DVP SETTLEMENT IN NSD

Transcription

1 DVP SETTLEMENT IN NSD

2 DVP SETTLEMENT DVP (Delivery versus payment) links the delivery and payment obligations in such a way as to ensure that the final (i.e. irrevocable and unconditional) settlement of securities occurs if and only if the final settlement of the corresponding payment occurs. NSD offers its clients DVP settlement using three DVP models: DVP 1: DVP 2: DVP 3: Settlement occurs on a trade by trade basis Securities are settled on a gross basis, but cash is settled on a net basis Net settlement of both securities and cash DVP settlement may be effected via cash accounts with NSD or with the foreign banks: Accounts Custody account with NSD DVP model Currency Cash account with NSD DVP 1, 2, 3 RUB, USD, EUR, CNY, HKD, GBP, CHF Cash account with Citibank N.A., NY, JP Morgan Chase Bank N.A. DVP 1, 2, 3 USD 2

3 DVP: SETTLEMENT VIA ACCOUNTS WITH FOREIGN BANKS 7 1 Account of Seller/ Seller s client Seller s trading securities account 3 Clearing participant (Seller) Citibank N.A., NY/ JP Morgan Chase Bank N.A., NY Cash 6 Account of NSD NSD 2 *Aggregate 8 clearing account for securities 8 settlements Cash 5 Account of Buyer/ Buyer s client Buyer's trading securities account Clearing participant (Buyer) Clearing participants (Seller and Buyer) send DVP instructions to NSD; 2. NSD executes netting of liabilities in pool of matched instructions; 3. Securities blocking; 4. NSD on the basis of Power of Attorney sends instruction to debit Buyer s/ Buyer s client cash account opened with the foreign Bank. 5. Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York transfers funds from the Buyer s/ Buyer s client cash account to the account of NSD; 6. NSD sends instruction to transfer funds from the correspondence account opened with Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York to the account of Seller/Seller s client; 7. NSD receives confirmation that the account of Seller/ Seller s client has been credited; 8. NSD settles securities. * For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account.

4 DVP: SETTLEMENT VIA ACCOUNTS WITH NSD 1. Clearing participants (Seller and Buyer) send DVP instructions to NSD; Trading bank account of Seller/ Seller s client Aggregate clearing 4 account for cash 4 settlements Trading bank account of Buyer/ Buyer s client 2. NSD executes netting of liabilities in pool of matched instructions; 3. Securities blocking; NSD 4. NSD simultaneously settles funds and securities. 2 Trading securities account of Seller 3 *Aggregate 4 clearing account for securities 4 settlements Trading securities account of Buyer 1 1 Clearing participant (Seller) Clearing participant (Buyer) * For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account. 4

5 DVP: SETTLEMENT VIA ACCOUNT WITH A FOREIGN BANK AND ACCOUNT WITH NSD Citibank N.A., NY/ JP Morgan Chase Bank N.A., NY 1. Clearing participants (Seller and Buyer) send DVP instructions to NSD; Account of NSD Cash 5 Account of Buyer/ Buyer s client 2. NSD executes netting of liabilities in pool of matched instructions; 3. Securities blocking; 1 6 Trading bank account of Seller/ Seller s client Trading securities account of Seller 3 NSD 2 *Aggregate 7 clearing account for securities 7 settlements Trading securities account of Buyer NSD on the basis of Power of Attorney sends instruction to debit Buyer s/ Buyer s client cash account opened with the foreign Bank. 5. Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York transfers funds from the Buyer s/ Buyer s client cash account to the account of NSD; 6. NSD reflects funds transfer from correspondence account opened with Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York to trading bank account of Seller/ Seller s client opened with NSD; 7. NSD settles securities. Clearing participant (Seller) Clearing participant (Buyer) * For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account. 5

6 CLEARING BATCHES A clearing batch is based on matched instructions for which currency control documents have been received. A clearing batch may include obligations to be terminated and/or fulfilled using DVP model 2 or DVP model 3. During a business day, NSD runs 9 clearing batches: Cash accounts with NSD 10:00, 12:00, 13:00, 14:00, 15:00, 16:00, 18:00, 18:45, 19:40 Cash accounts with the foreign banks 10:00, 13:00, 15:00, 18:00, 18:45 Timeframes within which settlement of clearing batches with accounts with the foreign banks will be effected depends on foreign settlement banks efficiency of NSD s instructions execution. 6

7 ACCOUNT LINKING OPTIONS 1.1 Cash account and securities account belong to one entity ICSD, CSD or Russian Custodian/Broker 1.2 Cash account belongs to the Client of ICSD, CSD or Russian Custodian/Broker The Client ICSD, CSD or Russian Custodian/Broker ICSD, CSD or Russian Custodian/Broker Trading cash account opened with NSD or with the foreign bank 1.3 (A) Several cash accounts, opened in the name of the Clients of ICSD, CSD or Russian Custodian/ Broker are linked with omnibus securities account 1.3 (B) Several cash accounts, opened in the name of the Clients of ICSD, CSD or Russian Custodian/ Broker are linked with segregated securities account Trading securities account opened for NSD clearing Resident Nonresident Resident Client A Client В Client C ICSD, CSD or Russian Custodian/Broker Subaccount for Client A Subaccount for Client B Subaccount for Client C ICSD, CSD or Russian Custodian/Broker 1.4 Cash account is linked with segregated securities account. Clearing participant/ The Client Subaccount for Client A Subaccount for Client B Clearing participant X 1.5 Cash account is linked with several securities accounts, belonging to the same Clearing participant Clearing participant/ The Client Clearing participant X Clearing participant X Clearing participant ICSD, CSD or Russian Custodian/Broker. 7

8 DVP SETTLEMENTS WITH CASH RESERVATION Clearing Participants are allowed to set a priority order for the execution of their clearing instructions for the receipt of securities (transaction code 19/1). Key Specifications Such instruction has a priority in respect of the bank account to be debited. The priority order starts to be taken into account on the settlement date of both matched and non-matched instructions. If there are several instructions with the same priority, they are queued on the firstcome, first-served basis, subject to the time of their registration. If the cash available is insufficient to execute the first instruction in the queue, the other instructions will not be executed. If there is no matching instruction available, other DVP2 and DVP3 instructions may be executed during the last clearing session; other DVP1 instructions may be executed after the launch time of the last clearing session. This mechanism applies to settlements through trading bank accounts held with NSD. To indicate that an instruction must be executed with cash reservation, the relevant box must be ticked in the instruction (Form MF190), or the code /RSVD/ must be used in the field :70E::SPRO// of the TRADDET block in an MT 541 message. 8

9 TOLERANCE PRINCIPLE (1/2) The application of a tolerance value allows to match and settle matching instructions if any minor differences have been found between the amounts stated in the matching instructions received from Clearing Participants. For matching instructions for which the tolerance values were specified: if the trade values stated in the matching instructions differ, then the trade value stated in the instruction issued by the Clearing Participant acting as the transferee of the securities will prevail. The trade value will be taken to be equal to: the trade value specified by the Clearing Participant acting as the transferee of the securities, if the difference between the trade values specified in the matching instructions does not exceed the tolerance value established by the transferor of the securities; or the trade value specified by the Clearing Participant acting as the transferor of the securities, if the difference between the trade values specified in the matching instructions does not exceed the tolerance value established by the transferee of the securities. If the tolerance value is established only for one of the matching instructions, the trade value shall be taken to be equal to that specified in the instruction of the Clearing Participant who did not establish a tolerance value, provided that the difference between the two trade values specified in the matching instructions does not exceed the tolerance value established by the other Clearing Participant. 9

10 TOLERANCE PRINCIPLE (2/2) A tolerance value shall be determined by each Clearing Participant at his own discretion and specified upon registration of bank account details. The maximum tolerance value* is USD 25 or RUB 800. The tolerance value must be stated in the account currency; otherwise, the tolerance value will not be applied. Examples: A s trade value: RUB 600 Securities B s trade value: RUB A s tolerance value RUB 150 A s tolerance value 2 RUB 50 A s tolerance value 3 RUB 150 A s tolerance value 4 RUB 50 B s tolerance value RUB 150 B s tolerance value RUB 120 B s tolerance value not established B s tolerance value not established The difference between the trade values is RUB 100. As 100<150, the trade will be executed at the B s trade value of RUB 500. The difference between the trade values is RUB 100. As 100>50<120, the trade can be executed at the A s trade value of RUB 600 and cannot be executed at the B s trade value of RUB 500. Therefore, the trade will be executed at the A s trade value of RUB 600. The difference between the trade values is RUB 100. As 100<150, the trade will be executed at the B s trade value of RUB 500. The difference between the trade values is RUB 100. As 100>50, the trade will not be executed. * If a tolerance value is established in any other currency, it may not exceed the equivalent of USD 25 at the Bank of Russia s exchange rate effective on the date immediately preceding the execution date of the relevant bank account details registration instruction. 10

11 CURRENCY CONTROL Necessary to provide currency control documents* By residents (not credit organisations) going to effect settlement in a foreign currency By residents (not credit organisations) going to effect settlement in rubles with non-resident client Not necessary to provide currency control documents By non-resident clients By credit organisations *Transaction basement documents for DVP settlement via cash accounts with NSD should be submitted simultaneously with the DVP settlement instructions or in advance of the settlement date. For DVP settlement via cash accounts with foreign banks the client has to provide NSD only with a brokerage service agreement/agency agreement/accession agreement/ etc., confirming legal relationship between the foreign bank and the client only once in process of cash account details registration. 11

12 MAIN REPORT TYPES SENT TO CLIENTS VIA SWIFT 1. Reporting on potential counterparty instruction (subscription to Electronic matching required) MT548; 2. Reporting on absence/ existence of matching instruction MT548, MT578; 3. Sending reports on the results of clearing instructions matching: MT548, MT537; 4. Reporting on instruction execution: MT545, MT547; 5. Reporting on clearing batch settlement results: MT575*; 6. Report on all unsettled deals with reason description: MT537; 7. Report on securities transfer based on clearing results: MT544, MT546; 8. Cash account statements: MT950 or via bank-client system ; 9. Reporting on instruction failure (expiration): MT Report on instruction cancellation: MT541/MT543; 11. Transfer of cash from accounts with the foreign banks: MT900. *To receive MT575 it is necessary to register in Message User Group (MUG). Registration can be made on web-site section Ordering > Order products and services > Message User Group, register to. 12

13 QUESTIONS & ANSWERS 1. Why is it necessary to provide NSD with debit authority in respect of cash accounts opened with NSD? - For DVP deals via cash accounts with NSD as well as via cash accounts with foreign banks, the Client has to provide NSD with an authority to debit his accounts. As of internal DVP, NSD being Clearing institution conducting DVP netting has debit authority in respect of clients trading cash/securities accounts, but at the same time NSD s debiting authority is limited by carrying out only these functions. The client always has the right to submit instruction and debit his account if cash or particular securities (as for securities account) are not involved in current DVP settlement liabilities of the client. If the customer already has cash accounts with the Foreign Banks, he will need to complete and send the relevant documents to the Foreign Bank authorising NSD to operate the customer's account with the bank. 2. When should the client credit his accounts (cash and securities) with necessary amount of cash and securities? - At the time a deal is concluded, there is no need to have sufficient securities and/or cash in the accounts. The securities and cash needed to settle the deal must be available in the accounts on the settlement date stated in the instruction, 15 minutes in advance of the clearing session. 3. When DVP instructions will be executed? - Instructions will be executed on the settlement date specified in the instruction or on the date the pairs of instructions are matched, where one of the instructions is missing on the settlement date. Execution period for DVP instructions is 30 days from the settlement date. 4. Is it possible to avoid transliteration in DVP reports? - For DVP settlement NSD already does not require clients for transliteration and does not send reports with transliteration. 13

14 CONTACTS NSD Hotline: Tel.: +7 (495) Client Services Division: Tel.: +7 (495) /91; Client Relations Development Department: Tel.: +7 (495) Web-sites: Address: 12, Spartakovskaya str., Moscow, , Russia

15 THANK YOU!

16 DISCLAIMER This presentation has been prepared and issued by NSD (the Company ). Unless otherwise stated, the Company is the source for all data contained in this document. Such data is provided as at the date of this document and is subject to change without notice This document does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the Company, or any of its subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives, accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or otherwise arising in connection therewith This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance, achievements or industry results to differ materially from those in the forward-looking statements include, among other factors: Perception of market services offered by the Company and its subsidiaries Volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and its subsidiaries operate Changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities markets Competition increase from new players on the Russian market The ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that are popular with the Company's and its subsidiaries' customers The ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the competitiveness The ability to attract new customers on the domestic market and in foreign jurisdictions The ability to increase the offer of products in foreign jurisdictions Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based