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Settlement Disciplines

System Updates for settlement Information

Timing of settlement statuses will vary by market and by custodian/sub-custodian. In the mature markets such as ESES (Euroclear settlement of Euronext-zone Securities) updated matching/ settlement status are often provided via Swift in less than 5 minutes. For emerging markets information can be much less frequent. Sub-custodians will generally send settlement statuses via Swift in near real-time. Given the shorter settlement timeframes under T2S, and with the upcoming settlement timeframes under SFTR, this will be increasingly important. It should be recognised that the process and timings of status updates is often dependent upon custodial network, so timings may vary between counterparties. (IBP-121 AGREED IN 2017)

Opposing settlement Information

A counterparty should not directly contact the custodial network of another counterparty. However, in more complex cases, it may be necessary to bring all parties together to resolve any disputes/unreconciled positions. This can only be done with both counterparties agreement. In the event Counterparty A sees a trade unmatched/failing but Counterparty B sees it as matched/settled, then Counterparty B is responsible for providing the market reference for that matched/settled trade typically sourced from their custodian network to Counterparty A. (IBP-122 AGREED IN 2017)

Notifying a Counterparty Regarding Amended Status/ Valuations

There is no requirement to update trading the market that has been received from a custodian. Where a counterparty cancels a loan or return, vendor platforms should be used to advise the counterparty. Where it is not possible to use a vendor platform, there is a requirement to notify the counterparty directly that a transaction has been cancelled. Pre-matching and fails reporting between counterparties is recommended. Timing, frequency and responsibilities are to be agreed on a bilateral basis. (IBP-123 AGREED IN 2017)

Best Effort Time Frames for Settlement

Transactions that will be uncollateralised need to be instructed by both counterparties 1 hour before the relevant market cut off. Collateralised transactions need to be instructed by both counterparties 4 hours before the market cut-off to allow sufficient time to agree collateral and release the borrow. Returns should be agreed on a matching platform whenever possible. Otherwise, settlement instructions should be in place 1 hour prior to market cut off. Returns and Recalls manually notified should be instructed for settlement up to an hour prior to market cut off. For more detail on this please see section 3 (v) Returns and Recalls. Back dated trades may only be processed if permitted by each counterparty's internal policies and are agreed bilaterally. Due to the additional approval requirements for back dated trades, and potential for manual intervention, notification times should be agreed bilaterally between parties. (IBP-124 UNDER ISLA REVIEW)

Partial Deliveries


Partial deliveries should be matched and agreed on a vendor platform prior to being instructed for settlement in the market. T2S enables auto-partialling of returns but this capability can only be used if both counterparties have subscribed to this functionality. Otherwise, partial bookings will be settled on a best efforts basis. If returns are matched but the delivering counterparty is short the position, the recipient should agree to accept partial returns. For recalls the delivering recipient will always offer a partial settlement on value date. (IBP-125 UNDER ISLA REVIEW)




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