESS VALIDATION SERVICE [TS.SD.SETT.00] HOLD/ RELEASE SERVICE [TS.SD.SETT.0] STATUS MANAGEMENT SERVICE [TS.SD.INF.00] SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES Status advices CSD PARTICIPANT (TS DIRECTLY CONNECTED PARTIES) RECEIVE STATUS ADVICE Calculate and instruct CA transformation TS.BP.CORP.BPRT.00 This process generates CA transformations based on the underlying pending settlement instructions in the underlying ISIN. The process sends to TS, maintenance instructions (cancellations for settlement Cancellation of instructions on the underlying ISIN must be completed before the close of business of the Record date or market deadline date Page: of 0

86 Buyer Protection instructions) in the underlying securities and the new settlement instructions for the outturn securities. See section..... TS Service Description Information services See section.. Settlement services TS Service Name TS Service TS Service Class Trigger Settlement Services TS.SD.SETT Settlement Services Receipt of a pre-matched settlement instruction from the CSD 0 This TS business service facilitates the settlement of instructions (e.g. hold), sent to TS from the CSDs. TS processes these settlement instructions by using one or more component services (listed below) in the Settlement Services. TS sends the results of the settlement services (status advice and settlement confirmations) to the CSD via the TS Status Management Service (TS.SD.INF.00). Settlement Services - Components Business Validation Service (TS.SD.SETT.00) See section.. Hold/ Release service (TS.SD.SETT.00) This TS service facilitates Hold / Release of settlement instructions in TS by TS parties. Page: of 0

87 Principles of Business Process Modelling Annex A - Methodology and drafting principles. Principles of Business Process Modelling TS Business Process Model represents end-to-end (EE) business processes of the CSDs and NCBs (or any other process owning entity) and depicts all the steps of an EE business process that transform a set of inputs to a set of outputs. A process hierarchy depicts the steps involved in an EE business process at three different levels... First Level Diagram Process Layer 0 The first level diagram represents the Process Layer of the process hierarchy and defines the EE business process of a process owning entity. An EE business process may consist of one or many processes. The first level diagram depicts interactions between the inter-related processes of an EE business process and does not include interaction with TS or any other external entity (see Figure.- for template of process layer). Process Hierarchy in TS Business Process Modelling methodology defines the level of decomposition of an EE Business Process and aims at establishing a parent-child relationship between processes Process is defined as an endeavour with a mutually exclusive objective TS Business Process Model does not describe or depict any interaction between the process owning entities and entities other than TS Page: of 0

88 Principles of Business Process Modelling Figure.- Template of First Level Diagram Depicts an EE Business Process of a process owning entity Depicts a PROCESS within an EE Business Process <<Name of Process Owning Entity>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> Depicts that this process can be further decomposed There are two types of processes: Collaborative Process and Internal Process Collaborative Process is a process in an EE business process that requires interaction with TS Internal Process is a process in an EE business process that does not require interaction with TS 0.. Second Level Diagram Activity Layer The second level diagram represents the Activity Layer in the process hierarchy and defines the activities that comprise a collaborative process only (internal processes of a CSD or NCB are not decomposed into activities). It depicts the interactions within a set of well-defined and interrelated activities within a process. For collaborative type of processes, if the activity requires interaction with TS 0 and can be broken down into tasks, the Activity layer resembles the Process Layer, in that; it does not depict interaction with TS or The concept of collaborative and internal processes is also applicable at the level of activities and tasks 0 The process layer diagrams do not depict any interactions with TS, whereas the activity layer and task layer diagrams depict all relevant interactions with TS Page: of 0

89 Principles of Business Process Modelling any other external entity (see Figure.- for template of activity layer with no TS interaction). For example, the process Notify CA consists of the activities: Obtain Securities Positions and Pending Instruction Details, Identify and Inform Entitled Position Holders. The Activity Layer does not depict interactions with TS because the activity Obtain Securities Positions and Pending Instruction Details it consists of tasks. In such cases, the third level diagram or the Task Layer depicts the interactions between the tasks and TS business services (see Figure.- below). Some activities may be common to more than one process (e.g., the activity Send Instructions and Receive Status Advices/ Settlement Confirmations) Figure.- Template of Second Level Diagram (no interactions with TS) <<Name of Process Owning Entity>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> 0 However, if no further decomposition of activity is possible and it requires interaction with TS, the Activity Layer depicts the TS interaction (see Figure.- below for template of activity layer with TS interaction). e.g., the process, Calculate and Instruct CA Entitlements consists of the activities Calculate CA and Instruct and Settle CA Entitlements. A collaborative process may consist of collaborative and internal activities (e.g. the activity Identify and Inform Entitled Position Holders in the process Notify CA). TS Business Process Model depicts two types of TS interactions: Primary interaction occurs between TS and the process owning entities. Secondary interaction occurs between TS and TS stakeholders other than process owning entities (like CSD participants or payment banks). These interactions occur because of primary interactions Page: of 0

90 Principles of Business Process Modelling Figure.- Template of Second Level Diagram (includes interactions with TS) <<Name of Process Owning Entity>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> <<Name of the Process>> <<Name of the process owning entity>> <<Name of the activity>> <<TS reference identifier>> <<Name of the activity>> <<TS reference identifier>> Depicts a logical grouping of TS business service (for e.g., Life cycle management services in Settlement Service Class) TS <<Name of TS Business Service>> <<TS reference identifier>> <<Name of TS Business Service>> <<TS reference identifier>> <<Name of TS Business Service>> <<TS reference identifier>> <<Name of TS Business Service>> <<TS reference identifier>> <<TS stakeholders other than process owning entity>> <<Name of process within the nonprocess owning entities>>.. Third Level Diagram Task Layer 0 The third level diagram represents the Task Layer (see Error! Reference source not found. in the section on sample process description) in the process hierarchy and defines the specific tasks that each activity is broken into. It depicts the interactions within a set of well-defined and interrelated tasks within an activity as well as interactions with TS business services. For example, the activity Obtain Securities Position and Pending Instruction Details consists of the following tasks: Query Securities Position for CA ISIN, Query Pending Instructions for CA ISIN and Receive Reports Position and Pending Instructions (are examples of collaborative tasks), Filter Reports for CA ISIN details (example of internal tasks). Page: 0 of 0

91 <<Name of Entity>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> <<Name of the process>> <<TS reference identifier>> CA Business Process Description Drafting Methodology Figure.- Template of Third Level Diagram (no interactions with TS) Process Owning <<Name of the process in the EE Business Process>> <<Name of the process owning entity>> <<Name of the activity>> <<TS reference identifier>> <<Name of the activity>> <<TS reference identifier>> Depicts a TASK within an activity <<Name of the Process>> <<Name of process owning entity>> <<Name of Activity within the process>> <<Name of Task>> <<Name of Task>> <<TS reference identifier>> <<TS reference identifier>> Interactions between the EE business process and TS business services TS <<Name of TS business service component type>> <<Name of TS business service component type>> <<Name of the TS Business Service Component>> <<TS reference identifier>> <<Name of TS business service>> <<TS reference identifier>> Depicts a TS business service (for e.g., Query Service or Report Generation Service) Depicts a TS business service component (for e.g., Settlement-related query service component) Depicts a TS business service component type (for e.g., Securities Balance Query or Settlement Instructions Query within the Settlement-related query service component). Drafting Methodology This section of a TS BPD document provides information regarding the TS reference and mapping details of the process in an EE business process Process Name Name of the process Convention for a naming a process <Verb> + <Business Object> Page: of 0

92 Drafting Methodology For example, Capture CA Process TS reference identifier of the process Business Actors It includes name of the entity that executes the process name(s) of the entities that participate in the process Business Objects Specifies the business objects referenced, modified or created in the process TS Service Class Name Name of TS Service Class and TS Service Class Identifier TS Service Description document includes the detailed description of TS Business Services For example, Settlement Service Class, Liquidity Management Service Class, etc TS Use Case Name Name of TS use case describing the interaction of the business applications of TS Actors (CSDs or NCBs) with TS TS UDFS document includes the description of TS use cases The use case should also be referenced in the description of the process to ensure that the reader understands the context in which the use case is relevant Trigger Event(s) that start the process Precondition List of conditions that must be true for a process to begin Codification Methodology o For codification of a process < TS.xx.yyyy.zzzz.nnn > xxx (alphabets only) stands for abbreviated document name (e.g. BP in this case) yyyy (alphabets only) stands for category of EE business process (e.g. CORP for corporate actions, SETT for settlements, etc) zzzz (alphabets only) stands for abbreviated name of EE business process (e.g. SECD for securities distribution) Page: of 0

93 Diagram Conventions and Standards nnn (numeric only) stands for the process number (e.g. 00, 00, etc) For example, TS.BP.CORP.SECD.00 is the TS reference identifier of the process Notify CA 0 o For codification of an activity < TS.xx.yyyy.nnn > xx (alphabets only) stands for abbreviated document name (e.g. AC in this case) yyyy (alphabets only) stands for category of EE business process (e.g. CORP for corporate actions, SETT for settlements, etc) nn (numeric only) stands for the activity number within a category (e.g. 00, 00, etc) For example, TS.AC.INF.00 is the TS reference identifier of the activity Obtain Securities Position and Pending Instruction Details Activities can be used across different business processes. e.g. Obtain Securities Position and Pending Instruction Details can be used in different corporate action notifications. o For codification of a task in an activity MM (numeric only) represents a Task within an Activity. The possible values are 0 thru. Diagram Conventions and Standards 0.. Basic diagramming concepts A business process diagram consists of a set of graphical elements. The four basic categories of elements are: Flow Objects; Connecting Objects; Swimlanes; and Artifacts The small set of notation categories enables the reader of a BPD to easily recognize the basic types of elements and understand the diagram. Within the basic categories of elements, additional variation and information can be added to support the requirements for complexity without dramatically changing the Page: of 0

94 Diagram Conventions and Standards basic look-and-feel of the diagram. Flow Objects These are the core elements of a business process diagram. The three Flow Objects are:. Process (or Activity or Task) They are represented in rounded rectangles They can be performed once or can have internally defined loops 0 For a collapsed version of a Process (or Activity), the details of the Process are not visible in the Diagram. A plus sign in the lower-center of the shape indicates that the Process can be decomposed into activities. For an expanded version of a process, the details are visible within its boundary In case of Task, markers or icons can be added to help identify the type of task (e.g., manual task). However, the marker must not conflict with any other standard BPMN element 0. Events They are represented by a circle and is something that happens during the course of a business process. The events affect the flow of the process and usually have a cause (trigger) or an impact (result). Events are circles with open centers to allow internal markers to differentiate different triggers or results. There are three types of Events (type of boundary determines the type of event), based on when they affect the flow: Start, Intermediate, and End A. Start Events Start Events indicate where a process will begin Page: of 0

95 Diagram Conventions and Standards There are different Triggers that indicate the specific circumstances that start the process None Start Events are used to mark the start of a process or when the start is undefined Any one of the triggers included in a Multiple Start Event will start the process 0 a. Intermediate Events Intermediate Events occur after a process has been started and before a process is ended There are different Triggers that indicate the specific circumstances of the Event They can be placed in the normal flow of the Process or attached to the boundary of an activity Events placed within the process flow represent things that happen during the normal operations of the process. They may represent the response to an event or the creation of an event (i.e., receipt of a message or sending of a message) Events attached to the boundary of a process (or activity or task) indicate that the process should be interrupted when the event is triggered. They are used for error handling and exception handling Page: of 0

96 Diagram Conventions and Standards b. End Events End Events indicates where a process will end There are different Results that indicate the specific circumstances that end the Process Table Summary of different types of triggers and their applicability to start, intermediate and end events Page: of 0

97 Diagram Conventions and Standards Page: of 0

98 Diagram Conventions and Standards. Gateways They are represented by the diamond shape and used to control the divergence and convergence of Sequence Flow. Thus, it will determine traditional decisions, as well as the forking, merging, and joining of paths. Different internal markers indicate the different types of behaviour control. 0 A. Exclusive Gateways (XOR) Exclusive Gateways (Decisions) are locations within a business process where the Sequence Flow can take two or more alternative paths (or used to merge the Sequence Flow). It is a fork in the road for a process and only one of the possible outgoing paths is taken during the process execution. There are two types of decision mechanism: Data Mechanism (e.g., condition expressions) These are the most commonly used type of Gateways. They can be shown with or without an internal X marker (without is the most common use). The Gateway (Decision) creates alternative paths based on defined conditions Page: of 0

99 Diagram Conventions and Standards Note: A hatch mark at the line beginning shows the default Sequence Flow. The default path is chosen only if all the other conditions of the Gateway are False. Event Mechanism (e.g., receipt of alternate messages) This type of decision represents a branching point in the process where the alternatives are based on events that occur at that point in the process, rather than conditions. The Multiple Intermediate Event is used to identify the Gateway. The Event that follows the Gateway Diamond determines the chosen path. The first event triggered wins. 0 Note: Exclusive Merge is a useful tool for modelling data based or event based merges. Exclusive means that the process chooses only one of the many inputs as the output from the gate. B. Inclusive Gateways Inclusive Gateways are decisions where there is more than one possible outcome (one or more outgoing Sequence Flows from a decision may be taken). The Gateways is identified by a O marker. Page: of 0

100 Diagram Conventions and Standards For Inclusive or Decision Gateways there cannot be zero output flows. A default output flow is necessary. The merging Inclusive Gateways follow decision Inclusive Gateway. For Inclusive or Merge Gateways, the process flow continues when the first signal arrives from any of the input Sequence Flows. If other signals arrive subsequently from the other input Sequence Flows, they are not used. The merging Inclusive Gateways follows the decision Inclusive Gateway. 0 C. Complex Gateways Complex Gateways define a more advanced definition of behaviour. An asterisk marker (bold) identifies this gateway. For complex decision gateways, the complex expression determines which output flow is taken. Page: 00 of 0

101 Diagram Conventions and Standards For complex merge gateways, the complex expression determines when the process starts D. Parallel Gateways Parallel Gateways is also called an AND gateway (for defining multiple parallel paths). All Sequence Flows out of AND gateway are taken. The + marker is used to identify this Gateway. The Gateway synchronises (wait for) parallel paths. 0 For parallel forking gateway, all sequence flows drawn out of the AND gateways are taken Page: 0 of 0

102 Diagram Conventions and Standards For parallel joining gateway, the AND gate must receive an input signal from all input Sequence Flows for the output flow to be taken. The process flow waits for all signals to arrive at the AND gateway before it can continue 0 Connecting Objects. Sequence Flow A Sequence Flow shows the order of activities in a process. A solid line with a solid arrowhead represents a Sequence Flow. The source and target must be one of the following objects: Events, Activities, and Gateways. A Sequence Flow cannot cross a Sub-Process boundary or a Pool boundary. 0. Message flow A Message Flow shows the flow of messages between two separate process participants (business entities or business roles) that are prepared to send and receive them. A dashed line with an open arrowhead represents a Message Flow. In BPMN, two separate Pools (see section on Swim Lanes) in the diagram will represent the two Participants. A Message Flow can connect to the boundary of the Pool or to an object within the Pool. Message Flow are not allowed between objects within a single Pool Page: 0 of 0