Settlement process - Sweden
The settlement process in the VPC system commences as soon as the instructions are registered in the system. Once receipt and delivery instructions have been matched, on the morning of the settlement date, a pre-settlement check is carried out on the securities holding and payment capacity. If these conditions are fulfilled, instructions are marked 'ready to settle'. Thereafter, settlement takes place at certain times during the settlement date. The change of ownership for securities and payments occurs once instructions have been settled in the market.
|T to T+1:|
The investor provides its custodian with the settlement instructions for the trade. On-exchange transactions will be automatically downloaded by the custodian (if requested by the investor).
|T to T+2:||The custodian provides the Swedish local custodian with the settlement instruction. The local custodian registers the instruction in the VPC settlement system. Off-exchange cash equity transactions are pre-matched in the separate VPC pre-matching system.|
Transactions in the pre-matching system are not binding and can be unilaterally revoked as long as they have not been released to the VPC settlement system.
Matched fixed-income transactions can only ever be revoked bilaterally.
Settlement date (SD)
Settlement is completed in the VPC system in several batches during SD: 08:00 (for fixed-income securities only), 10:00, 12:00, 14:00 and (for free of payment transactions only) 17:00.
Instructions that do not settle during the first cycle automatically pass on to the next cycle until they settle.
Instructions fail, as follows:
- If they do not settle on contractual SD; or
- Due to their late arrival, insufficient holdings of securities/cash or mismatch.
Failed unmatched transactions are cancelled in the VPC system after 20 days and the custodian must re-enter the transaction.
The cash is cleared at the Riksbank simultaneously with the securities. The custodian sends a settlement confirmation to the investor when the trade has been settled.
Over-the-counter (OTC) trades
The OTC market is a separate market within the stock exchange and any OTC transaction in a listed company must always be followed by a special registration in the trading system.
Trading in all major equities is centralised to the Stock Exchange and trades are centrally cleared and settled through the Swedish CSD. On-exchange trades in OMXS30, Large Cap, Mid Cap and most ETFs are cleared by CCP. The CSD also clears and settles all equities traded OTC outside the Stock Exchange. All listed equities, as well as the vast majority of the equities traded on the OTC market, are in book-entry form.
Partial settlement is only available for transactions in the AM/equities sub-market.
Partial settlement functionality is limited to transactions in the AM/equities sub-market and transaction need to meet the following CSD system requirements:
- Matched in the Pre-match system, that is, OTC and CCP (not on-exchange transactions settled bilaterally); and
- Mhere the delivery instruction is from a segregated CSD account (nominee or owner); and
- Where the counterparties are two separate clearing identities (that is, only for external transactions, not between two clients/accounts under the same CSD member); and
- Where the delivery instruction is either fully or partially released for settlement.
If all of the above conditions are not met, the CSD system cannot attempt partial settlement for the transaction.
Effective use of partial settlement differs depending on account and transaction type.
For a transaction between a sub custody client of SEB and another CSD member/a client of another CSD member:
- Partial settlement is possible for receipt instructions;
- Partial settlement is possible as per the CSD functionality described above, via the partial release functionality. Please note that SEB currently only uses partial release for deliveries towards CCPs, as the CCPs always allow partial settlement. SEB intends to increase use of partial release also for OTC deliveries.
For a transaction between two sub custody clients of SEB:
- Partial settlement for receipt instructions is possible for all custody accounts;
- Partial settlement for delivery instructions is possible for all custody accounts.
There is no support for partial settlement for securities in Euroclear Sweden’s PM/fixed income sub-market.
Nominee registration is allowed. If the beneficial owner wants to vote by proxy or attend general meetings, temporary registration in the name of the beneficial owner is mandatory.
Stamp duty is not applicable in the Swedish market.
A non-settled transaction fee of SEK 10 for matched but unsettled transactions is charged to the party who fails to deliver the securities.
A penalty fee will be transaction based and applicable to all settlement transactions registered in the equity market involving central counterparties (CCP): currently LCH. Clearnet (LCHLGB2EXXX), X-clear (CLRXCHZZXXX) and EuroCCP N.V (EMCFNL2AXXX). These penalty fees will be applicable to any future CCP who will become members of the Swedish settlement system.
Both clearing members and CCPs are subject to the late settlement fee for failure to deliver on transactions where the counterparty is a CCP. Thus the fee is debited to either the CCP or clearing member depending on who fails to deliver.
Euroclear Sweden will apply the penalty fee of SEK 500.00 per failed matched delivery per intended settlement day.
NASDAQ Buy-in Rules
The following rules apply to SE transactions that are not cleared and settled through the CCP environment. If the seller has not delivered the securities by SD+2 (N as Notification date), the buyer may send the first notification of a possible buy-in to the seller. The first possible execution date for the actual buy-in is N+5 (SD+7) at 8:00 CET at the earliest and the buyer has to send an updated notification to the seller informing that the buy-in has started.
EUROCCP N.V. (CCP) Buy-in Rules
Buy-ins are only triggered for non-deliveries of equities by the clearing participant. Non-settled receipts due to lack of funds from the clearing participant will be subject to fail management fees.
On Intended Settlement Date (ISD) +5 (buy-in execution) EUROCCP will begin the buy-in process if the delivery of equities is not made by the clearing participant by the deadline of ISD+4 (notification date).
After the deadline on the ISD+4, EUROCCP will determine which buyer has the right of a buy-in and which clearing participant has the oldest obligation to deliver the relevant number of equities. This clearing participant will be appointed for the buy-in, and will be informed directly about the upcoming buy-in. At the end of this day, the closing price for the failed equities delivery is determined and will be used to determine the maximum buy-in offer price.