Settlement services - UK debt securities

09.01.2019

Pre-matching service (for deliveries only)

The table below summarises CBL's pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of CBL's pre-matching services, see Pre-matching services for external settlement instructions.

Service offeredMethod employedStart (local time)
Bulldogs and UK Gilts
Release of pre-matching instruction followed by a settlement instructionAutomated through CRESTOn receipt of instructions

Procedures for domestic counterparties

Procedure for the domestic counterpartyDeadline
Receipt in CBL
Counterparty in CREST must release delivery instructions from their relevant Participant ID to CBL’s “CEDEL” Participant ID.Market deadline
Delivery from CBL
Delivery in CBL Counterparties in CREST must input receipt instructions from CBL’s Participant ID to their relevant designated account.Market deadline

Trades executed on The London Stock Exchange Retail Order Book market

Customers trading UK government bonds (gilts) on the London Stock Exchange Order Book (ORB) market can settle in the EUI CREST system.

In order to trade on the ORB, the customer must be set up as an LSE trading member or access the market via a broker. The customer must provide settlement information to the LSE.

Settlement provider: Clearstream Banking S.A.
Settlement provider BIC: CEDELULLXXX
CREST Participant ID: CEDEL
CREST Membership ID account: NET

Once a trade has been executed, LSE will provide a trade confirmation.

Clearstream customers cannot use the Direct Input service.

Customers must input a settlement instruction that includes the place of trade as follows:

Connectivity mediumInstruction format
CreationOnlineAdditional places:
Place of trade: Stock Exchange
Code: XLON
Xact via SWIFT and Xact File TransferField :94B::TRAD//EXCH/XLON

Allowed countervalue difference

A maximum difference of GBP 10 or EUR 15 is allowed for external transactions with domestic counterparties. In the case of a discrepancy within this limit, the amount of the deliverer will prevail.

Specific settlement rules / settlement restrictions

Transactions with counterparties in CREST can be settled on an against payment basis in GBP or EUR, irrespective of the denomination currency of the security.

Note: Instructions with EUR countervalue can settle on all TARGET business days; instructions with GBP countervalue can settle on UK market business days only.

The following norms for the completion of optional matching fields should be considered when sending settlement instructions to CBL:

Trade price

Deal or Trade Price should be input by those customers for whom completion is necessary to satisfy regulatory reporting requirements; it need not be input by members who are not obliged to satisfy these requirements.

The number of decimal places input should correspond to the price at which the trade was struck; for example:

  • If the trade was struck in 16ths, the price would be input to four decimal places.
  • If the trade was struck in 32nds, the price would be input to five decimal places.

A maximum of six decimal places will be accepted by CBL.

The price should exclude commission but include any “turn” or “brokerage” fee.

Unlike other optional matching fields, the trade price must match exactly only if entered by both counterparties. If it is entered by one counterparty and not by the other, the instruction can still match.

Trade date

Trade date is not a matching criterion unless one of the counterparties provides one in its instruction. In this case, the field becomes a matching criterion and, if the transaction is to settle, both counterparties must complete the field with identical entries.

Trade place

Trade place, in CREST terminology, is “Trade System of Origin”.

For off-exchange trades (that is, (a) trades between two non-members or between a non-member and a member where the member is acting as an agent; (b) all stock loans; and (c) repos), trade place should not be specified as its completion triggers the transmission of a transaction report to the exchange.

For on-exchange trades, the trade place should always be specified.

Trade place is not a matching criterion unless one of the two counterparties provides one in its instruction. In this case, the field becomes a matching criterion and, if the transaction is to settle, the other counterparty (even if not a member of the exchange) must complete the field with an identical entry.

CBL does not check the above optional matching fields and does not assume responsibility for settlement failures due to non-compliance with the above norms. Customers are advised to confirm the use of these norms with their counterparties.

CREST account identification

CBL holds its aggregate customer account positions in a single designated account held under the unique Participant ID “CEDEL”.

To ensure that transactions with counterparties in CREST settle as scheduled, customers must determine with their counterparties the Participant ID from or to which a delivery is to be made.

Receipts

For receipts from counterparties in CREST, customers must do the following:

  • Instruct the counterparty to deliver the gilts to CBL’s Participant ID “CEDEL”;
  • Determine the Participant ID from which their counterparty is delivering the gilts to CBL’s CREST account;
  • Indicate the corresponding CREST counterparty code in their receipt instruction.

The indication of the correct CREST counterparty code is a critical matching element; use of the wrong code may result in a settlement failure.

Example:

A customer that wants to receive gilts from a CREST counterparty and deposit them in its CBL account must instruct its counterparty in CREST to deliver the securities to CBL’s Participant ID “CEDEL”.

The customer must also input a receipt instruction relating to its CBL account indicating the CREST counterparty code corresponding to the counterparty’s
Participant ID.

Deliveries

For deliveries to counterparties in CREST, customers must do the following:

  • Determine the Participant ID of the CREST counterparty;
  • Indicate the corresponding CREST counterparty code in their delivery instruction.

The indication of the correct CREST counterparty code is a critical matching element; use of the wrong code may result in a settlement failure.

Example:

A customer that wants to deliver gilts from its CBL account to a CREST counterparty must input a delivery instruction relating to its CBL account, indicating the CREST counterparty code corresponding to the counterparty’s Participant ID.

No partial settlements

Market practice is that a counterparty is entitled to deliver as much of its stock as it can according to stock availability and receive as much stock as it can according to cash availability in its CREST account: there are no set minimum amounts for partial settlements. A single trade can be partially settled on a number of different value dates depending on when the delivering party obtains the stock or the receiving party obtains the cash.

CBL customers are not allowed to initiate splits, whereas CREST counterparties are allowed to initiate them. Nevertheless, customer instructions might be subject to a splitting process initiated by CREST counterparties, in which case the original customer instruction (parent instruction) will be cancelled and the booking of securities and cash will be done as two separate bookings on the customer account. The original customer instruction (parent instruction) will be cancelled and will not be replaced by the corresponding split instructions (sibling instructions) in the CBL system.

Decimal allowance

Gilts may be held in CREST in fractional denominations. CBL enables customers to settle and hold UK government debt and foreign sterling-denominated (“bulldog”) instruments with a maximum number of two decimal digits. This applies across all services, including securities settlement transactions for internal CBL-CBL and domestic transactions, securities statements and asset services statements.

Maturity blockings

Gilts generally become ineligible for settlement in CREST on the seventh business day (at close of business) in the UK market before their final maturity date (that is, during the “shutting period”). 3.5% War Stock becomes ineligible on the tenth business day (at the start of real-time processing) before final maturity date.

Generally, the latest opportunity for transactions in maturing gilts to be positioned for settlement with counterparties in CREST is the seventh business day (end of day processing) in the UK market before the final maturity date (or, if such date is not a business day in CBL, the business day in CBL that immediately precedes it). For 3.5% War Stock, the latest opportunity is on the tenth business day (at the start of real-time processing) before final maturity date.

The latest opportunity for transactions in maturing gilts to be settled with counterparties in Euroclear Bank over the Bridge is the last business day (start of real-time processing) in the UK market before the final maturity date (or, if such date is not a business day in CBL, the business day in CBL that immediately precedes it).

Management of failed instructions

  • CREST matched receipt and delivery instructions with domestic counterparties that have not settled on SD will remain pending until they settle or until they are cancelled by both parties in CREST.
  • CREST matched instructions, for which a cancellation request has been sent to the market, remain blocked for settlement in the CREST system until the cancellation is matched by the counterparty.
    Where the cancellation request is not matched by the counterparty, CBL will exceptionally accept an authenticated free format message from customers to reverse the cancellation request in CREST and reactivate the instruction in the system for further settlement.
  • CREST instructions that remain unmatched by the requested settlement date are reported to CBL as pending. CBL reserves the right to cancel instructions with domestic counterparties that have not been matched by the fifth business day after the requested settlement date.
  • Non-CREST instructions that remain unmatched by the requested settlement date are reported to CBL as pending. CBL reserves the right to cancel such instructions by the 15th business day after the requested settlement date.

Deposit of physical gilts

To deposit UK gilts for dematerialisation in Clearstream Banking, customers must follow the process detailed below.

1. Prepare the documents

  • Make a copy of the certificate(s).
  • Download documents attached below:
    • The Transfer form;
    • The Deposit List.
  • Complete the fields as indicated on the CREST Transfer form ensuring that fields are entered as described in “Key to completing the CREST Transfer Form” below.
  • Complete the fields as indicated on the CREST Deposit List, ensuring that fields are entered as described in “Key to completing the CREST Deposit List” below.

2. Send the documents to Clearstream Banking

Once the forms are completed, customers should send the copy of the certificate(s), one completed original CREST Transfer form and two completed original CREST Deposit Lists by registered mail to Clearstream Banking AG Settlement department in Frankfurt at the following address:

Clearstream Banking AG
Settlement Global
OAA / EA.08.301
60485 Frankfurt am Main
Germany

Clearstream Banking will do the following:

  • Check the authorised signatures on the respective documents;
  • Once approved, input a receipt instruction into CREST;
  • Add the CREST reference (SDRN) of the transaction (up to 16 characters) to the CREST Transfer Form; and
  • Mail all documents back to the customer.

3. Send the documents to CREST Courier and Sorting Service (CCSS)

When the customer has received the documents back from Clearstream Banking, the following documents should be mailed to the CCSS (also known as the “CREST counter”):

  • The original certificate(s);
  • The two CREST Deposit Lists;
  • The CREST Transfer form;

plus, if the holder of the physical securities is a corporation, certified copies (in English) of:

  • The Articles of Association (template to be requested directly by the holder from the issuing company or registrar);
  • The Certificate of Registration; and
  • The list of authorised signatures.

All documents must be sent to the following address via a secure courier service:

TNT Business Solutions
Enterprise House
6 Pages Walk
LONDON
SE1 4SB
United Kingdom

Note: The certificate(s) must be securely attached to the reverse side of the CREST Transfer Form. It is recommended that a strong staple be used. Under no circumstances should a rubber band be used as there is a risk that the certificate will become detached from the CREST Transfer Form, which may ultimately lead to rejection of the CREST Transfer Form by the registrar.

Two copies of the CREST Deposit List must be secured by a rubber band to the CREST Transfer Form with the stapled certificates attached.

4. What EUI will do upon receipt of the documentation from the customer

Upon receipt of the documentation at the CREST counter (CCSS), EUI will do the following:

  • Check that all details match;
  • Stamp the CREST Deposit Lists;
  • Send one stamped CREST Deposit List to the Clearstream Banking settlement department.

EUI will then credit the securities on CBL’s account with CREST, usually within two to three business days from the day following the receipt of the forms. Upon confirmation of credit of the securities, CBL will credit the customer’s account with a free of payment receipt based on the information previously provided by the customer.

If a deposit set (the certificate(s), the CREST Deposit Lists, and the CREST Transfer Form) is rejected by the CCSS or the registrar, all documents will be mailed back to the address of the executor of the transfer, Clearstream Banking. Clearstream Banking will then mail the documents back to the customer.

N.B.: To avoid any rejection by the CREST counter (CCSS), resulting in additional costs and delay in settlement at the customer’s expense and risk, it is of the utmost importance that the customer complete the CREST Transfer Forms and Deposit Lists accurately.

Key to completing the CREST forms

The CREST Transfer Form

Click on the image to view an illustration of the CREST Transfer Form with the following annotations:

1.To be completed by Clearstream Banking.
2.The name of the security.
3.The type of the security - for example, government bond, bulldog.
4.The number of securities (in words).
5.The number of securities (in figures).
6.The Designation text, if any, exactly as it appears on the certificates.
7.The exact name(s) and address(es) of the registered certificate holder(s).
8.The signature(s) of the registered holder(s):
-If a corporation: two authorised signatures, stating professional title and name in each case;
-If an individual: the individual’s signature;
-If several persons: each person’s signature.
To avoid confusion, customers must, when validating the signature(s) of registered holder(s), ensure that their own signature/stamp is to the left of or below the borders of the form content.
9.Enter the text exactly as shown here (that is, “Clearstream Banking SA” / “CEDEL” / “NET”).
10.Customers are responsible for guaranteeing the signatory of the registered owner and, by signing and stamping the Power of Attorney, customers are deemed to have performed a check on the signature(s) and the proper power and authority of the registered owner(s).

Complete the above-indicated fields only. All other fields must be left blank for completion by Citibank, N.A. or the CREST (CCSS) counter.

The CREST Deposit List

Click on the image to view an illustration of the CREST Deposit List, with the following annotations:

a.Enter the text exactly as shown here (that is, “Clearstream Banking SA” / “CEDEL” / “London”).
b.Enter the text as appropriate for your organisation.
c.To be completed by Clearstream Banking.

Complete the above-indicated fields only. All other fields must be left blank for completion by Clearstream Banking or the CREST counter.

New issues settlement

Transactions in new issues are settled on the day on which the distribution takes place on the UK market. For confirmation times, please refer to Settlement times.