Service enhancement for the admission of CSC securities

15.12.2017

Clearstream Banking AG, Frankfurtinforms customers about a service enhancement in the area New Issues. Since February 20172 an automated reinstruction procedure ensures that any CASCADE-LION transaction (non-CCP stock exchange trade) that is rejected by TARGET2-Securities (T2S) will be newly presented for settlement processing.

Effective

19 February 2018

CBF will offer an additional functionality for the admission procedure. The “EDT Data Sprint” service will allow issuers and their agents to publish securities with the new admission type “Collective Safe Custody (CSC)3 intended”. Any security that will be introduced via CBF and is marked with this flag will be immediately presented to T2S to enable the static data for this ISIN. Once the static data is stored on T2S, OTC and Stock Exchange instructions (LION) will be accepted for a processing according to the T2S lifecycle.

This announcement outlines the functional solution designed by CBF. It also describes the related T2S procedures for the introduction of static data and maintenance of settlement instructions.

Background

In general, the CBF admission procedure defines that the New Issues team can accept new securities in CSC the day before issue / value date (VD– 1). This deadline ensures that the securities can be posted with the correct value into the issuing agent’s account. As soon as the admission procedure is completed, a CSC-eligible security will be introduced on T2S and will be made eligible for the T2S settlement processing. The picture below provides an overview of the necessary steps:

If the admission procedure is not completed in time, an automated reinstruction procedure transmits any CASCADE-LION transactions that were rejected by T2S. This procedure will be executed until the static data for the new ISIN is accepted by T2S and CASCADE-LION transactions can be forwarded to the T2S settlement processing. For the time being this service is not applicable for any other instruction types.

Functional solution

The “EDT Data Sprint” service will enrich the current securities admission functionality. The enhanced functionality will serve CBF’s issuers and their agents. It continues to use the existing infrastructure of the EDT admission procedures. The complementary service is based on the current framework, which will remain and still needs to be followed. That means, the existing deadlines and service levels are still valid.

In future, securities can be introduced with a new publication status called “CSC intended”. This status will be shown in the static data field “GS201” (value 3 - GS vorgesehen / CSC intended). All static data that is provided in this stage needs to be considered as preliminary. In general, it can be assumed the initial information used for the “EDT Data Sprint” represents default values.

The list below defines the mandatory securities static data that are required by T2S:

  • ISIN code;
  • Classification of financial instrument (CFI code);
  • Short name;
  • Long name;
  • Issue Date;
  • Settlement type;
  • Minimum settlement unit;
  • Settlement unit multiple;
  • Country of issuance;
  • Currency.

In line with the T2S procedures, the static data – also for “EDT Data Sprint” - needs to be accepted by T2S before instructions can be transmitted to the settlement platform. Otherwise, the validation will fail and the T2S rejection procedure will become applicable.

In order to allow a timely instruction management, CBF will transmit the securities static data with the status “CSC intended” in real-time mode to T2S. In a subsequent step, if a modification was requested by the issuer or its agent, the updated static data will be sent to T2S. This modification may lead into a revalidation of already pending instructions and could lead under certain circumstances into a rejection.

Besides the reporting towards T2S, securities static data is delivered via Propris and is transmitted to Wertpapiermitteilungen (WM). For these maintenance activities the existing procedure will be re-used; that is, the data will be provided multiple times during a day and within the end-of-day procedures.

Admission procedure

The “EDT Data Sprint” service will be offered to customers who already use the EDT functionality. In a dedicated announcement CBF will publish the basic prerequisites for the issuers and their agents.

In future, these customers can publish securities static data of a new security before the CSC admission process has started. The existing EDT admission deadlines for the different security types will remain unchanged.

CBF provides the new service via the existing EDT Portal. Different file formats4 can be used to upload the preliminary static data for bonds, certificates and warrants. If required, the securities static data can be modified by the issuer or its agent. The modification is allowed until the admission procedure is completed. This means, as long as the status “CSC intended” is shown. CBF will transmit the updated information to T2S and provide the information via Propris and towards WM.

Please note, that preliminary data cannot be validated by CBF and hence will not be transferred into the regular CSC admission process. The issuer or its agent will be responsible for securities static data attributes in the status “CSC intended”. As outlined in the section “Functional solution” the preliminary data covers T2S relevant data, only.

The security remains in status "CSC intended" until the admission procedure is completed.

Instruction management

CBF customers will benefit from the “EDT Data Sprint” functionality. As soon as a new security has been published using this functionality, stock exchange trades (CASCADE-LION transactions, instruction type AA10) and OTC trades (instruction types AA01 / AA02) will be accepted by T2S. This will reduce the number of rejections and enables customers to provide OTC instructions in due time. The pending instructions can settle once the admission procedure is completed.

Once the admission procedure has been completed, the securities static data will be updated by CBF and the information is transmitted to T2S. Additionally, the information will be distributed via Propris and WM. In a next step, T2S will forward the pending instructions to the settlement process.

Upon decision of the issuer the admission process might be stopped. The ISIN will become inactive even though instructions may be pending in the T2S lifecycle management. In this case, CBF customers and their counterparties are requested to enter cancellation requests. Otherwise, matched instructions will remain pending on T2S.

Please consider, the processing of vaults instructions (instruction type AA16) requires the completion of the admission procedure. Hence, these instructions cannot processed on T2S if the status of the security is still “CSC intended”. As today, the vaults instructions remain pending in the CBF environment.

Customer readiness

CBF will enable a dedicated setup for issuers and their agents who would like to use the “EDT Data Sprint” functionality. For more details regarding the CBF service level and the contractual framework between the customer and CBF, please contact our New Issues team via the email address edtadmissions@clearstream.com.

Contact

The T2S Support team at Clearstream will be able to answer your questions regarding specific functions and processes designed for T2S.

Clearstream T2S Support Team

Email: T2S-Support@clearstream.com
Tel. +49 (0) 69 / 211 18 27 8
Fax. +49 (0) 69 / 211 60 80 60
Clearstream Migrated to T2S - We Will Support You

---------------------------------------

1. This Announcement is published by Clearstream Banking AG (CBF), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500.

2. For more information please refer to announcement D17011.

3. Collective safe custody is the regular legal structure for holding and transferring securities held in the form of book-entry credits (Girosammelgutschrift) in Germany.

4. Available formats are XLS, XLSX, XLSM, CSV, XML. CBF supports also the automated processing via the CBF HOST.