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Returns and Recalls

Notification of Returns

As with all processes, returns should be issued via automated platforms, and accepted/rejected within a reasonable time period intraday and up until close of business. Returns should be processed on a settlement cycle agreed by both counterparties, but a minimum of T+1 settlement cycle to maximise matching and settlement rates. Returns booked for same day settlement should be processed on a best-efforts basis. As with all processes, returns should be issued via automated platforms where possible, and accepted/ rejected within a reasonable time period intraday and up until close of business. Returns should be issued to the bilaterally-agreed party at least 30 minutes before the market cut-off for the market where the return is issued via an automated platform, and 60 minutes before the market cut-off where the return is issued manually. Returns may only be rejected with a reasonable explanation, such as a corporate entitlement events or evidence of a term agreements. (IBP-133 UNDER ISLA REVIEW)

Failing Returns

Cancellations should be notified to the bilaterally-agreed party. Where a return is not a recall and has been unmatched for 3 days or matched and failing due to insufficient stock for 5 days, the counterparties may bilaterally agree to take further action. (IBP-134 AGREED IN 2017)

Specific Requirements for Returns

Where there are specific requirements in place to process/book/accept returns, these requirements should be bilaterally agreed and documented between the market participants prior to trade booking and implementation. It is recommended that counterparties ensure there are no reconciliation or contract differences on a position prior to a return being booked on settled. Booking and settling returns on a position that is not fully reconciled and agreed by both market participants is likely to create further processing issues at a later stage in the trade life-cycle for example billing. (IBP-135 AGREED IN 2017)

Issuance of Recalls

Recalls should be issued either via an agreed communication method the bilaterally-agreed party prior to 60 minutes before the market where the recall is to settle closes. All recalls should be issued in line with standard settlement cycles. Recalls should be acknowledged within 3 hours or by 17:00 London time, whichever is soonest for market participants located in EMEA. Gilts: Notification of an intent to recall a Gilt from loan should be sent (and acknowledged by the recipient by 10:00 London time, on settlement date. UST's: Notification of an intent to recall a UST from loan should be sent (and acknowledged by the recipient) by 15:00 London time on settlement date. (IBP-136 AGREED IN 2017)

Recalls Outside of Market Cycles

If any recall needs to be issued outside market cycles then the counterparty recalling should verbally instruct the recall recipient, and subsequently provide confirmation via agreed communication method.The recipient of the recall should take 'best or reasonable efforts' to settle the recall in the required timeframe. This means that the recall recipient should utilise every reasonable option to return the stock earlier than the relevant market settlement cycle. Where a counterparty has received a buy-in notification due to a failing recall, the counterparty should make every effort to ensure that the failing counterparty is aware of the buy-in issuance at the earliest opportunity. (IBP-137 AGREED IN 2017)

Claims as a Result of Penalties and Fines

Recalling counterparties should endeavor to partially settle sales wherever possible, and therefore should accept partial returns or recalls. Recall recipients will only be liable for 'sale fail' costs for the portion of the sale where they have failed to return stock in the required timeframe. Partial settlement can be requested within market deadlines following receipt of shares or notification that the recall recipient is insufficient to deliver. Counterparties should seek to issue claims within 30 days but within a maximum of 60 days of the settlement of the sale. The recommended minimum claim is 500 USD or equivalent, or as bilaterally agreed between counterparties. The claim recipient must endeavor to pay the claim within the same time frames of 30 days where possible but within a maximum of 60 days. Claim issuer should provide the following information on claims: *Date, time and the name of the borrower contact to whom the recall was issued *Trade and settlement date of recall *Actual settlement date of recall *Security ID and description *Quantity recalled *Cash amount of recall (based on sale price) *Claim calculation (i.e. cash amount of recall, interest rate, days of fail/100/360 or 366 depending on market) *Reason for claim *Payment instructions (IBP-138 AGREED IN 2017)

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