I nuovi servizi per gli emittenti Palazzo Mezzanotte, Milano, 28 Maggio 2013
I nuovi servizi per gli emittenti XE Eurobonds Raising the bar Andrea Tranquillini Head of Network Management & International Issuance Monte Titoli 2
New Service Main Features 1 XE ISIN Key Service Differentiators 2 STP offered by MT-X and UnaVista 3 No requirement for ICSD agent safekeeping and servicing 4 Central Bank Money 5 Streamlining of the execution process 6 Corporate Actions Automation 7 Significantly Lower Safekeeping Fees Impact Market neutral to accept new XE ISIN. Code is neither a key driver of liquidity nor quality. Great improvement on current processes and cost savings Simpler process brings efficiencies. Further efficiencies with Dematerialisation option Provides an alternative to the current Commercial Bank Money service. Significant risk reduction option General simplification of the execution process with benefits for Lead Managers, Sub Custodians and Investors Proposed development using XBRL taxonomy offers benefit for Global Custodians, addressing a significant concern raised previously Major benefit for Global Custodians and Investment Banks 3
A new Numbering Agency Securities coding SECURITY CODE XE prefix Unique for International Bonds & Debt Instruments where MT is Issuer (I)CSD X E 0 0 B 1 F 3 M 5 9 0 Code identifying place of deposit (for international bonds) Filler Seven digits alphanumeric code (using SEDOL format) Check digit Additional request for membership submitted to the ANNA (Association of Numbering Agencies) Membership not a showstopper to start allocating codes 4
A new simpler structure All functions imbedded within Monte Titoli ISSUER ISSUER s AGENT CBL Monte Titoli LEAD MANAGER PARTICIPANTS INVESTORS Key Benefits AT ISSUANCE fewer parties reduced Operational risk. SAFEKEEPING As per the ECB Standard 3, Monte Titoli has a unique and direct relationship with the issuer. FORM Global Note safe kept by Monte Titoli. Dematerialization possible with servicing efficiencies. COMMUNICATION All communications from Issuer or Agent directly to MT. Prime record with MT. 5
Issuance structure Issuer responsible for creating issue, settlement, and post-issuance servicing Issue closed Issue created Securities distributed Issuer Issue A/C (Debit) Agent A/C (Credit) Participant (Credit) Investor (Credit) Issuer appoints, and notifies MT of 1. ISSUER AGENT responsible for Issue creation, and Post-Issuance servicing 2. PAYMENT AGENT responsible for interest & principle events SETTLEMENT AGENT can be either: - Lead Manager (for Syndicated Issues), or - Programme Agent (for direct programme issuance). As agreed bilaterally between Issuer and Agent. Must be A/C holder 6
Primary settlement roles DVP Securities distribution and proceeds payment to issuer Monte Titoli Issuer Option 1 Lead Manager Issuer S e c u r i t i e s U n d e r w r I te r U n d e r w r I te r U n d e r w r I te r C a s h EUR via T2 Option 2 Programme Agent Issuer Investors 7
Issuance process Process flow Securities ISSUER Cash 1. Security created in issuer account (DR) ISSUER s AGENT 2. Simultaneous automatic credit (FOP) according to agent account for «distribution» 3. Distribution occurs on a realtime DVP basis 1 2 MT 4 T2 4. Simultaneous DVP RTGS settlement for cash leg via T2 3 Lead Manager/IPA* PARTICIPANTS INVESTORS * Depending on the role performed and on the type of issuance Key Benefits Settlement Real time Gross Settlement in Central Bank money (T2). Settlement Immediate finality in the early morning of issue date. 8
Settlement with peers Transferability of XE Eurobonds Monte Titoli Direct Participants T2 Express Net & (RTGS) Transaction input Settlement & confirmation CBL Realignment EB CBL Sett. system BRIDGE EB Sett. system CBL 1 CBL 2 EB 1 EB 2 Key Benefits Settlement No limitation in transferability of XE assets with peer ICSDs. Currency Phase 1 EUR CeBM settlement in T2, Phase 2 Multicurrency in CoBM Deadline Currently available during T2 opening hours. Overnight window planned 9
Income processing CURRENT PROCESS Funds advanced to Participants (at cost), based on; Credit standing of Participant, and Credit standing of Issuer Poor credit funds credited next day, or when receipt determined (Upon receipt of Funds) NEW PROCESS Immediate payment to the market as soon as issuer paying agent pays. Most payment in T2 settled by mid morning CET. Irrelevance of participant and issuer credit rating. Immediate finality of payment and minimization of reversal risk. Key Benefits Credit Risk Removal of overnight and intraday exposure for crediting proceeds Operational Risk Substantial reduction of reversal risk. 10
Assets servicing CORPORATE ACTIONS In December 2012, Monte Titoli has been recognized amongst the top CSDs for CA standards implementation in the T2S markets. FISCAL SERVICES Pre-issuance and post-issuance services outsourced to market leading provider GlobeTax. Both relief at source and refund available if applicable. Electronic reporting for issuer agents. Key Benefits Corporate Actions Forerunner of European harmonization Fiscal Service Specific assistance in the pre-issuance phase provided 11
Collateral eligibility criteria TYPE of EUROBONDS CGNs (Classic Global Note) eligible but not when held via common agents for EB or CBL. NGNs July 2006 Created to enable EB & CBL to meet the ECB requirements, addressing concerns around Undue custody risk on use of Common Depositaries. (Standard 3 of ECB SSS Standards) Monte Titoli meets ECB requirements for both Global (CGN) and dematerialised. EUROSYSTEM RULES Laid down in Annex I to Guideline ECB/2011/14 of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem. Key Benefits CGN Eligible if held with Monte Titoli as no Undue Custody Risk. Book entry Eligible as held and settled with Eurozone SSS fulfilling ECB standards 12
An innovative language XBRL extensible Business Reporting Language Point raised about SWIFT communication standards not ensuring exhaustive transfer of information and need for interpretation of information in documents Examine a possible solution to Important information, not covered in SWIFT messages, by using XBRL to tag the information and enable all parties to enjoy STP Standard taxonomy (dictionary) of terms mandated in law by US and other governments for financial reporting consistent with ISO 20022 messaging standard used to tag data in text-heavy documents Makes documents (e.g. Market Announcements, Term Agreements) machine readable and reduces re-keying effort and associated error risks Establish a sub-working Group to evaluate and take necessary steps towards addressing this quickly GlobeTax helped develop the XBRL withholding tax taxonomy for corporate actions Key Benefit Communication Increase quality of communication at issuance on securities data Operations Reduce risk of reversal on payment date 13
Cost reduction Significantly lower safekeeping fees (concentration of agency roles in Monte Titoli expected to bring at least of 30% savings) Reduced servicing efforts and administrative burden for intermediaries De-risked real-time DVP CeBM issuance process without credit exposure Streamlined real-time Corporate Actions processing in CeBM in Central Bank Money Reduction of operational risk thank to real time DVP settlement Dismantling of the credit exposure principle thanks to full STP RTGS DVP Eligibility for ECB and CCP collateral 14
Legal Structure Enrica Cremonini Legal Counsel Gruppo Borsa Italiana 15
Legal Framework Main aspects Monte Titoli operates within the legal framework of the Italian Finance Act (Leg.D.58/1998), and the Monte Titoli rules on Centralised Administration of Securities are approved by the competent authorities as complying with the laws. This legal framework is fully compliant with the industry standards (ESCB Recommendations for Securities Settlement Systems and BIS Principles for Financial Markets Infrastructures, requiring a high degree of legal assurance for each aspect of the clearing and settlement process, including: Legally valid and enforceable arrangements for netting and collateral Valid and enforceable rules on the entitlement to securities and the legal effects arising from a credit book entry on a security account only the relevant account holder is entitled to exercise rights arising from the securities No claims on securities can be exercised by MT Clear definition of the nature of the proprietary rights on book entry securities Full protection of Client s assets in the event of the insolvency of a system participant or the CSD is granted by strict asset segregation rules, both at CSD and Intermediary level and prohibition of actions or attachments by the creditors of the intermediary or of the CSD against the securities which are the property of the Intermediary s client Settlement Finality rules implemented according to EU Legislation to protect the settlement system in case of insolvency 16
Legal Framework Monte Titoli as Depositary and Safekeeper In accordance with the legislation, and having a contractual relationship with the Issuer, MT as authorized CSD, manages the securities settled through its settlement system as follows: A securities account is opened for the issue on Monte Titoli s books The issue is deemed to be completed when securities are credited on the participants securities account Securities in certificated form: MT acts as a custodian of the physical document representing the security. Upon receipt of the security, MT registers the issue on the relevant securities accounts Securities in dematerialized form: MT provides for the registration on the relevant securities account upon completion of the placement process and upon instruction of the Issuer or of the Issuer Agent Reconciliation: at the end of each accounting day, MT verifies that the amount registered in the securities account held by intermediaries is equal to the amount registered in the issuer s securities account Corporate actions management: Notices in relation to note holders meetings Income payments of principal and interests under the securities Tax services in relation to the relevant securities Issue closed Issue created Securities distributed Ongoing Servicing 17
Legal Framework Options for form of securities Securities cleared through MT may be either in certificated (global or definitive) form or in uncertificated ( dematerialised ) form According to private international law, the form of securities will be regulated by the law where securities are issued If the securities are issued in Italy, Italian law will apply to the form of the securities If the securities are issued in another jurisdiction, the law of such jurisdiction will apply to the form of the securities (e.g. if the securities are issued in the UK, UK law will apply) Securities in dematerialized form are deemed to be issued when the issuer s securities account is opened and the relevant securities are credited therein 18
Legal Framework Dematerialization rules To the extent Italian law applies to the form of securities, article 83-bis of Italian Finance Act and article 15 of the Joint Regulation set forth that the financial instruments to be issued in dematerialized form are the following: Financial instruments traded or intended to be traded on Italian regulated markets; Shares, other equity instruments, bonds and other debt instruments, as well as any other financial instrument that gives the right to acquire other financial instruments issued by an entity having financial instruments listed on an Italian regulated market or is included in the list (held by CONSOB) of issuers having shares diffused to the public; Bonds and other debt instruments issued for an aggregate amount of at least Euro 150 millions (below this amount form is optional) ; Other financial instruments for which the issuer opts for the dematerialization regime. 19
Legal Framework Guidelines on documentation amendments The new structure will modify the operations and timing of both the issuance process and the ongoing servicing. As a consequence this will have to be appropriately reflected in all the relevant legal documents related to the issue such as: 1. Prospectus/Offering Circular 2. Subscription Agreement/Progamme Agreement 3. Global Note 4. Agency Agreement ( and Trust Deed) 5. Operative and Administrative Procedure Memorandum 6. Signing & Closing Memorandum A&O drafting documentation templates ICMA Legal & Docs Committee to review In amending these documents, considerations are: 1) For certificated issues in Monte Titoli, securities will be in CGN form. Normally the wording used in programmes already includes both NGN or CGN 2) Monte Titoli will be indicated as the depository and safekeeper of the note 3) The Operative and Administrative Procedure Memorandum and the Agency Agreement needs to reflect timing and procedure in line with Monte Titoli operations. 4) The Issuer will have an agreement with Monte Titoli with standard terms and conditions both for custody and safekeeping service. 20
Contacts Sales Team Alessandro Zignani Head of Post Trade Sales Cristina Belloni Global Post Trade Sales Giovanni Costantini Global Post Trade Sales XE Eurobonds team Andrea Tranquillini Head of Network Management & International issuance Enrica Cremonini Legal Counsel Details azignani@londonstockexchange.com T +39 02 33635 212; M +39 366 6120430 cbelloni@londonstockexchange.com T +39 02 72426504 gcostantini@londonstockexchange.com T +39 02 33635283 Details atranquillini@londonstockexchange.com e.cremonini@montetitoli.it 21
Grazie della Vostra attenzione
The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to be considered as a recommendation by Borsa Italiana S.p.A. as to the suitability of the investment, if any, herein described. This document has not to be considered complete and it is meant for information and discussion purposes only. Borsa Italiana S.p.A. accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this documents. AGREX, BEST VENUE INDICATOR, BORSA ITALIANA and BORSA ITALIANA s logo, BORSA ITALIANA ITALIAN STOCK EXCHANGE, BORSA VIRTUALE, BORSAM@T, CITY FOR GOOD, DDM, ELITE, ETFplus, EUROMOT, EXPANDI, EXTRAMOT, IDEM-THE ITALIAN DERIVATIVES MARKET, IDEX, MARKET CONNECT, MIB, MIB 30, MIBTEL, MIDEX, MINIFIB, MINIFIB, MIV, MOT, MTA, MTF, NIS, SEDEX, STAR, STAR SEGMENTO TITOLI CON ALTI REQUISITI, TECHSTAR are registred trademarks owned by Borsa Italiana S.p.A. CC&G is a registred trademark owned by Cassa di Compensazione e Garanzia S.p.A. MONTE TITOLI, X-TRM AND MT-X are registred trademarks owned by Monte Titoli S.p.A. MTS, BOND VISION, EUROMTS are registred trademarks owned by MTS S.p.A. London Stock Exchange, the coat of arms device and AIM are registered trade marks of London Stock Exchange plc. FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership on the same. Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd Italian branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities 23