T2S Settlement services - CBF - Spain

18.09.2017

The hold and release feature available in T2S will be used by CBF for the pre-matching of settlement instructions in T2S.

 

Service offered

Method employed

Start (local time)

All securities

CBF

 

The T2S hold/release process allows for a released transaction to be set back to hold as long as it has not settled. Instructions that were sent on “Hold” can be released via a corresponding MT540 – MT543 “NEWM”. The status of a CBF instruction can be changed via a modification (MT530) until its final settlement. In parallel to the instruction hold flag set by the CBF customers (“Party hold”) , T2S provides hold information from the counterparty (“counterparty hold”) and from Iberclear (“CSD hold”) itself. Therefore, the following values can be reported to CBF customers:

  • “CSDH” for CSD hold
  • “PREA” for Party hold
  • “RRCY” for Counterparty hold

Automated through T2S

On receipt of instructions

Matching service

Matching is mandatory and will follow T2S requirements. For matching, the CASCADE instruction types AA01 (Wertpaperübertrag/MT542/MT543) and AA02 (Match Instruction/MT540/MT541) can be used. In addition to the mandatory matching criteria in T2S the following fields may, if present, be matching criteria.

Additional matching field

The following additional matching fields are initially not mandatory but, when one of the counterparties provides a value for them in its instruction, matching values must be provided by the other counterparty.

  • Opt-out indicator
  • CUM/EX indicator

Note: When processing corporate actions (KADI), CBF looks to the EX-TRD (SPEX) flag to determine whether a trade was executed cum coupon. In T2S, this is indicated using the Trade Transaction Condition Indicator (TTCO indicator). This indicator is an additional matching criterion in T2S and this instruction can only be settled if both counterparties provide the same value. The value “SPEX” entered by the customer will be changed by CBF to “blank” as part of the mapping. We strongly recommend that customers  agree the assignment of the new matching criterion with their counterparties in Iberclear.

Optional matching field

The following optional matching fields must match when provided by both counterparties:

  • Common reference (as matching is case sensitive, CBF recommends using capital letters only);
  • Client of delivering/receiving CSD participant (applies to Party 1 BIC of CBF participant and Iberclear participant as well as to Party 2 BIC of Iberclear participant’s client);
  • T2S SAC of the delivering/receiving CSD participant (SAC of CBF in Iberclear will always be filled in by CBF, SAC of Iberclear participants is to be filled in by CBF customers and Iberclear participants.)

Note: CBF recommends to agree on the usage of a common reference (:20C::COMM) and the T2S Security Account number (SAC) with the counterparty in Iberclear. Both fields are “optional” matching criteria in T2S and avoid cross-matching if it is populated in the settlement instructions of both parties.

Allegements

If the Iberclear counterparty of the CBF customer instructs first, an allegement instruction will be generated by T2S. T2S will send the allegement message (sese.028) to CBF or to the DCP, without prior validation, whether the ISIN is eligible in the counterparty CSD, that in this case is CBF.

The allegements will contain the additional and optional matching criteria described above. These can be used to correctly format instructions to ensure matching if it has not yet been sent to CBF.

  • CBF customers acting in ICP mode will receive an allegement via the existing connectivity channels if the ISIN is eligible in the link with Iberclear. CBF will receive the counterparty CSD account in the allegement and not an omnibus or mirror account. Therefore, ICPs can directly use the account information in their instruction as provided via the allegement.
  • CBF customers acting in DCP mode will receive the allegement from T2S if the ISIN is eligible with Iberclear.

In CASCADE Online screens, for example in screen KVAI-AA, allegement instructions can be identified by the new instruction sub-type “L”, that is “KZ-AA” = “L” for instruction types AA01/02.

Identification of CSDs and counterparties in T2S

In T2S all CSDs will be identified by their BIC11. It is mandatory to address customers of Iberclear with a BIC11 in the Party 1 field of the settlement instruction. Should this information be missing, the instruction cannot be accepted by CBF, that is, the instruction will be rejected by CBF. Customers operating with CBF in straight-through processing mode will receive an MT548 “REJT“.

The omnibus account of CBF in Iberclear (1870T) will additionally be represented in T2S as the Securities Account Number (SAC).

The counterparty CSD BIC is used to address the CSD where the counterparty is set up as T2S Party. This counterparty's CSD is reflected in CASCADE with a counterparty CSD account. The counterparty CSD BIC must be used in cross-border instructions with T2S In-CSDs. 

Counterparty CSD account

CBF Omnibus account

T2S SAC

Counterparty CSD BIC

Iberclear

4710

1870T

IBRCDAKVDEFFXXX000000001OMEX0000001

IBRCESMMXXX

Procedures for domestic counterparties

Procedure for the domestic counterparty

Deadline

Receipts free of and against payment in CBF

Domestic counterparties delivering securities free of or against payment in favour of a CBF customer must indicate in their settlement instructions to Iberclear:

  • Deliver to: BIC11 of Clearstream Banking Frankfurt (DAKVDEFFXXX)
  • Receiving CSD participant: BIC11 of the CBF participant

15:50 SD against payment and
17:50 SD free of payment

Delivery free of and against payment from CBF

Domestic counterparties receiving securities free of and against payment from a CBF customer must indicate in their settlement instructions to Iberclear:

  • Receive from: BIC11 of Clearstream Banking Frankfurt (DAKVDEFFXXX)
  • Delivering CSD participant: BIC11 of the CBF participant

15:50 SD against payment and
17:50 SD free of payment

Partial settlement

In T2S partial settlement for eligible instructions is allowed at the last night-time settlement cycle in sequence ‘X’; and within the real-time settlement period:

  • At 08:00, 10:00 CET, 12:00 CET, 14:00 CET and 14:15 CET.
  • 15 minutes prior to the DvP cut-off time (between 15:45 CET and 16:00 CET).

Within these windows all transactions that are pending due to lack of securities or cash and hold a positive partial settlement indicator are included in the partial settlement processing.

CBF customers can define within the instruction whether partial settlement is to be applied or not by setting a partial settlement indicator. In addition, they can set a flag on account level (CBF 7-digit account number) that defines the default value to be set to those instructions where the partial settlement indicator is not filled. The flag is maintained within CBF’s static account database and defines which partial settlement indicator is to be assigned to an instruction as default value (NPAR, PART).The flag applies to delivery and receipt instructions.

Partial settlement applies only when full settlement is not possible due to lack of securities or cash. T2S will perform partial settlement according to the available position after analysing the partial settlement indicator in the instruction.  The settlement instructions are submitted to a full settlement attempt before being submitted to a partial settlement attempt.

Partial settlement is applicable to domestic and cross-border instructions and is not allowed for PFoD instructions. Also, Partial settlement is not applied if instructions are linked to any other settlement instruction with link type ‘Before’, ‘After’, ‘With’ or via pool reference. Partial settlement is not applied if the transaction undergoes a process where a CoSD Hold is used. The unsettled remaining part of a partially settled settlement instruction can be cancelled.

Allowed countervalue difference

The following T2S cash tolerances will apply to instructions (against payment instructions in EUR only):

  • EUR 2 for transactions with an amount equal to or less than EUR 100,000; and
  • EUR 25 for transactions with an amount greater than EUR 100,000.

In the event of a discrepancy within the limits, in principle the cash amount of the delivering party will prevail.

Back-to-back processing (Transaction Linking)

Back-to-back processing is available for transactions in Iberclear-eligible securities.

Cancellation and handling of invalid instructions

T2S distinguishes between the following types of cancellation:

  • Unilateral: Non-matched instructions can be deleted by the party who placed the instruction at any time. Instructions remaining in this status will be cancelled by T2S after 20 business days.
  • Bilateral: Is required when an instruction has matched. Both counterparties have to agree to the cancellation.

CBF will report the cancellation with the existing status report (MT548). The reason codes listed below will be used for this purpose:

:25D::IPRC//CAND :24B::CAND//CANI (Cancelled by ordering party)
:25D::IPRC//CAND :24B::CAND//CANS (Cancelled by the system)
:25D::IPRC//CANP :24B::CANP//CONF (Requesting cancellation by counterparty)
:25D::IPRC//CPRC (Cancellation request from counterparty)

Instructions for which the cancellation has not been confirmed by the counterparty and which show the status “Release“ will be transferred to the settlement process on the Intended Settlement Day (ISD), meaning settlement can take place. Instructions set on Hold and then released can not be set on Hold again.

Invalid instructions rejected by Iberclear or T2S will be reported by Iberclear to CBF and subsequently to CBF customers.

If a settlement instruction is rejected by Iberclear, this is reported to CBF with the relevant identification. CBF will then notify the CBF customer of this rejection. If an instruction passed Iberclear but rejected by T2S, T2S can give up to four reasons for rejection at the processing stage. The ISO codes designated by T2S are used for this. Iberclear will forward this rejection to CBF. CBF will then notify the CBF customer about the rejection, always quoting the first reason for rejection from T2S.

Recycling rules

Unmatched instructions will be recycled for 20 business days (starting from the initial settlement date), after which they will be cancelled.

Unmatched cancellation requests will be recycled for 20 business days (starting from the date of receipt).

Matched instructions will have no cancellation limit and will be recycled until a business rule is violated (for example, security reaches maturity).