Finland: Euroclear Finland introduces new system for bonds
Monday 3 November 2014
the Finnish CSD, Euroclear Finland (EFI), will implement the first phase of its adaptation to TARGET2-Securities (T2S).
In this first phase (Release 1), EFI will launch a new platform, called Infinity, that replaces the RM system for bonds.
In the second phase (Release 2), planned for Q4 2015, the OM system for equities and corporate bonds will be replaced by Infinity and the third phase (Release 3) in February 2017 the outsourcing of the settlement activity to T2S will take place.
Impacts on customers
In the context of the Release 1, Clearstream Banking1 customers are not required to make any changes to their settlement instructions with counterparties in Finland sent to CBF. CBF continues to access the Finnish market via CBL who remains a direct participant in Infinity and Nordea Bank Finland continues to operate CBL’s account.
Customers should, however, be aware of some changes to current market practices for bonds and align with their counterparties accordingly, where relevant. These changes are detailed below.
Note: Release 2 is expected to have an impact on customers’ settlement instructions and further details will be communicated early 2015.
EFI will implement the T2S matching rules in Release 1. As a consequence, certain fields may, if present, be matching criteria, as indicated herebelow:
The Opt-out indicator field specifying no market claim processing will not be mandatory but, when one of the counterparties provides a value for it in its instruction, the other counterparty must provide the matching values:
CBL will opt out from automatic market claim processing and the above field will be included in each settlement instruction sent on behalf of CBF customers for settlement on the CBL account in Infinity.
The customer must, therefore, ensure that their counterparty indicates the same opt-out at instruction level; otherwise, the instructions will not match.
Common Trade Reference
The optional matching field Common Trade Reference can be omitted by either counterparty but must match when provided by both counterparties:
|Common Trade Reference|
Customers can include this optional field to reduce the risk of cross-matching but, if both parties provide a value, this value must be identical in both instructions in order for them to match. If this is not the case, the instruction remains unmatched in Infinity and will be reported as such to the customer.
Hold and release
EFI will introduce the T2S hold/release service in Infinity. EFI-counterparties can put their instruction on hold provided that the customer’s instruction is not yet provisioned and released to the market. For CBF customers the hold/release functionality remains unchanged.
If the EFI-counterparty has placed its instruction on hold, we will report status/reason SETT//PENx PENx//PRCY in SWIFT.
EFI will adopt the standard T2S recycling rules in Infinity such that:
- 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); bilateral cancellation continues to be required for matched instructions.
We will advise customers of the cancellations performed by EFI upon execution.
New cash tolerance
Currently, EFI applies a unique cash tolerance (allowed countervalue difference) of EUR 25. With the implementation of Release 1, EFI will apply the cash tolerance that will be in effect in T2S, as follows:
- EUR 2 for transactions with an amount less than or equal to EUR 100,000; and
- EUR 25 for transactions with an amount greater than EUR 100,000.
If there be a discrepancy with the counterparty instructions, the customers will be advised accordingly.
CBF will not support the new T2S instruction types RWP (receipt with payment) and DWP (delivery with payment) in the context of Release 1.
Although EFI will accept instruction type PFOD (against payment instruction with a zero quantity) and already matched instructions, CBF will, as today, reject such instructions received from customers.
Counterparty identification and procedure for domestic counterparties
Counterparty identification in the settlement instructions will continue to be mandatory but will not be part of matching criteria in Infinity. Counterparty matching is performed only at the level of the CSD participant.
Customers are requested to inform their local counterparties of the following details to be used for instructions with CBF customers settling on the CBL account in Infinity:
|DEAG / REAG:||BIC of CBL: CEDELULL|
|BUYR / SELL:||BIC of CBF customer|
All transactions that have been entered into to the RM system on/before 31 October 2014 and that have not settled will be transferred in the new Infinity EFI platform by Nordea Bank Finland.
Transactions sent on/after 3 November 2014 will immediately be sent for matching and settlement in Infinity.
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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.