Cross-Border Settlement Service Instructions 5 April 2012 T h e I t a l i a n t e x t s h a l l p r e v a i l o v e r t h e E n g l i s h v e r s i o n 1
CONTENTS CONTENTS... 2 INTRODUCTION... 3 1. GENERAL PROVISIONS... 4 1.1 DEFINITIONS... 4 1.2 SERVICE FUNCTIONALITIES AND COMMUNICATION CHANNELS... 4 1.3 COMMUNICATIONS... 5 1.4 CALENDAR AND TIMING OF THE SERVICE... 5 1.5 FEES... 5 2. OBLIGATIONS OF THE PARTICIPANTS TO THE SERVICE... 6 2.1 ACCESS TO SERVICE... 6 2.2 RELATIONSHIP BETWEEN MONTE TITOLI AND PARTICIPANTS... 6 3. SERVICE FEATURES... 7 3.1 TRANSACTIONS INPUT BY PARTICIPANTS... 7 3.2 ROUTING OF TRANSACTION SBY MONTE TITOLI TO CROSS-BORDER SETTLEMENT SYSTEMS... 8 3.3 REPORTING ON THE TRANSACTIONS SUBMITTED FOR SETTLEMENT... 11 3.4 DVP AND FOP TRANSACTIONS RELATED TO FINANCIAL INSTRUMENTS UNDERGOING CORPORATE ACTIONS... 11 2
Introduction The Cross-Border Settlement Service is provided by Monte Titoli pursuant to Articles 59-62 of the Operating Rules for the Settlement System (Express II) and the related activities (hereinafter: the Rules). These Instructions are the implementing provisions of the Rules. Monte Titoli operates within the Cross-Border Settlement Services pursuant to their corresponding regulations. Monte Titoli also provides for the Operating Documents, which contain the operating provisions regarding each Cross-Border Settlement System. Such Operating Documents shall be read together with the Rules and Instructions regarding the Cross-Border Settlement Service and are available to the participants through publication in the dedicated cross-border section of Monte Titoli s web site (www.montetitoli.it). 3
1. General Provisions 1.1 Definitions 1.1.1 The definitions provided under Art. 2 of the Rules are completely acknowledged in these Instructions, with the same meaning. 1.1.2 In addition, the following definitions apply to terms used in this document: a) Rules: means the Operating Rules of the settlement services (Express II) and the related activities, as provided by Art. 69.1 of Decree Law No. 58 of 24 February 1998, Consolidated Law of Finance as amended; b) Cross-Border Settlement Service (or, the Service ): means the settlement service for the transactions carried out by the participants within Cross- Border Systems in compliance with the corresponding procedures and rules; c) Cross-Border Settlement Systems or Cross-Border Systems: the foreign entity offering services analogous to the centralized administration and/or the settlement services managed by Monte Titoli, subject to supervisory measures equivalent to the ones provided in the Italian jurisdiction and linked to Monte Titoli pursuant to a specific agreement. 1.2 Service functionalities and communication channels 1.2.1 The Service requires Monte Titoli to operate within the Cross-Border Settlement Systems, on behalf of its participants, in compliance with the functioning rules of the relevant Cross-Border Systems. 1.2.2 The Service functions are made available through the following communication channels: X-TRM National Interbanking Network (RNI) SWIFT LU6.2 The above channels allow the input of transactions into the X-TRM Service, where provided, or, in case of RNI, the direct routing of transactions to Monte Titoli for the subsequent sending to the Cross-Border System. 1.2.3 If the participant is unable to input the transactions through the above specified telematic channels due to contingent situations, the participant is required to immediately notify Monte Titoli. In such a case, Monte Titoli accepts the instructions submitted in a written form (fax with authorised signatures), for the time required to restore the connection. 4
1.2.4 Whereas Monte Titoli communicates a contingency situation, participants are required to operate in compliance with the guidances provided from time to time by Monte Titoli. 1.3 Communications 1.3.1 Monte Titoli communicates to participants, through the information posted on its website, any operational aspects related to the ordinary man allegements agement of the Service. 1.3.2 Communications regarding extraordinary events may be transmitted by Monte Titoli through telematic channels (including, but not limited to: e-mail messages, RNI 097 free narrative messages, broadcast through the X-TRM On-Line Service). 1.3.3 The procedures and the timing for the notifications depend on their content and on the urgency with which they must be disclosed. 1.4 Calendar and timing of the Service 1.4.1 The Service follows the TARGET calendar. 1.4.2 The Service is manned from 8:00 CET until the closing time of the Service, or until the deadline envisaged for submitting transactions to Cross-Border Systems, as indicated in the Operating Documents. 1.4.3 The hours for submitting to Monte Titoli the transactions to be settled within Cross Border Services and for routing the cancellations are specified in the Operating Documents. 1.4.4 The opening hours described under 1.4.3 above are subject to changes, also due to changes by Cross-Border Systems. Monte Titoli informs the participants, if possible, as provided for under paragraph 1.3 above. 1.5 Fees 1.5.1 The Service provides for specific fees to be charged by Monte Titoli, specified in the Price List ( Fees for services provided to intermediaries ). 5
2. Obligations of the participants to the Service 2.1 Access to Service 2.1.1 The Request for Services, that the entities satisfying the requirements specified in the Rules are required to subscribe in order to participate, is available in Monte Titoli s website. Upon reception of the Request for Services, Monte Titoli sends to the participant a written notice of acceptance, specifying the date of entry in force. 2.1.2 If the participant uses an agent bank for cash settlement, the participant is required to: a. appoint the same agent bank appointed for the settlement within the Express II Settlement Service; b. request the agent bank to send to Monte Titoli the acceptance of its appointment as agent bank, also with reference to the Cross-Border Settlement System; c. in case of withdrawal, exclusion or suspension of the agent bank from TARGET 2, arrange for prompt substitution, notifying Monte Titoli in a timely manner. 2.2 Relationship between Monte Titoli and Participants 2.2.1 Participants to the Service provide, directly or indirectly, the information regarding their clients and the transactions carried out on their behalf, if required by the Cross-Border Systems in which Monte Titoli participates, or by any other authority/body entitled to request such information; 2.2.2 Whereas the Cross-Border Systems connected to Monte Titoli apply penalties (including but not limited to: failing settlement when due, or late matching with respect to time limits envisaged by the Cross-Border System), Monte Titoli reiterates the charge of the Cross-Border System on the account of the intermediary to whom the penalty is to be applied. If the penalty is in currencies other than Euro, Monte Titoli charges as a matter of course the account of the intermediary for the corresponding amount based on the exchange rate in force at the charging date 1. Penalties will be charged to the intermediaries accounts without any further charge, and upon prior notice by Monte Titoli, based on the penalties charged from time to time by the Cross-Border System. 1 The exchange rate is the market exchange rate, as of the closing of the accounting day preceding the charging date. 6
3. Service Features 3.1 Transactions input by participants 3.1.1 DVP transactions are disposed by entering transfers into the X-TRM Service. The specific procedures for inputting the transactions used for each Cross-Border Settlement System are specified in the Operating Documents. 3.1.2 FOP transactions are disposed by entering transfers into the X-TRM Service or, for securities delivery transactions, also through RNI messages. The specific procedures for inputting the transactions used for each Cross-Border Settlement System are illustrated in the Operating Documents. 3.1.3 DVP and FOP transactions inputted via X-TRM: a. specify an end-of-validity date which cannot be later than ISD+30 (in the Operating Documents, Monte Titoli reserves to specify an end-of-validity date earlier than ISD+30 with regard to the routing to some Cross-Border Services). The end-of-validity date applies exclusively with reference to what provided for in letter c) and paragraph 3.1.4; b. may not be modified; c. may envisage an ISD preceding the input date, on condition that the end-ofvalidity date is equal to or later than the entering date. 3.1.4 On the end-of-validity date, DVP transactions: a. if not matched in the Cross-Border System, are cancelled on initiative of Monte Titoli; b. if matched in the Cross-Border System and not settled, are cancelled on initiative of Monte Titoli, if the Cross-Border System provides for unilateral cancellation of matched transactions; c. if matched within the Cross-Border System, and not settled, if the Cross- Border System provides for the cancellation of the matched transactions subject to bilateral agreement, the transactions may be cancelled upon request of the participants (as long as the counterparty matches the cancellation). 3.1.5 The end-of-validity date may not be specified for FOP transactions disposed through a RNI 710 message. As for the timing for re-entering FOP transactions not matched or not settled as of the date of the sending of the transaction, please refer to the Operating Documents. 3.1.6 Cancellation of transactions which are not matched on ISD or not settled on ISD may be requested by participants in accordance to the rules of the Cross-Border System to which such instructions have been routed for settlement. 7
3.1.7 Cancellation of instructions disposed via X-TRM may be sent to Monte Titoli (for subsequent routing to Cross-Border Systems) compatibly with the deadlines indicated in the Operating Documents. Requests for cancellations of non-matched instructions must be sent via X-TRM. Requests for cancellations of already matched instructions must be sent in a written form (fax with authorised signatures). 3.1.8 The cancellation of FOP delivery transactions disposed via RNI messages may be sent in writing to Monte Titoli (fax with authorised signatures) at any time, limited to pending transactions due to unavailability of securities, or accepted but pending due to a deferred settlement date. 3.1.9 In case of transactions referring to financial instruments not set up in the X-TRM Service, the participant is required to submit a prior request for admission of the instrument in Monte Titoli s Master file using the General Appointment Form available in MT-X. 3.2 Routing of transactions by Monte Titoli to Cross- Border Settlement Systems A. Pre-positioning / Pre-funding 3.2.1 The transactions are routed to the Cross-Border Settlement System following the so-called pre-positioning/pre-funding, i.e. the verification of the availability of the financial instruments on the securities account that the selling participant holds at Monte Titoli, or the availability of cash on the TARGET 2 account of the purchasing participant or of its agent bank. 3.2.2 In case of lack of assets on the accounts of the instructing intermediary, the transaction will be put on hold by Monte Titoli and released to the Cross-Border System for settlement only on condition that the coverage is made available within the opening hours of the relevant Cross-Border System or otherwise on condition that the end-of-validity date specified within the transaction is equal to or greater than the following business day. 3.2.3 Pre-positioning/pre-funding is activated as follows: a. in case of both DVP and FOP securities deliveries disposed through X- TRM, an availability block is applied to the securities account of the sender of the transaction when the instruction is captured by Monte Titoli. The account will be debited at the same time as the settlement of the transaction within the Cross-Border System; b. in case of FOP securities deliveries disposed through a RNI message, either on sight or with a deferred settlement date, an availability block is applied to the securities account of the sender of the transaction when 8
the instruction is sent to the Cross-Border System. The account will be debited at the same time as the settlement of the transaction within the Cross-Border System; c. in case DVP securities receipt transactions disposed through X-TRM, the participant s (or its agent bank s) cash account will be debited in TARGET 2 at the same time as the sending of the instruction by Monte Titoli to the Cross-Border System. 3.2.4 The availability of securities or cash on the participants accounts does not ensure the settlement of the transaction, since, should the counterparty not match the transactions in due time, or should it not provide the cash or securities required for the settlement, the transaction will remain pending within the Cross- Border System, or will be cancelled at the end of the accounting day, according to the operating rules of the System and based on paragraphs 3.1.4 and 3.1.5 above. 3.2.5 The pre-positioning/pre-funding mechanisms remain in place until settlement of the transaction. If the participant wishes to make use of the securities or cash blocked or already debited due to pre-positioning/pre-funding, it is necessary to cancel the transaction. The cancellation request may be input by the participant, in compliance with the operating rules of the System and based on paragraphs 3.1.6 and 3.1.7 above. Confirmation of the cancellation by the Cross-Border Settlement System is the prerequisite for the unblocking of the securities or the return of the cash to the participant. B. Routing of transactions to the Cross-Border Settlement Systems 3.2.6 Starting from the moment of routing to the Cross-Border Settlement Systems the transactions inputted by participants in compliance with Chapter 3.1 may be cancelled, compatibly with the operating rules of such Systems. 3.2.7 The transactions input into the Service are final and irrevocable according to timings and rules in force within the Cross-Border Settlement Systems within which the transactions are to be settled. 3.2.8 The transactions are routed to the Cross-Border System for their settlement: a. in case of both DVP and FOP deliveries disposed through X-TRM upon capturing of the instruction (as long as the instruction is sent during the opening hours specified in the Operating Documents). In case of unavailability of the balance on the accounts, the transaction will be put on hold and re-processed daily until the end-of-validity date; 9
b. in case of FOP securities deliveries disposed through a RNI message, upon capturing of the instruction, in case of on sight transactions, or upon the expiry date in case of deferred settlement date, (as long as the instruction is sent during the opening hours specified in the Operating Documents). In case of unavailability of the balance on the accounts, the transaction will be put on hold until the closing of the accounting day during which the transaction is processed; c. in case of DVP securities disposed through X-TRM, on the ISD, the instructions with a deferred ISD will be put on hold upon capturing by Monte Titoli. 3.2.9 Instructions received after the hours specified in the Operating Documents are captured by Monte Titoli and sent to the Cross-Border System for settlement on the following business day, subject to the following exceptions: a. Instructions related to transactions with end-of-validity date equal to the date of input into the X-TRM Service, received by Monte Titoli after the hours specified in the Operating Documents, which will be rejected; b. Instructions related to receipt of securities with end-of-validity date and ISD greater than the date of input into the X-TRM Service, received by Monte Titoli after the hours specified in the Operating Documents, which are sent to the Cross-Border System on the ISD (see par. 3.2.8 above); c. Instructions received after the hours specified in the Operating Documents, which may nonetheless be routed by Monte Titoli to the Cross-Border System for settlement on the business day on which they are received, if this is allowed by the automatic routing procedures. 3.2.10 The partial execution of transactions (so-called partial delivery) is possible if allowed by the rules of the Cross-Border Systems, and the corresponding procedures are set out in the Operating Documents. 3.2.11 Transactions are managed individually, i.e. without netting. 3.2.12 Cash legs of DVP transactions can only be settled in Euro. 3.2.13 If the transfer of cash related to settlement of a securities selling transaction, or to the cancellation of a purchase transaction already sent to the Cross-Border System but still awaiting settlement cannot be carried out within the settlement/cancellation accounting day due to expiry of the Service cut-off times, cash will be transferred on the following business day without overnight interests. 3.2.14 The Service does not carry out any verification regarding holding restrictions or the enforceability of rights deriving from the possession of financial instruments which may be envisaged by the issuers. 10
3.3 Reporting on the transactions submitted for settlement 3.3.1 The Service provides the reporting regarding the capturing, matching and settlement of the transactions and movements on securities accounts through the same channels used by participants to input the transactions. 3.3.2 Cash settlement reporting is transmitted by TARGET 2. 3.3.3 The reporting referring to the cancellation of transaction is provided through the same channels used by the participants to submit the transactions. 3.3.4 The Service does not allow the viewing of contracts inputted by counterparts who are participants in Cross-Border Systems (so-called allegements), nor the viewing of the fields for which matching is not possible. 3.4 DVP and FOP transactions related to financial instruments undergoing corporate actions 3.4.1 In case of transactions related to financial instruments undergoing corporate actions, Monte Titoli may apply time limits (cut-off). Such limits will be communicated from time to time through Service Notices. 3.4.2 In case of transactions traded cum, for which the settlement is carried out ex, the related claim will be managed by the counterparties, unless Monte Titoli is involved in the processing of the market claim carried out by the Cross-Border System. 11