settlement blocks for securities trade transactions, depending on the currencies included in the settlement:

Transcription

1 VP Clearing Rules

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4 Clearing participants may report trade transactions from 05:00 hours until 01:45 hours on the subsequent day on all days except Saturdays, Sundays, New Year s Eve, the Friday after Ascension Day and other Danish public holidays (opening days) VP will execute the settlement of securities trade transactions on all the above mentioned settlement days in such a manner that VP's 24-hour settlement period commences at 18:00 hours and is concluded immediately prior to 18:00 hours on the subsequent settlement day VP shall as of the 24-hour settlement period complete one or more net settlement blocks for securities trade transactions, depending on the currencies included in the settlement: Wherever referred to in the following, a settlement block etc. shall mean a net settlement block on a settlement day that is possible for trade transactions in the reported settlement currency (DKK, SEK or Euro) Real time gross settlement (RTGS) is completed on all days except Saturdays, Sundays, New Year s Eve, Friday after Ascension Day and other Danish public holidays The legal effect time of trades that are settled via RTGS depends on the settlement method chosen by the parties Real time gross settlement achieves legal effect when the final verification has commenced at the reporting time. VP performs gross settlement in DKK/EUR during a period determined by Danmarks Nationalbank normally between 08:00 and 15:00 on all days except Saturdays, Sundays, New Year s Eve, Friday after Ascension Day and other Danish public holidays (opening days) Gross settlement for future settlement in Euro achieves legal effect when verification has commenced at 11:00 on the settlement day selected by the parties. If one of the parties reports later than 11:00 on the agreed

5 settlement day, the final verification will commence when the missing reporting is received, but no later than 15: VP may in special circumstances postpone or cancel one or more of the stated net settlement blocks Concluded securities trade transactions to be settled in VP's clearing and settlement system must be reported to VP as trade transactions. The clearing and settlement of trade transactions will be carried out by crediting or debiting, as the case may be, the affected securities accounts against any recording of trade amounts on the affected cash accounts. 2.8 Securities trade transactions are subject to the general provisions set out below, as thereafter specified and/or modified, depending on the type of trade and/or parties to the trade Trade transactions concerning bonds denominated in DKK and with a nominal value in excess of DKK 500 million cannot be settled in VP's net settlement blocks. There is no nominal limit for trade transactions concerning bonds traded on MTS Denmark for settlement in VP Both parties to a concluded securities trade transaction (seller and purchaser) shall arrange for the trade transaction in question to be reported to VP. Depending on the type of settlement, trade transactions may be reported for subsequent settlement either: in one of the settlement blocks prescribed by VP (net settlement); or for immediate settlement in one of the periods prescribed by VP for this purpose (Real Time Gross Settlement) Trade transactions may also be reported by stating a previous settlement block, but only for settlement in a subsequent settlement block Bonds traded on MTS Denmark for settlement in VP are reported by MTS Denmark on behalf of both parties Real Time Gross Settlement (RTGS) can only be reported by settlement administrators who participate in the system as primary cash providers holding cash accounts with Danmarks Nationalbank or the European Central Bank, and only on their own behalf To achieve maximum efficiency and to reduce the risks associated with the settlement of trade transactions between the participants, VP requests that the reporting of trade transactions be made as soon as possible after conclusion of the trade transaction in order to establish agreement with respect to the details of the trade transaction (matching) The reporting of trade transactions requires reporting of both

6 a preadvice and an instruct However, the instruct may be contained in the reporting of the preadvice. This is always the case as regards Real Time Gross Settlement (RTGS) and reporting made by MTS Denmark, unless exemption is granted by MTS Denmark The reporting of preadvices and instructs will vary depending on the parties participating in the trade transactions. The various types are described in the following The clearing member reports the preadvice and instruct concerning its own part of a securities transaction and also does so on behalf of any third party A clearing member that is not an securities account controller may choose to itself report the preadvice and instruct concerning its own part of a securities transaction The reporting of the clearing members sale may be made on behalf of the settlement administrator by the participant who is the securities account controller for the settlement administrator's VP Account The participant who is the Paying Agent on behalf of the clearing member may with respect to the clearing members purchase of securities report preadvices and instructs on behalf of the latter Non-Clearing members cannot themselves carry out reporting of trade transactions. In the case of a private individual's sale of securities, the reporting of the securities made available shall be undertaken by the individual s securities account controller. It may be agreed with the private individual that trade amounts must be recorded on the affected cash accounts. In the case of a private individual's purchase of securities, the latter s cash account manager may, in connection with the reporting, guarantee payment for the securities The preadvice of the trade transaction shall contain the information necessary for the settlement of the trade transaction, including the counterpart to the trade transaction, ISIN, nominal amount/number of

7 dematerialised securities, trade date, settlement date/time, as well as any trade amount and foreign currency. A detailed description of the information to be reported in the preadvice is given in VP's guidelines and rules Upon receipt of the preadvice VP will make acknowledgement material available to the sender/party and any other participants in the settlement of the trade transaction in question For a transaction to be included in a net settlement block, VP must have received both preadvices concerning such transaction and matching must be completed with a positive result before the legal effect time of a settlement block. If a preadvice designates a specific settlement block in which the transaction in question is to be settled, matching will be carried out until the legal effect time of the said settlement block. If no specific settlement block has been designated, the preadvices will be included in matching until the legal effect time of the last settlement block 20 settlement days thereafter To be included in matching, VP must have received both preadvices concerning a trade transaction for RTGS before the end of the periods prescribed for RTGS After receipt in due time of the last of the two preadvices VP will carry out matching, i.e. a comparison of the information contained in such preadvices, cf. the appendix to the Participation Agreement and VP's guidelines and rules. The comparison will include the following: Agreement with respect to the agreed trade amount. If the trade amount reported by the purchaser deviates from that reported by the seller, the trade amount reported by the seller in the preadvice will apply, provided that the difference does not exceed VP s tolerance thresholds for matching, with reference to VP s system manual. Agreement with respect to the choice of settlement day and, where relevant, the choice of settlement block If the result of the matching is positive (match), VP will make the pertinent output data available to the parties and any other participants in the settlement of the trade transaction in question In the case of a match, two preadvices concerning net settlement can provide the basis for settlement of the trade transaction as from the future settlement day chosen and the following 20 settlement days ('settlement period'), after which the preadvices will lapse The instruct relates to the reported preadvice either because the preadvice and the instruct were reported together or because the separately reported

8 instruct refers to the preadvice. In the case of Real Time Gross Settlement, the instruct is contained in the preadvice In the instruct the parties will specify a validity period, i.e. the period during which the trade transaction concerned may participate in the settlement. The validity period will commence with the first possible settlement block in the 'settlement period' If an instruct has been received by VP prior to the commencement of the 'settlement period', the next-following settlement block of that 'settlement period' will be deemed to be the commencement of the validity period. If the instruct is received at a later time, the next-following settlement block will be deemed to be the commencement of the validity period. A previously specified validity period may be changed by reporting a new instruct. A specified validity period must as a minimum comprise one settlement block and cannot include more than the remaining part of the 'settlement period' The settlement of the trade transaction requires that the instructs of both parties to the trade transaction specify validity periods that coincide in full or in part When both parties to a trade transaction have reported instructs with coinciding validity periods, the reporting will be binding and will be considered to have been concluded in the system cf. section 57 c(1), no. 1 of the Danish Securities Trading Act. Simultaneously herewith, the transaction cannot be unilaterally cancelled or revoked by either the participant or a third party cf. section 57 c(1), no. 2 of the Danish Securities Trading Act. The transaction is thus 'ready for settlement'. However, if the parties to a trade transaction so agree, a binding trade transaction may be cancelled by both parties reporting a cancellation transaction which must be received prior to the legal effect time of the settlement block in which the cancellation is to have effect, unless a party in agreement with NASDAQ OMX s rules for buyin can cancel the trade transaction unilaterally. Binding trade transactions reported by MTS Denmark may only be cancelled by MTS Denmark A more detailed description of the information to be reported in the instruct is given in VP's guidelines and rules As from the first future settlement block designated, VP will satisfy itself of the presence of sufficient securities on the sales side (securities check) and sufficient means of payment on the purchasing side (cash check) in respect of trade transactions which are 'ready for settlement' In the first future settlement block designated, VP shall check that the seller has cover for the securities sales reported and instructed by the seller. It shall be checked on a net basis whether the securities account designated by the seller contains sufficient securities in the ISIN traded to complete the reported sales. In addition to the holding book-entered at VP, all approved

9 incomings that are to be book-entered at VP not later than concurrently with the book-entry of the seller's sales shall be included in the computation of availability If the check reveals that the seller's holding of securities in the designated ISIN available on the designated securities account is insufficient to complete all reported sales, none of the relevant account holder's sales in the affected ISIN will be completed in the settlement block in question, cf., however, below Parallel with the securities check, VP will check that the purchaser has cover for the payment of the securities purchases reported by such purchaser. In the computation of the purchaser's total payments, payments in respect of the purchaser's approved sales of securities in the same settlement shall be set off. It shall be checked that the total payments on the designated cash account with Danmarks Nationalbank, the European Central Bank or with the primary cash provider do not exceed the total amount made available to the purchaser in the settlement block in question. For SEK, a check is made that there is cover for the amount transferred to VP s Client Settlement Account with Sveriges Riksbank Trade amounts reported in Euro will be incorporated in the cash check in accordance with the section of the present clearing rules entitled 'Payment settlement in Euro in the European Central Bank' The amount available includes a maximum amount as notified by Danmarks Nationalbank, the European Central Bank or the primary cash provider. In respect of DKK, the amount available may also incorporate the collateral value (automatic collateralisation value) of specific securities accounts, provided that a separate agreement to this effect has been entered into. The collateral value will be computed in accordance with the section of these clearing rules entitled 'The VP System for the Administration of Automatic Collateralisation' and in accordance with any special conditions stipulated by the pledgee/lender, cf. the automatic collateralisation scheme of the pertinent lender If the cash check reveals that the purchaser's total payments exceed the notified amount available on the cash account designated by the purchaser, none of the reported purchases with payment transfers in respect of the cash account in question will be completed in the settlement block in question, cf., however, below To limit the effects of the non-completion of trade transactions resulting from insufficient holdings of securities or cash means as mentioned previously under 'Securities check' and 'Cash check', VP will be entitled, but not obliged, to seek information in the reports received and subsequently complete the transactions for which cover can be obtained. VP shall seek to complete such trade transactions in accordance with the principles governing 'VP's Multilateral Netting' which are set out in these clearing rules and which have been laid down in consultation with and with the acceptance of the participants. The general aim of these principles is to minimise the risk

10 associated with settlement by seeking to complete the largest possible proportion of the total settlement reported for the settlement block in question Trade transactions which, despite the above principles, have not been completed in a settlement block will be postponed for inclusion in the nextfollowing settlement block in which trade transactions in the reported currency (DKK, SEK or Euro) are settled. Trade transactions reported with no trade amount will be included in the next-following settlement block. However, the preadvices shall remain in force provided that the pertinent 'settlement period' has not expired. During that period the preadvices may be reinstructed. The trade transactions will be cancelled when the 'settlement period' has expired VP will make information regarding the above available to the affected parties. MTS Denmark will also be informed of the above in connection with trade transactions reported by MTS Denmark On RTGS on the same day, VP will cover check the RTGS when the transaction has been matched and is thus 'ready for settlement'. First, a check is made to determine whether the seller has cover for the reported and instructed sale of securities. If this is the case, the holding will be reserved while a check is made to determine whether the purchaser has cover in respect of the payment for the reported purchase of the securities in question In the event of either party having insufficient cover, such party's instruct of the RTGS shall be cancelled. The party in question may re-instruct the reported preadvice until it automatically expires at the end of the periods prescribed for RTGS, at which time the trade transaction in question will be cancelled On RTGS for future settlement in Euro, VP will check on the agreed settlement day whether there is cover for the reported and confirmed sale of securities. If this is the case, the holding will be reserved while a check is made to determine whether the purchaser has cover in respect of the payment for the reported purchase of the securities in question. If one of the parties lacks cover, the trade is postponed for new control on the next possible settlement day VP will make information regarding the above available to the affected participants Settlement will take place when the net effect of all approved trade transactions in the relevant settlement block is credited or debited to the

11 affected securities accounts (book-entry) against the simultaneous recording of trade amounts on the affected cash accounts and, if so agreed and if necessary, when the 'automatic collateralisation' has been book-entered. All updating will be carried out in the settlement block in question and information thereon will be made available to the affected participants RTGS will be carried out with respect to the individual approved trade by crediting or debiting, as the case may be, the affected securities accounts (book-entry) against the simultaneous recording of trade amounts on the affected cash account. The updating will be carried out immediately after the final cover check, and information thereon will be made available to the affected participants When the correct recording of the trade amounts has been transferred to Danmarks Nationalbank/its data centre, the European Central Bank, or made available to the payment administrator, VP will be released of any and all liability as regards the further processing of the information and payments The aforementioned principles for the clearing and settlement of securities transactions between participants will also apply to any participant that might be subject to compulsory liquidation proceedings, file for suspension of payments etc. However, the said application of these principles will be conditional upon the pertinent securities transactions having been reported to VP for settlement with binding effect ( ready for settlement ), cf. section 57c(1), item 2 of the Danish Securities Trading Act, before VP has received notification of the compulsory liquidation etc. of the participant Until 18:00 hours on the date of compulsory liquidation, the pertinent securities transactions will be included in VP's net settlement blocks and will be submitted for settlement in accordance with the normal principles for clearing and settlement in net settlement blocks, cf. section 57 of the Danish Securities Trading Act and the pertinent provision of the Participation Agreement If VP is not informed of the compulsory liquidation until after 18:00 hours on the date of compulsory liquidation, VP will continue to seek to settle the participant s securities transactions until the time that the stated information is received. If the information is received at a time when a net settlement block has been submitted for settlement, the stated information will not be acted upon until the settlement of the block has been completed Until 18:00 hours on the date of compulsory liquidation, the transactions in question will be submitted for settlement in accordance with the normal principles for clearing and settlement in RTGS, cf. section 57c of the Danish Securities Trading Act.

12 The trade transactions are finally and irrevocably completed and attain legal effect in the following manner: A trade transaction for settlement in a net settlement block is finally and irrevocably completed when the settlement block in which the pertinent transaction is settled is completed. A net settlement block is completed as of the posting on a net basis of the trade amount etc. and the crediting or debiting of the affected securities accounts (book-entry), cf. The effectuation of settlement. The trade transactions in question will attain legal effect as at the legal effect time specified for the net settlement block in question, cf. Introductory provisions An RTGS trade transaction is finally and irrevocably completed when the pertinent securities have been transferred to the buyer with legal effect time as of the binding reporting of the transaction. The following accepted market practice shall apply: all trade transactions for which, unless otherwise agreed between the parties, no specific settlement block has been designated shall have been reported for settlement and, if possible, matched prior to block 10, the intention being to complete the greatest possible proportion of settlement as early as possible in the 24-hour settlement period in the interests of the participants and the overall functionality of the settlement system -including flexible and efficient international settlement. In each settlement block, all such trade transactions as have been reported for settlement will have net cover in terms of securities. The requirement of net cover in terms of securities with respect to the individual settlement blocks will ensure that late deliveries by a participant do not adversely affect the overall settlement process, or other participants in the settlement process. In each individual settlement block, net purchases must have cash cover. When determining its financing requirements the participant must include an appropriate liquidity buffer and allow for reservations made in the VP System for the administration of collateral in connection with clearing and payments systems so as to ensure that the participant can generally accommodate situations where transactions are not completed as expected due to non-delivery. Participants who fail to include a sufficient liquidity buffer and consequently overdraw their cash accounts will incur a sanction. Calculated over a period comprising the immediately preceding 6 months, the sanction will for the first four instances of overdrawing be DKK 5,000, DKK 10,000, DKK 20,000, and DKK 20,000,

13 respectively, and thereafter DKK 50,000 for each subsequent instance of overdrawing. The mutual agreement between the participants concerning settlement practices (i.e. that all trade transactions with respect to which no specific settlement block has been designated - unless otherwise agreed between the parties - must be reported for settlement and, if possible, matched prior to block 10) as well as the professional rules concerning interest claims and the section of VP's Clearing Rules not affected by the present set of rules, will constitute the complete set of rules governing settlement practices in the Danish securities market Settlement practices are exemplified in the two rule sets below The rules regulating this practice comprise all types of securities registered as securities assets in VP. For the time being a scheme has only been established for shares and securities in relations to shares All VP accounts of an account holder with the same Account holder ID are aggregated in calculations and comparisons concerning the account holder in question Account holders, on whose VP accounts their social security numbers (CPR numbers) are registered as Account holder ID, are not comprised by the scheme Account holders with more than the number of share trades per month (currently 500) specified on VP s customer centre (the closed part of VP s website, to which only participants have access), (professional account holders), are comprised by the scheme. The number of share trades is calculated as an average over one year, after which the account holder is included in the following year s statement After the end of each month VP customer centre will specify the individual settlement percentages for all professional account holders As the basis for valuation, VP will calculate the average settlement percentage for the value of all securities trades with specified trade amounts for shares etc. for the period of one month. a) Too low an individual settlement percentage for a three-month period

14 c) Too low an individual settlement percentage after the expiry of the agreed deadline Settlement percentages are available at VP s customer centre This rule set will be reviewed annually in VP s customer forum with the purpose of evaluating the effect and the size of e.g. benchmark and sanction. a) Cover in terms of securities must be ensured for each settlement block. b) For each settlement block, cover in terms of cash must be ensured with respect to the total net purchase plus a suitable liquidity buffer. Furthermore, reservations made in the VP System for the administration of collateral in connection with clearing and payments systems must be allowed for. c) In the case of non-compliance with these rules, any participant that runs up a cash overdraft will for the first four instances of cash overdrawing incur a sanction of DKK 5,000, DKK 10,000, DKK 20,000 and DKK 20,000, respectively and thereafter DKK 50,000 for each subsequent instance of cash overdrawing.

15 d) Elimination of cash overdrafts shall be carried out in accordance with the currently applicable objective criteria, cf. VP's Clearing Rules. e) Trade transactions that by reason of insufficient cover in terms of securities and/or cash cannot be settled as expected will be postponed for inclusion in the subsequent settlement block. f) With respect to the sales transactions of clearing members where it is known in advance that the corresponding purchase transactions cannot be settled in block 10, block 20, block 30 or block 70, such sales will be covered by other means. g) The designation of a specific settlement block as regards transactions reported for settlement will be in compliance with settlement practices, always provided that this designation is pursuant to an agreement with the trading counterparty and that the designation can be made without detriment to the other participants and the overall efficiency of the settlement system. h) Each individual clearing member will compute a liquidity buffer, having particular regard to the consequences if part of a delivery is delayed or not delivered. The liquidity buffer must be calculated prior to blocks 10, 40, 70, 60 and 50. i) Only one sanction will be incurred with respect to blocks 10, 20 and 30 overall for the same settlement day. Separate sanctions will be incurred with respect to blocks 40, 70, 60 and 50. Sanctions will be calculated on a continual basis over the period comprising the preceding 6 months VP's holding checks will be carried out in advance of settlement in order to ensure that participants in VP's clearing system have cover both as regards securities and as regards cash for the transactions reported by them In principle, none of the transactions reported by a participant will be carried out unless there is sufficient cover for all transactions. To limit the effects of this principle, it has been agreed with the participants in the Participation Agreement that VP will be entitled to seek to execute those transactions for which cover can be obtained, the remaining transactions being postponed to the subsequent net settlement block to be settled in the same currency. The overall objective of this search for cover will be to carry out the greatest possible proportion of the total settlement Account holders who do not hold a Participation Agreement with VP can enter into an agreement with their securities account controller as Private Professional to entitle VP in cases of insufficient cover to seek to execute those transactions for which cover can be obtained according to the same principle, hereunder partial settlement, as applies to participants who hold a Participation Agreement with VP.

16 All reported transfers and trade transactions will be checked for holding cover by way of dematerialised securities per VP Account per ISIN. Drawn and undrawn bonds under the same ISIN will be checked separately. As regards transfers and Real Time Gross Settlement transactions, holdings will be checked at the time of reporting and then updated. As regards trade transactions, holdings will be checked in the settlement block in question In the event of insufficient cover for the completion of all trade transactions under one ISIN on a VP Account, the highest possible number of transactions will be completed by postponing other transactions In case of inadequate holding cover, postponement will take place according to the following principles: 1. A search is made under transactions sales to counterparties, which in VP s clearing system are termed non-clearing member. If, in this search, one transaction is found that will cover the overdrawn amount, this transaction will be postponed. If that is not the case, the largest transaction will be postponed first, and then the other transactions one by one in rising magnitude, until cover has been fully or partially provided. If the number of such postponeable transactions is not adequate to provide cover, VP will continue to the next principle. 2. A search is made under transactions sales to counterparties, which in VP s clearing system are termed clearing members, until one transaction or a combination of transactions settles the overdrawn amount, based on a principle of postponing as little as possible, cf. below. When the search finds a result that fulfils the criteria, the transaction(s) in question will be postponed The will take place on the basis of the following two alternative principles, in order of priority: a) The first attempt is for all transactions one by one. Subsequently, all combinations of two, three, four and five transactions. This search can lead to the testing of a very high number of combinations, which is why a top limit is applied, meaning that the search will be discontinued when the limit for the number of combinations has been reached. If, at such time, full cover for the other transactions has not been obtained, postponement will instead be based on the following principle: b) The largest transaction will be postponed first, and then the other transactions one by one in rising magnitude, starting with the smallest transaction, until there is no longer any overdrawn amount.

17 If the postponement of the latest transaction on the basis of the rules stated above means that an excess amount is held, an attempt will be made to use this amount to complete one or several of the minor transactions already selected for postponement For transactions in an ISIN between a clearing member, acting as a central counterparty (CCP), other clearing participants and Private Professionals, where transactions as a result of a shortage of holdings must be postponed in accordance with the aforementioned postponement rules, VP s rules for partial settlement alternatively apply For partial settlements it is applies that: transactions for which, during settlement, there proves to be a shortage of holdings can be cancelled by VP in their entirety and replaced by two new transactions; the two new transactions are legally binding for the parties; the two new transactions are on the same terms and together are of the same size as the cancelled transaction Partial settlement is executed in accordance with the following guidelines: Partial settlement of transactions between a clearing member clearing centre, acting as a central counterparty, and a clearing participant or private professional that is not a clearing member, acting as a central counterparty, is only implemented in block 40. The transaction with the earliest specified settlement date is selected for inclusion in the partial settlement. If there are several transactions with the same specified earliest settlement date, the transaction with the highest settlement sum is chosen. The part of the transaction that is not settled when partial settlement has been made in block 40 is postponed until block 60. The result of manual dissolution of overdrawn amounts may result in additional partial settlement Partial settlement where a private professional is a party to the transaction will not take place if the transaction is subject to: Payment reservations, cf. section 72(1) of the Danish Securities Trading Act; or Mortgage rights, cf. section 55(7) of the Danish Securities Trading Act and VP s system for the administration of mortgage rights Following a holding check of dematerialised securities a holding check shall be carried out on the cash side. It shall be checked whether the individual participant in VP's clearing system has cover for the trade amounts relating to all the trades reported by that participant. The check, which must encompass all such purchases and sales for the pertinent settlement block as have been

18 reported and confirmed by the settlement administrator in question, shall establish whether the participant in question has cover for the calculated net amount drawn within his automatic collateralisation agreement and/or within the maximum drawing facility reported by Danmarks Nationalbank, the European Central Bank or the primary cash provider. For SEK, a check is made that there is cover for the amount transferred to VP s Client Settlement Account with Sveriges Riksbank If the settlement administrator does not have sufficient cover, transactions will be postponed to a subsequent settlement block In the event of inadequate cover and thus postponement - the general rule is that, in the first instance, transactions that have no side effects will be postponed, which includes ensuring that the participant s holding cover is not overdrawn. The aim is to postpone as little as possible Postponement will be based on the following overall criteria (items a d), looking under each criterion also at the possible effect which transactions may have on the parties automatic collateralisation agreements, and ensuring that the uniform sub-criteria listed under 1-5 below are applied under each criterion: a) Sales to clients that are not clearing participants, where the transaction affects an automatic collateralisation agreement, b) The overdrawing party s purchases from other clearing participants, the overdrawing party s sales without cash settlement to other clearing participants and the overdrawing party s purchases from clients that are not clearing participants, c) Sales from others to the overdrawing party s clients (that are not clearing participants). d) Sales from others to such clearing participants as have been granted a maximum drawing facility by the overdrawing party Within each of the criteria above, transactions will be postponed on the basis of the following sub-criteria, under which the searches in 1-3 are made without side effects: 1. The search is for one transaction that will precisely cover the overdrawn amount. If such a transaction is not found, the next subcriterion will be applied instead. 2. The search is for one transaction that will cover the overdrawn amount by itself. If such a transaction is found, it will be saved with the purpose of possible postponement. Subsequently, it will be examined whether a combination of several transactions is able to cover the overdrawn amount. If the combination of transactions comes closer to the overdrawn amount, the combination will be postponed rather than the transaction which by itself would be able to provide cover. If this procedure does not cover the overdrawn amount in full, the next sub-criterion will be applied instead.

19 3. The necessary number of transactions will be postponed until cover for the overdrawn amount has been provided. Transactions are selected and postponed as follows: The largest transaction is postponed. If there is still an amount overdrawn, an attempt will be made to cover this amount by postponing transactions one by one in declining magnitude. If postponement of the next transaction in this order means that the overdrawn amount is covered, it will be examined before this transaction is postponed whether a following, minor transaction would be adequate to cover the remaining overdrawn amount. If this procedure only partially covers the overdrawn amount, the process continues with the next sub-criterion. 4. A search is made for transactions whose postponement will only have limited side effects. It is examined whether there are any resales (i.e. purchases resold in the same settlement), which if they are postponed are able to cover the overdrawn amount. This procedure only concerns resales without amount settlement or purchase in which only part of the holding has been resold. If this is the case, these will be postponed. 5. If, having gone through the sub-criteria above, the overdrawn amount has still not been fully covered, sub-criterion 1 under the next criterion will be applied with a view to covering the remaining part of the overdrawn amount Cash settlement in DKK at Danmarks Nationalbank can in relation to the VP System only take place if the participant has been approved for this purpose by Danmarks Nationalbank and has established the requisite accounts with Danmarks Nationalbank Such participants will participate in VP under the function category of 'primary cash provider' Prior to the settlement at VP, the participant will inform Danmarks Nationalbank of such participant's drawing facility requirements in DKK in accordance with Danmarks Nationalbank's rules thereon. Based on this information, Danmarks Nationalbank will electronically communicate to VP the participant's maximum drawing facility with respect to the subsequent settlement block. In so doing, Danmarks Nationalbank guarantees that any drawing in the subsequent settlement (including the drawing on Euro accounts as converted into DKK by VP), which does not exceed the notified maximum drawing facility, will be paid for the account of the participant. Danmarks Nationalbank cannot change the notified maximum after the legal effect time fixed for the settlement block in question.

20 Recording on the participant's account with Danmarks Nationalbank will be carried out on the conclusion of the predetermined settlement block Recording will not only be carried out in respect of the function categories undertaken by the participant on its own behalf in accordance with its Participation Agreement with VP, but also in respect of such other participants for which the participant in its capacity of primary cash provider makes payment available in connection with trade transactions and share subscriptions, etc The participant's drawing on its own current account with Danmarks Nationalbank in connection with Real Time Gross Settlement of trade transactions will in each individual case be subject to the approval of Danmarks Nationalbank Recording on the participant's account with Danmarks Nationalbank will be carried out in connection with the granting of the said approval Real Time Gross Settlement will only be carried out in respect of the participant's trade transactions on its own behalf As regards VP's transfers of payments from the issuer of demateralised securities to investors, such payments will be transferred to the receiving cash account controllers from accounts established with Danmarks Nationalbank by the primary cash providers. In advance thereof, the issuer will have informed VP to which accounts with the participants (the primary cash providers) the payments will be debited. The payments will be irrevocable unless otherwise specified in appendices Cash settlement in SEK via Sveriges Riksbank can only take place if the participant has established the requisite accounts with Sveriges Riksbank or has concluded an agreement with a SEK Paying Agent with an account with Sveriges Riksbank Cash settlement in SEK takes places via VP s Client Settlement Account with Sveriges Riksbank The participant must transfer, no later than 10:45 on the desired settlement day, the required trade amount to VP s Client Settlement Account with Sveriges Riksbank Recording on the participant's account or its SEK Paying Agent s account with Sveriges Riksbank will be carried out on conclusion of block 70.

21 Recording will not only be carried out in respect of the function categories undertaken by the participant on its own behalf in accordance with its Participation Agreement with VP, but also in respect of such other participants for which the participant in its capacity of primary cash provider for SEK makes payment available in connection with trade transactions etc Cash settlement in EUR with TARGET2 (the Eurosystem payment system) can in relation to the VP System only take place if the participant is primary cash provider and has established the requisite TARGET2 cash accounts with a central bank. Furthermore, the participant must have a cash settlement account in DKK with Danmarks Nationalbank For other clearing participants that make cash settlement via a primary cash provider, it is a precondition for securities settlement in EUR that the primary cash provider holds a EUR cash account with a central bank and also opens a EUR account for book-keeping of the clearing participant s securities settlement in EUR Prior to the settlement at VP, the participant must inform the relevant central bank of such participant's drawing facility requirements in EUR in accordance with rules thereon. Based on this information, VP obtains the participant s maximum drawing facility in the coming settlement block Recording on the participant's TARGET2 cash account will be carried out after the relevant central bank s approval of the item on the conclusion of the predetermined settlement block Recording will not only be carried out in respect of the function categories undertaken by the participant on its own behalf in accordance with its Participation Agreement with VP, but also in respect of such other participants for which the participant in its capacity as primary cash provider makes payment available in connection with trade transactions and share subscriptions, etc The participant's drawing on its own current TARGET2 cash account in connection with Real Time Gross Settlement of trade transactions shall in each individual case be subject to the approval of the relevant central bank Recording on the participant's TARGET2 cash account will be carried out in connection with the granting of the said approval Real Time Gross Settlement will only be carried out in respect of the participant's trade transactions on its own behalf.

22 As regards VP's transfers of payments from the issuer of dematerialised securities to investors, such payments will be transferred to the receiving cash account managers primary cash providers from TARGET2 cash accounts established by the primary cash providers. In advance thereof, the issuer must have informed VP of the accounts with the participants (the primary cash providers) to which the payments must be debited. The payments will be irrevocable unless otherwise specified in the appendices Trade settlement in EUR can only be carried out as net settlement in the context of the special Euro settlement block of the 24-hour settlement period (block 50) in which only trade transactions in EUR can be settled. The VP System for the Administration of Automatic Collateralisation can only be utilised with a primary cash provider as lender Non-settled EUR trade transactions will be postponed and will be resubmitted for settlement in the next-following EUR settlement block, always provided that the preconditions pertaining thereto continue to be met VP will utilise the exchange rate most recently received from Danmarks Nationalbank when calculating conversions between DKK and EUR. The exchange rate utilised will be employed in the conversion calculations relating to all the EUR settlement blocks, as well as the exchange block within the 24-hour settlement period In order to be included in the EUR settlement, trade transactions must specify the trade amount in EUR and designate a validity period encompassing at least one EUR settlement block The primary cash provider will specify the EUR amount available to the participant With respect to clearing participants who carry out payment settlement via TARGET2 cash accounts, VP will convert trade amounts reported in EUR into DKK and in connection with the completion of settlement will post the net effect of the Euro trade amounts in the pertinent block in DKK on the individual participant's TARGET2 cash account. Such clearing participants are under an obligation to participate in the special exchange block (PVP) cf. below With respect to other clearing participants who carry out payment settlement via a primary cash provider, the net effect of the EUR trade amounts relating to all approved EUR trade transactions in the pertinent block will be posted in Euro on the participant's EUR account with the primary cash provider. As regards such other clearing participants, the

23 exchange of DKK for EUR will be executed via the primary cash provider's participation in the exchange block (PVP) In this settlement block, VP will exclusively execute the settlement of trade transactions where the trade amount is designated in EUR On behalf of clearing participants that maintain a TARGET2 cash account in EUR, the relevant central bank latter will report such amounts in EUR as are made available to the pertinent participants in the aforementioned settlement block On behalf of other clearing participants that effect payment settlement via a primary cash provider, the primary cash provider will report the amount that is made available to the clearing participant in this settlement block in EUR. The trade transactions concerned will be checked for cover in terms of amount, in accordance with Cash Settlement via a Primary Cash Provider The net effect of the trade amounts (in EUR) relating to all approved trade transactions in the above settlement block will be posted in EUR to the pertinent participant's TARGET2 cash account or at the affected primary cash provider, respectively On the basis of the results of the settlement effected in blocks 10, 20 and 30, VP will execute an exchange block where obligations/entitlements entered into in Euro, but posted on a net basis in DKK, are converted on a net basis into obligations/entitlements in EUR and then posted to the participants TARGET2 cash account. With a view to usage in the exchange block, VP will by settlement block save each primary cash provider's net posting in EUR as well as the corresponding value thereof in DKK (converted and posted). The net amounts posted will also incorporate any EUR postings in respect of other clearing participants that effect payment settlement via the primary cash provider in question A liquidity provision agreement has been established in order to support the settlement effected in the exchange block. VP has concluded a bilateral agreement with two participants in the exchange block that have agreed to function as liquidity providers that, subject to detailed provisions, can provide liquidity to a participant that does not have cash cover in the exchange block. Liquidity providers maintain a TARGET2 cash account. Pursuant to the aforesaid bilateral agreement, one of the liquidity providers will function as active and the other as stand-in for the former during periods specified in accordance with a rotation scheme If an activation of the liquidity provision facility becomes necessary during the execution of the exchange block, the active liquidity provider will assume all obligations to pay and all entitlements to receive payment in the exchange block with respect to the/those participant/s who has/have insufficient cash cover in the pertinent cash check.

24 The liquidity provision agreement includes limits with respect to the active liquidity provider's obligation to participate. If these limits are exceeded, the exchange block will be aborted and all clearing participants who participate in the exchange block will be informed thereof On the basis of a given clearing participant's net result in the EUR settlement in each of the first three settlement blocks of the 24-hour settlement period (blocks 10, 20 and 30), VP will calculate each participant's total net obligation/entitlement in both DKK and EUR The exchange block will also incorporate any subscription amounts denominated in EUR. As of the exchange, participants with a calculated net obligation to deliver Euro will be obliged to deliver the amount specified in EUR against the receipt of a corresponding calculated net entitlement in DKK. Participants with a calculated net entitlement in EUR will similarly be obliged to have cover in respect thereof in terms of DKK and will as of the conversion receive the amount specified in EUR as against the simultaneous delivery of the corresponding calculated net obligation in DKK VP will execute a cash check in connection with the exchange block. With a view to usage in the cash check, Danmarks Nationalbank for DKK and the relevant central bank for EUR will with respect to each clearing participant report such amount as is made available to the participant in question in the exchange block. Depending on the participants' own positions, the amount available will be specified in either DKK or EUR. By participant, VP will check that the pertinent participant's payment obligation is denominated in the same currency as the specified amount available and that it does not exceed such amount. If the cash check reveals that none of the participants' obligations exceed the amount available, VP will complete the exchange block and the results thereof will be posted to the participants' accounts at Danmarks Nationalbank and at the relevant central bank that operate the TARGET2 cash account. If the cash check reveals that the obligations of one or more participants exceed the amount available, the entire exchange will be postponed. The affected participants will be informed thereof and may alter their positions in Danmarks Nationalbank and in the relevant TARGET2 central bank in order to assemble cover in respect of their obligations At a given point in time after the first cash check, VP will execute a new cash check to which Danmarks Nationalbank and the relevant TARGET2 central bank will report new amounts available. If the second cash check reveals that certain participants continue to have insufficient cover, the entire exchange will be postponed again and the liquidity provision facility for exchange blocks will be activated.