Entitlement Compensation Rules - UK

10.01.2018

Bonds

Market compensation basis:Settlement Date
Automatic Compensation Managed by Local CSD:Yes (CREST-eligible securities)
Restriction on custody events/transaction types:No restriction
Service offered by CBL:Adjustment is performed based on information received from the depository.

Equities

Market compensation basis:Trade Date
Automatic Compensation Managed by Local CSD:Yes (CREST-eligible securities)
Restriction on custody events/transaction types:No restriction
Service offered by CBL:Adjustment is performed based on information received from the depository.

Additional information:

CREST considers stock movements to be dealt “ex” if:

  • The Trade Date falls between the Ex-Date and the Record Date (the "Ex period"); or
  • The Trade Date falls before the Ex period but the transaction is marked “special”.

CREST considers stock movements to be dealt “cum” if:

  • The Trade Date falls before the Ex period; or
  • The Trade Date falls during the Ex period but the transaction is marked “special” by the parties to it.

Proceeds of corporate actions are subject to Stamp Duty Reserve Tax under the 1.5% regime (not under the 0.5% regime). For further information, please refer to the Market Taxation Guide - UK.
Note: CBL’s depository does not process tax reclaims on compensation.

Types of events where automatic market claims will be generated at the CSD in the CREST system:

  • cash dividends;
  • scrip dividends;
  • enhanced scrip dividends;
  • interest payments;
  • capital repayments;
  • capitalisations;
  • open offers;
  • rights issues; and
  • selected schemes of arrangement.

There are some dividend distribution exceptions where automatic compensation will not be generated.

For example, if a corporate action event takes place at the same time as a dividend entitlement date (otherwise known as a reverse split) claims will need to be bilaterally agreed to between the parties.

Reverse market claims are automatically compensated by the CSD in the CREST system (TD= after Ex-date, settlement prior to RD)

For cash distributions

Market claims are automatically generated by CREST on RD+1 when the default currency is known.  If the default currency is not known, claims will not be generated on RD+1. 

Claims settle in CREST early in the morning of payment date, unless a previous match is deleted by both parties.

For non-cash distributions

Market claims are generated on the rights/entitlement line for the relevant issue and will settle on that line accordingly.  CREST will automatically transform any market claims or open trades that are matched, up to 10 days after the PD. 

CREST-settled claims are archived 60 business days after actual settlement date.