Entitlement Compensation Rules - Introductory and explanatory information

14.01.2019

The Entitlement Compensation Rules contain information on the rules applicable to entitlement compensation (also referred to as market claims) for those markets where Clearstream Banking offers settlement and custody services.

This information is available for most markets under Products & Services/Market Coverage then in the Market page.

A Clearstream Print Basket is provided to enable you to generate a pdf file consolidating the entitlement compensation details of all the relevant markets.

A requirement for entitlement compensation is usually raised when entitlement proceeds are credited to a party that is not entitled to such proceeds and they are thus owed to another party, due to the pending settlement of a trade between those parties. This may be the result of a securities transaction around the ex date, record date or payment date of such entitlement, depending on the applicable market eligibility rule. Market practice or local market rules determine whether a domestic security, that is traded cum- or ex-distribution, is entitled to compensation.

The Rules cover, per market and instrument type, the following information:

  • The applicable market compensation basis, that is, whether the trade date rule or the settlement date rule applies;
  • Whether an automatic compensation process is managed by the local CSD;
  • Whether there are any restrictions on market claims) or whether any type of transaction and/or custody event is eligible for market claims);
  • Any additional details of use customers;
  • A description of the service offered by Clearstream Banking for transactions with domestic counterparties.

For information about internal CBL transactions, please refer to the CBL Customer Handbook.

Definitions

The terms used in this document have the following meanings:

Automatic market compensation managed by local CSD

If the entitled trade has not settled by the record date, the domestic CSD automatically credits the entitlement proceeds to the buyer and debits the entitlement proceeds to the seller.

Entitlement compensation coverage

The compensation applies to all types of custody events or to all transaction types (free of payment, against payment, physical).

Ex-date

Unless otherwise indicated, the day on which a security is traded ex-coupon for the first time.

(Market) record date (RD)

The date on which securities positions are fixed, that is, the date on which holders are recorded as eligible to receive the income or other entitlement on a security.

Requested settlement date (RSD) rule

The contractual settlement date (up until record date) determines whether the buyer is entitled to receive the entitlement proceeds.

Settlement date (SD) rule

The settlement date is the date on which the transaction settles and determines whether the buyer is entitled to receive the entitlement proceeds.

Trade date (TD) rule

The trade date (before ex-distribution date) determines whether the buyer is entitled to receive the entitlement proceeds.