Transaction management in T2S

24.03.2016

In line with the Corporate Actions Joint Working Group (CAJWG) and Corporate Actions Subgroup (CASG) International Standards as well as best market practices, market claims and transformations (together referred to Transaction Management) should be processed automatically by the issuer CSDs in T2S, and will require no input from the participant.

Market Claims

As per the market standards for Corporate Actions (CA), a market claim is a process to reallocate the proceeds of a distribution to the contractually entitled party.

The T2S CA standards, being standards on flows, focuses on the scenario where the contractually entitled party has not received the underlying securities (there is a pending underlying transaction) at close of business on record date.

Market claims (on-flow) are based on instructions traded cum coupon and settled after record date. The market claim period of 20 business days will start on the next business day following the record date. Reverse claims (on-flow) are based on instructions traded ex coupon and settled prior to or on record date. Reverse claims are only generated once, that is at the end of the record date.

Market claims will be detected for all transactions after the close of business on record date and during the rest of the claims detection period

However, counterparties in the underlying transaction may choose to “opt-out” if they want to indicate that no claim at all should be raised on a given transaction.

Counterparties in the underlying transaction may choose to include the ex/cum indicator only if they want to deviate from the standard market claim procedure. Market claims will be detected only for matched instructions (that is, irrevocable transactions).

Transformations and reorganisations

As per the market standards for CA, a transformation is defined as the process by which pending transactions still unsettled by the end of record date and/or market deadline, are cancelled and replaced in accordance with the terms of the reorganisation.

Transformations for reorganisation events in securities and/or cash are performed on pending transactions if a transaction cannot settle due to a corporate action event after record date. In these cases the pending instruction will be amended in a way that settlement can take place after the respective corporate action event has been processed.

Transformations can occur for income and non-income events. They are processed on record date after the end of day. A 20-day claim period will be implemented for transformations and reorganisations, so that instructions with a trade date prior to ex-date which are instructed only after record date will be transformed within this period. However, in contrast to non-income claims, transformations will only be processed once a day after the end of day.

Transformations in securities, where applicable, are processed for events that involve the change of the nominal amount and/or ISIN without compensation in cash.