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Collateralising Corporate Entitlements

Rights Created on Pay Date

Value of rights created on open positions should be included in the exposure calculation, using the standard pricing sources. If rights are not tradable and have no value, they will be automatically excluded of the exposure calculation. (IBP-185 AGREED IN 2017)

Dividends

Outstanding dividends should be included in exposure figures because they represent an exposure risk from market pay date until payment is made to the beneficial counterparty of the loan transaction. If dividends are not paid on Pay Date, the beneficial counterparty retains the right to request collateral from the recipient counterparty if the exposure is deemed unacceptable. If collateral is required, dividends should be included on Pay Date +4 (PD/PD+1 as the days to generate the claims & PD+2/+3; as the days to perform payments, reconciliations & matching). During periods of high volume, flexibility should be expected as more time may be required to match all claims & process all the payments. (IBP-186 AGREED IN 2017)

Coupons

All coupons paid on lent positions should be paid on Pay Date as soon as the claim is received. If coupons are paid on Pay Date, no exposure is created. The beneficial counterparty retains the right to request collate from Record Date. In case coupons are not paid on Pay Date, they should be included in exposure to mitigate the risk. (IBP-187 AGREED IN 2017)

Redemtion and Maturity

Securities finance transaction redemption & maturity should only be closed in the Operations system once the cash is received from the counterparty. Until proceed have been received, the original transactions should remain open and included in exposure calculations. Once the cash is received by the beneficial counterparty, original transactions can be closed and removed from exposure calculations. (IBP-188 AGREED IN 2017)

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