Settlement services - UK equities, corporate bonds and investment trusts

31.07.2017

Pre-matching service

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)
Equities and corporate bonds
Immediate Release Flag availableAutomated through CRESTOn receipt of instructions

Connectivity mediumInstruction format
CreationOnline and Xact Web PortalTick to enable the “Immediate Release” option.
Xact via SWIFT and Xact File TransferField :22F::STCO/CEDE/IREL

Procedures for domestic counterparties

Domestic counterparties must instruct CREST according to the SDRT regime, as described below:

Procedure for the domestic counterpartyDeadline
If the counterparty in CBL operates an account under the standard rate of duty of 0.5%
a.In the case of free of and against payment receipt transactions by CBL customers:Market deadline
-Deliver to: Clearstream Banking participant number 00XJJ
-For account of: Clearstream Banking S.A.
-In favour of: Account number of CBL customer
b.In the case of free of and against payment delivery transactions by CBL customers:
-Receive from: Clearstream Banking participant number 00XJJ
-By order of: Account number of CBL customer
If the counterparty in CBL operates an account under the standard rate of duty of 1.5%
a.In the case of free of and against payment receipt transactions by CBL customers:Market deadline
-Deliver to: Clearstream Banking participant number 14XKL
-For account of: Clearstream Banking S.A.
-In favour of: Account number of CBL customer
b.In the case of free of and against payment delivery transactions by CBL customers:
-Receive from: Clearstream Banking participant number 14XKL
-By order of: Account number of CBL customer

Allowed countervalue difference

A maximum difference in countervalue of GBP 10.00, EUR 15.00 or USD 15.00 is allowed for matching and settlement of against payment transactions with domestic counterparties. No difference in countervalue is allowed for account transfers between CBL accounts (OAT instructions).

Specific settlement rules / settlement restrictions

Partial settlement

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, customers’ instructions might be subject to a splitting process initiated by CREST counterparties, in which case the original customer instruction (parent instruction) will automatically be reversed and replaced by the corresponding split instructions (sibling instructions): one settled instruction for the quantity and amount confirmed; and one outstanding instruction for the remaining quantity and amount, which may settle at a different time.

Nationality Declaration

Some UK equities eligible in CREST are subject to a Nationality Declaration on transfers in the domestic market.

For holdings of UK securities subject to Nationality Declaration, the registrar must be informed of the nationality of the beneficial owner. This process allows issuing companies to monitor the level of ownership by foreigners.

UK equities held in CBL will always be declared to the registrar as held by a Luxembourg national. If a CBL customer purchases such securities but, at the point of registration, is unable to register them because the limit of foreign ownership has been reached, CBL’s custodian will contact the counterparty to arrange for the trade to be cancelled and for any settlement proceeds to be returned. The cash account of the customer will be debited at the point of settlement and will be re-credited only upon receipt of the monies from the counterparty. Backvaluation will not be applied to the re-credit of funds.

Note: The breach of the limit does not apply to CBL customer who is a UK national. CBL will advise the customer to provide a UK Nationality Declaration so that the trade can be re-instructed by CBL’s custodian.

CBL will accept no responsibility with regard to any problems resulting from the registration process applicable to securities subject to Nationality Declaration.

The following is a non-exhaustive list of issues subject to Nationality Declaration. This list is provided for information purposes only and is correct according to the best information available to CBL at the time of publication. However, CBL accepts no responsibility for any inaccuracies or omissions.

ISINName of Security ISINName of Security
GB0009697037Babcock International Group PLCGB00B0WMWD03Qinetiq Group Ordinary 1p
GB0002634946BAEIE00BYTBXV33Ryanair EUR 0.006
GB00B7KR2P84Easyjet OrdinaryGB00B1VYCH82Thomas Cook Group Ordinary
GB00B192PN10BROKER DIRECT 20PDE000TUAG000 TUI AG DI
GB00B4QMVR10Flybe Group Ordinary 1pJE00BN574F90WIZZ AIR HOLDINGS
ES0177542018IAG Common Stock
GB00B054QP30My Travel A ordinary 1p

Matching on trades resulting from options and SDRT impact

For trades that result from an option, the Settlement Processing Narrative field (/RO/) is a mandatory matching criterion in the settlement instructions.

CreationOnline - Settlement Processing Narrative /RO/
Xact via SWIFT - :70E::SPRO///RO/

The main purpose of this field is to make SDRT relief available to the members of recognised investment exchanges as the value of the trade may be considerably lower than current market price. In such cases, the broker may charge a reduced amount based on the option value.

If SDRT had been paid on a full valuation and the customer could prove that the SDRT chargeable on the option is lower, a reclaim may be filed. For further information, please refer to the Market Taxation Guide - UK.

If the Settlement Processing Narrative field is populated and contains, in addition, values for trade price and trade margin as shown below, these values become mandatory matching criteria.

The trade margin should be input as follows:

CreationOnline - Settlement Processing Narrative /MARG/PCT amount/
Xact via SWIFT - :70E::SPRO///MARG/PCT amount/

Note: For negative amounts, the margin should be preceded by a “N”.

Own Account Transfers (OAT)

Domestic settlement instructions generated within the same CREST ID are automatically matched and settled on the intended settlement day (ISD). To cancel OAT transactions, customers must do so prior to the ISD; otherwise, even if cancellation is applied, when SDRT is due, it will automatically be charged in the CREST system and a tax reclaim will be required to obtain a refund on SDRT.

Penalties in connection with CREST Settlement Discipline rules

The penalties explained hereafter apply to external transactions only and not to internal transactions between CBL customers.

Re-submission charges (or fees)

A CREST re-submission charge of GBP 0.50 per day will be levied on all transactions that are eligible for settlement on their intended settlement date plus 20 business days (ISD +20) or later but fail to settle in the CREST system. On receipt of the relevant charges, CBL will debit customers' accounts.

Matching fines

The matching discipline regime includes standard deliveries (DEL), residual deliveries (RES) and stock loans (SLOs) relating to the following security categories:

  • FTSE 100;
  • FTSE mid 250;
  • Irish Equivalent 100;
  • Irish Equivalent 250;
  • Other UK and Irish settlable securities;
  • Residual UK and Irish.

Matching is binding in EUI and, to avoid matching fines, should occur, at the latest, one local business day after the trade date (T+1).

  • For each transaction that remains unmatched at close of business on T+1, a fine of GBP 2 will be charged.
  • For each subsequent day a transaction remains unmatched in EUI, an additional fine of GBP 2 will be charged.

The fine is always charged to the party that was last to input and amend its instruction in the local market.

Unmatched transactions will be subject to fines for a maximum of five local business days, when the instruction will be cancelled in the Clearstream system.

Matching fines are calculated retroactively at the end of each two-month period. On receipt of the relevant charges, CBL will debit customers’ accounts.

Settlement fines for failed deliveries

Each external delivery that remains unsettled in the local market after its intended (contractual) settlement date will incur a settlement fine. Such fines are charged by CREST per CBL account with CREST.

The settlement fine will be calculated based on the average market value of the number of all unsettled transactions that do not reach specific settlement performance targets.

The settlement performance target is linked to the number of days a transaction remains unsettled after its contractual settlement date (S). The settlement fine will amount to either GBP 5 or an ad-valorem fine of 0.05% per unsettled transaction, whichever is higher.

The criteria for the calculation of the settlement fines are as follows:

DateSettlement performance targetDateSettlement performance target
S85%S+10 to S+1598%
S+190%S+16 to S+2099%
S+2 to S+995%

In line with local market practice, settlement fines for failed deliveries will only be calculated up to 20 local business days after the contractual settlement date.

Penalties are charged on the basis of periods of two months. On receipt of the relevant charges, customers may be charged.

Interest charges for failed receipts and interest credits for failed deliveries

A matched against payment external receipt instruction that remains unsettled in the domestic market after its contractual settlement date, due to lack of cash or credit, will, according to CREST rules, be subject to interest charges.

A matched against payment external delivery instruction that remains unsettled in the domestic market after its contractual settlement date, due to the counterparty’s lack of cash or credit, will give rise to interest credits.

The interest charge is based on the prevailing LIBOR one week borrowing rate of the transaction currency (EUR or GBP) and is due 10 local business days after the contractual settlement date.

CBL will book interest charges or credits on the account of the respective customer when charged or credited by the local market.

Back-to-back processing

Back-to-back processing is available for transactions in dematerialised securities eligible in the CREST system. Customers can increase same-day turnaround of instructions by “linking” one domestic receipt to one domestic delivery.

The settlement deadline for back-to-back instructions is 15:00 CET on SD-1. Customers must ensure, together with the respective counterparty, that the receipt and delivery instructions will match on SD-1.

Customers should be aware that, where one or other of the transactions to be linked fails to match, the linking process will not take place.

The CREST system prioritises individual transactions over linked transactions and the linking of two transactions may, therefore, not guarantee settlement.

CBL will bear no responsibility with regards to failure of a linked transaction. By sending a back-to-back instruction in the UK market, customers are deemed to indemnify CBL for any costs, penalties or loss that CBL may incur.

Deadlines for the receipt of valid instructions remain unchanged for back-to-back transactions (see Settlement times).

To benefit from this functionality, customers must ensure that their back-to-back transactions are formatted according to the following, as appropriate:

Connectivity mediumPool ID formatField(s) to be used
CreationOnline16x a
and
Turnaround
Pool Reference

Type of Settlement Transaction
Xact via SWIFT and Xact File Transfer:POOL//16x a
and
:SETR//TURN
Field :20C: sequence A1

Field :22F: sequence E

a. The reference (16x) must neither start nor end with a single slash (/) character nor must it contain two consecutive slash (//) characters.

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.

Procedure for depositing physical securities eligible in Citibank

The procedure comprises the following steps:

  • The customer prepares the documents.
  • The customer sends the documents to Clearstream Banking for authentication and guarantee.
  • The customer processes the authenticated forms returned from Clearstream Banking, delivering them, with covering letter, to Citibank.
  • Citibank processes the received physical certificates and documentation.

1. The customer prepares the documents

For CREST-eligible physical securities:

For non–CREST-eligible physical securities:

  • Download the Stock Transfer Form from the CBL website.
  • Complete the Stock Transfer Form as indicated below.

Plus, if the holder of the physical securities is a corporation:

  • The original Articles of Association; and
  • A certified copy (in English) of the Certificate of Registration.

Note: It is of the utmost importance that the customer submits the appropriate transfer form. Citibank, N.A. will return any securities transferred using inappropriate forms to the contact name and address provided in the covering letter.

2. The customer sends the documents to Clearstream Banking for authentication and guarantee

Customers must send the original CREST Transfer Form or Stock Transfer Form only, duly completed and signed, by registered mail to Clearstream Banking Settlement department in Frankfurt at the following address:

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

CBL will:

  • Check that the form is correctly completed.
  • Check and validate the authorised signature(s).
  • Send the authenticated form back to the customer by mail.

N.B.:Physical securities and any additional documentation must not be sent to Clearstream Banking.

3. The customer processes the authenticated forms returned from Clearstream Banking, delivering them to Citibank

When customers receive the documents back from CBL, they must do the following:

  • Send to Clearstream Banking an appropriate free of payment receipt instruction indicating the appropriate stamp duty status, if applicable.
  • Send to Citibank, via a secure courier service, at the following address:

    Attn: Citigroup Residuals
    1st Floor
    1 North Wall Quay
    Dublin 1
    Ireland

    the following documents:

    • The original certificate(s);
    • The appropriate transfer form; and
    • A covering letter, including a contact name and address to enable Citibank to return the securities if no instruction is received within five days or if the securities are not in good order;

Note: For reasons of safety, customers are strongly recommended to send the physical certificates and the documentation separately.

In addition, if the holder of the physical securities is a corporation and the documents have not already been provided to the registrar, the following certified copies (in English) should be sent directly to the registrar:

  • 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.

4. Citibank processes the received physical certificates and documentation

For CREST-eligible physical securities:

  • Citibank checks the documentation and the certificates.
  • Citibank arranges for the deposit of shares to be stamped by HMRC or for SDRT to be charged (for 0.5% SDRT regime) or exemption (no change of beneficial ownership) to be applied.
  • Citibank sends to the Registrar the documentation and the certificates for dematerialisation and re-registration under the name of Citibank nominee (Vidacos nominee).
  • After the completion and confirmation of the re-registration, Citibank credits the securities to Clearstream Banking’s account.

Note: If no instructions are received within five days of receipt of the certificates and/or transfer form, all documents will be returned to the contact name and address provided in the covering letter.

For non–CREST-eligible physical securities:

  • Citibank checks the documentation and the certificates.
  • Citibank arranges for the form to be stamped by HMRC and (for 0.5% stamp duty regime only) for the stamp duty to be paid.
  • Citibank sends to the Registrar the documentation and the certificates for re-registration under the name of Citibank nominee (Vidacos nominee).
  • After the completion and confirmation of the re-registration, Citibank credits the securities to Clearstream Banking’s account.

Note: The re-registration process may require more than two weeks for completion.

If no instructions are received within five days of receipt of the certificates and/or transfer form, all documents will be returned to the contact name and address provided in the covering letter.

Stamp Duty Reserve Tax (SDRT) and Stamp Duty

Stamp Duty Reserve Tax (SDRT) is a duty payable on electronic transfers.

Stamp Duty is a duty payable on paper transfers.

SDRT on dematerialisation for CREST-eligible securities

Where a customer account is subject to the 0.5% stamp duty regime, 0.5% SDRT applies to dematerialisation of physical securities to be deposited in EUI unless an exemption - No Change in Beneficial Ownership (NCBO) - is claimed in the settlement instruction.

Dematerialisation of physical securities to a customer account subject to the 1.5% stamp duty regime is subject to 1.5% SDRT.

Stamp Duty on physical non–CREST-eligible securities

Stamp duty is payable at a rate of either 1.5% or 0.5% ad valorem (for receipts free or against payment, where no exemption is claimed).

The 0.5% Stamp Duty regime

For 0.5% stamp duty to apply, customers must complete the “Request for Application of the 0.5% SDRT Regime”.

Receipt of physical securities into CBL will be subject to 0.5% stamp duty ad valorem unless there is no change of beneficial ownership.

A customer that deposits physical securities with CBL must indicate in the instruction either the stampable consideration (when ad valorem duty is payable) or the relevant code word (when fixed duty is payable - see “The customer opts for the 0.5% SDRT regime” in UK Stamp Duty Reserve Tax (SDRT)).

Upon receipt of the settlement instruction and the Stock Transfer Form, Citibank will arrange for the form to be stamped by HMRC and for the stamp duty to be paid.

The 1.5% Stamp Duty regime

If the customer does not submit the “Request for Application of the 0.5% SDRT Regime”, the account remains subject to 1.5% stamp duty such that every receipt of physical securities in CBL will, unless an exemption applies, be subject to stamp duty at the rate of 1.5% ad valorem.

It is market practice that stamp duty on receipt of physical securities in a clearance service be paid by the delivering party, which must complete the Stock Transfer Form and have it stamped by HM Revenue & Customs prior to delivering the form, together with the securities, to Citibank. If this procedure is not followed, the securities will not be accepted but will instead be returned to the delivering party, together with the unstamped form.

Customers must claim any exemption in their settlement instruction by indicating the relevant code word in accordance with the requirements applicable to CREST-eligible securities (see “The customer opts for the 1.5% SDRT regime” in UK Stamp Duty Reserve Tax (SDRT)).

Impact on corporate actions and income collection

CBL will not be responsible for corporate actions and income payments with respect to physical certificates that have not been re-registered and returned by the transfer agent to the depository (Citibank).

Entitlements will pass to Clearstream Banking's depository if the certificates are re-registered not later than the record date of a corporate action or an income collection event. Corporate actions and income events will be processed on an “as-received basis”.

“Business as usual” processes will apply as soon as the re-registered securities have been credited to the Clearstream Banking customer's account.

Bilateral securities lending and borrowing

Customers entering into bilateral securities lending and borrowing arrangements in the UK market are fully responsible and liable to incur SDRT charges or fines linked to such transactions executed via CBL.

Keys to completing the transfer 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, equity, unit trust, corporate bond.
4.The number of shares (in words).
5.The number of shares (in figures).
6.The exact name(s) and address(es) of the registered certificate holder(s).
7.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.
8.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 Clearstream Banking or the CREST counter.

The Stock Transfer Form

Click on the image to view an illustration of the Stock 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, equity, unit trust, corporate bond.
4.The number of shares (in words).
5.The number of shares (in figures).
6.The exact name(s) and address(es) of the registered certificate holder(s).
7.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.
8.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 Clearstream Banking or the CREST counter.

Domestic bilateral securities lending and borrowing in CREST

A UK domestic lending service is offered by Clearstream Banking for UK CREST eligible securities and free of payment settlement instructions.

Customers entering into bilateral securities lending and borrowing arrangements in the UK market are fully responsible and liable to incur SDRT charges or fines linked to such transactions executed via Clearstream Banking.

Customers are, and remain, fully responsible for managing their lending trades and considering any custody/income events that may affect their entitlements and/or lending transactions. Auto compensation is applied to lending/borrowing trades. Customers must ensure entitlements are covered on the CBL omnibus accounts prior and no later than entitlement date distribution. Any costs incurred due to non-compliance will be passed on to the customer.

Domestic stock lending trades are applicable for SDRT in CREST unless the ISIN is an exempted stock.

Irish loans are exempted as long as the return leg is processed within 12 months (or less than 365 days) of the settlement of the opening leg.

For UK chargeable securities, SDRT can be exempted up front and has no time limit, however this is only the case when certain criteria are met, as follows:

  • One of the members must be recognised as an intermediary on the London Stock Exchange (LSE), or a Markets in Financial Instruments Directive (MiFID) exempted intermediary for stock lending relief; and
  • The security lent, must be on the LSE list of regularly traded securities; and
  • The SLO must be reported to the LSE with the correct Trade system of Origin (TSO)

If one of the above criteria is not met, then SDRT is charged on the new loan and the loan return in the same manner as a standard settlement trade, namely, Citi will pass a debit on the related cash account which will be evident on the MT940 cash statement for that day.

Note: Loans on a 1.5% SDRT Clearstream Banking account are not exempted and arising SDRT is not reclaimable under any circumstances.

Instruction specifications

In order to identify the instructions as lending/borrowing in CREST, the following fields must be populated:

Identification as lender or borrower

Identification of every instruction as lending or borrowing throughout the life of the transaction:

  • SWIFT :22F:: SETR//SECL if lender; or
  • SWIFT :22F:: SETR//SECB if borrower.

This field must be populated in all related instructions and must be the same as the opening leg. Failure to follow this procedure will result in the instruction being treated as a standard OTC trade.

The original loan reference must always be unique. In the event of a duplicate reference, Clearstream Banking will reject the instruction and the customer will receive an instruction status message with narrative:

  • "Domestic loan with same reference already exists".

In CREST, the related Stock Loan Return (SLR) will be set up automatically and will remain in the system until the borrower returns the securities to the lender. The customer has to input the SLR with the trade date under which the loan opening settled in CREST.

Linking the opening and closing leg

In addition to the above, in order to be able to link the opening and closing leg(s), the previous opening leg reference must always be included in the closing leg(s) as follows:

  • SWIFT :20C:: PREV//(original loan instruction reference); or

In the event of the original loan reference being not included as per above, no opening leg will be identified. The instruction will then not be released to the market and the customer will receive an instruction status message with the following narrative:

  • "Waiting settlement of opening leg".

Once the loan has been confirmed in CREST, the following interim status update may be reported prior to the receipt of the MT542 settlement confirmation:
:25D::SETT//PEND
:16R:REAS
:24B::PEND//LALO

In the event that the counterparty sends partial deliveries, it may happen that they are short and the customer may receive the following message:

  • "Counterparty Insufficient Securities".

If the customer is due to receive the securities from the counterparty:

  • It is the counterparty’s responsibility to raise the priority in the market to allow the trade to settle;
  • If no closing leg is instructed on the day that the counterparty has returned the securities, Clearstream Banking will manually book them into the customer's account with a fee of 50 EUR per individual booking.

Partial settlement

The standard CREST rules and Clearstream Banking services apply.