CFCL Settlement services – Malaysia

Settlement process

Please refer to the Settlement process - New Zealand for the complete information. 

Settlement services

Pre-matching service

The table below summarizes CFCL's pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of CFCL's pre-matching services, see Pre-matching services for external settlement instructions.

Procedures for domestic counterparties

This section describes the procedures for domestic counterparties of the Malaysian market, which is a Register market with a CSD link:

Reducing settlement risk for trades in securities listed in Bursa Malaysia

To reduce settlement risk, Clearstream Fund Centre has issued standing instructions to HSBC so that HSBC will, by default, attempt to settle the client's against payment transactions in these securities via the Institutional Settlement Service (ISS) mechanism.

However, HSBC only has a limited influence on a stockbroking company’s settlement choice and brokers may elect to settle via Bursa Depository Transfer, in which case HSBC will follow suit.

To reduce settlement risk, clients may want to instruct their counterparties to deliver such securities through ISS wherever possible, in which case, clients should either send standing instructions to their counterparties or issue case-by-case instructions that may be worded as follows:

• “Please settle (all our Malaysian against payment transactions in Bursa Depository) via ISS (Institutional Settlement Service).”

Partial settlement in ISS

A trade can be successfully confirmed via ISS on T+2, even if there are insufficient shares on the delivering account. This may lead to a partial settlement.

Allowed countervalue difference

A maximum difference in countervalue of MYR 70 is allowed for the matching and settlement of transactions with domestic counterparties.

Specific settlement rules/settlement restrictions

Domestic (external) against payment transactions with domestic counterparties in all eligible securities can be effected in MYR only.

No change of beneficial owner declaration for securities listed on Bursa Malaysia

To fulfil Malaysian regulatory requirements, for trade settlement under an omnibus structured account at Clearstream's level, transactions in securities listed on Bursa Malaysia allowed in Clearstream Fund Centre must always include the no change of beneficial owner declaration in line with local regulations. Please see "Settlement restrictions" below and refer to the relevant instruction specifications.

Settlement restrictions

Securities listed on Bursa Malaysia

Malaysian regulations prohibit free of payment transfers for securities listed on Bursa Malaysia when there is a change of beneficial ownership.

As a consequence:

• Internal settlement instructions: against payment are allowed but free of payment are not allowed and will be rejected.
• Domestic (external) settlement instructions: against payment are allowed but free of payment are only allowed provided that there is no change of beneficial ownership or it is one of the approved reason categories.

Internal transfers that do not involve a change of beneficial owner (for example, portfolio transfers) are permitted. Although instructions will be rejected in the first place, Clearstream Fund Centre will regenerate instructions after successful validation of the format requirements. Clients must specify details in their instructions as follows:

Please refer to the relevant instruction specifications.

For domestic (external) free of payment transfers of securities listed in Bursa Malaysia, they must fall within one of the following approved reason categories (this rule does not apply to trades in de-listed securities):

a. Prior written approval is required from Bursa Depository for category B5; for the other categories, no prior approval is required.

Before instructing any of these free of payment receipt or delivery of securities in Bursa Depository, clients are strongly recommended to contact Clearstream Fund Centre (at the address below), with appropriate lead time, to confirm the relevant reason for the requested transfer or to ascertain that the required approval will be issued prior to the requested transfer date. Any supporting documentation required should also be sent to the address below:

For transactions where there is no change of beneficial owner, there is a need to ensure that the transfer is for the same end beneficiary, that is, NCBO basis. Therefore, when instructing a domestic (external) free of payment transaction, where there is no change in beneficial ownership, clients must specify in the Narrative field of their instructions:

• /beneficiary’s name/ and asset transfer.

This information will then be verified with the counterparty.

In the event of a mismatch between the beneficiary names and/or purposes of transfer, the counterparty and Clearstream Fund Centre’s depository will put on hold the free of payment transfer until the discrepancy can be resolved. As such, clients are advised that in the event of doubt, either Clearstream Fund Centre or its depository may request additional details of the beneficiary and/or purpose of transfer. Clients should bear in mind that such transactions form part of the audits conducted on local custodians by Bursa Depository and the provision of such information is mandatory.

Clearstream Fund Centre will not assume any liability if clients do not comply, or have not communicated in due time, with the request for additional details of the beneficiary and/or purpose of transfer.

SSDS-eligible securities

• Internal instructions: against payment and free of payment are allowed.
• Domestic (external) instructions: against payment and free of payment are allowed.

To trade and settle SSDS-eligible securities, clients are requested to take note of the following:

1. Obtention of a Legal Entity Identifier

All investor types in Table A (excluding individual investors), attached below, are required to obtain a Legal Entity Identifier (LEI) for the segregated securities account opening and reporting purposes.

Clients are requested to obtain and provide Clearstream Fund Centre with the LEI of the ultimate beneficial owner (UBO). The LEI details are to be included in the MT599, described in point 3 below.

2. Account opening requirements

Clients of Clearstream Fund Centre who wish to hold SSDS-eligible securities for underlying ultimate beneficial owners (UBOs) must open the following accounts, in addition to their main Clearstream Fund Centre account:

a. An additional Clearstream Fund Centre account per ultimate beneficial owner (UBO), to distinguish third party assets from proprietary assets on the Malaysian RENTAS link. Please refer to the CFCL Client Handbook for further details on how to open the additional accounts.

b. A segregated securities account per UBO within the books of Clearstream Fund Centre’s depository, HSBC Bank Malaysia Berhad.

c. A segregated securities account per UBO within the books of RENTAS.

Note: Account opening requests for UBOs that are individuals will not be accepted. Clients who only hold proprietary securities in their main Clearstream Fund Centre account only need to open segregated securities accounts at Clearstream Fund Centre’s depository (point 2b. above) and RENTAS (point 2c. above).

There will be no requirement to open segregated cash accounts per UBO. Clients may continue to use Clearstream Fund Centre’s existing omnibus cash account in Malaysia.

3. Account opening instruction requirements

Clients are requested to send Clearstream Fund Centre instructions via SWIFT MT599 free-format message in order for their segregated securities accounts to be opened at Clearstream Fund Centre’s depository and RENTAS.

Instructions should be issued from the new additional Clearstream Fund Centre account (see 2a. above), and should ensure the following details are mentioned:

QUOTE
Attn: Settlement Singapore
Please take this MT599 as our request to open a new segregated securities account at HSBC Bank Malaysia Berhad and 
RENTAS.
CFCL Account Number: <insert the number of the Clearstream Fund Centre account opened per UBO>
UBO Name:
Account name: Clearstream Fund Centre S.A. - <insert name of UBO as per registered LEI>
If account opening is at fund level, you can format the account name as either:
Clearstream Fund Centre S.A. - <insert name of fund as per registered LEI of the fund>, or
Clearstream Fund Centre S.A. - <insert name of fund as per registered LEI of the fund> (name of fund manager)
Registered address: <insert address as per registered LEI or if account opening is at fund level then insert address as per registered LEI of the fund>
Country of incorporation: <insert country as per registered LEI or if account opening is at fund level then insert country per registered LEI of the fund>
Business registration number: <insert business registration number obtained from regulatory body/authority (such as the trade and companies register) in country of incorporation or if account opening is at fund level, where there is no such number, then insert “N/A”>
Date of incorporation: <insert date as per incorporation with regulatory body/authority (such as the trade and companies register) in country of incorporation or if account opening is at fund level then insert date fund is established>
Institutional sector: <insert the relevant investor type code from the investor types in Table A>
Legal Entity Identifier: <insert LEI or if account opening is at fund level then insert LEI of the fund>
Please link the securities account to our existing MYR cash account for all settlement and corporate action transactions and set up the required SWIFT reporting advice as per existing arrangements.
UNQUOTE

Note: The account opening process will generally take up to five business days after the client has provided the relevant information.

When acting as an intermediary (refer to footnote d in Table A for definition) to hold individuals collectively, the “Institutional sector” should be indicated as “IN”. When acting as an intermediary to hold corporate entities collectively (refer to footnote c in Table A on criteria to hold such entities collectively), the “Institutional sector” should be indicated as “NF”.

An intermediary holding individuals and corporate entities collectively cannot have both individuals and corporate entities co-mingle in the same account. The intermediary will have to hold the collective of individuals in one securities account and the collective of corporate entities in another securities account.

Account name at RENTAS will be formatted as “/Account name at RENTAS will be formatted as/ (Clearstream Fund Centre S.A.)”

Clients are liable for the usage of any safekeeping accounts obtained through Clearstream Fund Centre and HSBC. Clearstream Fund Centre shall bear no responsibility for any illegitimate or erroneous use - for any trading or other purpose - of such safekeeping accounts. Clearstream Fund Centre does not validate whether the safekeeping accounts that customers use in their settlement instructions sent to Clearstream Fund Centre represent the legitimate investor who ordered the underlying transaction. Clearstream Fund Centre shall therefore not be responsible if the client uses a safekeeping account belonging to an investor other than the investor on whose behalf the relating transaction has been or was deemed to be executed or settled.

4. Clearstream Fund Centre client domestic (external) settlement instructions

a. When settling outside of Clearstream Fund Centre, the segregated securities account number opened at the depository (see point 2b. above) must always be mentioned in the customer’s domestic settlement instructions so that it can be transmitted to Clearstream Fund Centre’s depository. The segregated securities account number at Clearstream Fund Centre’s depository of the ordering party (on deliveries) or the beneficiary (on receipts) must be indicated in the first row of the narrative of domestic (external) settlement instructions (:70E::SPRO// in Xact via SWIFT and Xact File Transfer; Settlement instruction processing additional details in CFC Web Portal) as follows:

“/SAFE/318-NNNNNN-085” (Where NNNNNN is 6 digits).

Example:

:70E::SPRO///SAFE/318-NNNNNN-085

Additionally, the buying/selling counterparty’s RENTAS segregated securities account number must also always be mentioned in the customer domestic settlement instructions (:97A::SAFE// (Sequence E1) in CFC via SWIFT and CFC File Transfer; Party 1 Safekeeping account in CFC Web Portal) as follows:'

“0xxxNxxxxxxxxxxxxxxxxxxxxxxxx” or “0xxxRxxxxxxxxxxxxxxxxxxxxxxxx” (Where 0xxx represents the participant code of the counterparty’s custodian, N-non-resident, R-resident and xxxxxxxxxxxxxxxxxxxxxxxx is the safekeeping account number – length and permutation of the account number may vary by counterparty)

Example:

:97A::SAFE//0xxxNxxxxxxxxxxxxxxxxxxxxxxxx

Please refer to the instruction specifications for CFC via Swift and CFC File Transfer and CFC Web Portal in relation to domestic (external) settlement of SSDS-eligible securities.

Note: Failure to adhere with the above requirements will lead to a fail trade or delay in settlement.

b. Clients must communicate their RENTAS segregated securities account (see point 2c. above) details to their domestic counterparties prior to trading.

The RENTAS segregated securities account is a matching criterion in the Malaysian market.

As such, clients receiving/delivering securities from/to the Malaysian market must request their domestic counterparty to deliver/receive the securities to/from their RENTAS segregated securities account (0222N318xxxxxx085 or 0222R318xxxxxx085) as follows:

• Delivering/Receiving Agent: HSBC NOMINEES (ASING) SDN BHD (BIC HBMBMYKL) to/in favour of: Clearstream Fund Centre SA for account number 0222N318xxxxxx085; or
• Delivering/Receiving Agent: HSBC NOMINEES (TEMPATAN) SDN BHD (BIC HBMBMYKL) to/in favour of: Clearstream Fund Centre SA for account number 0222R318xxxxxx085
• Seller/Buyer: Ordering party's/beneficiary's account number in CFCL.

c. In principal, transactions of SSDS-eligible securities must be settled against payment when there is a change of beneficial owner. However, transactions of SSDS-eligible securities where there is a change of beneficial ownership, may settle through the use of a free of payment (FOP) instruction provided that there is a separate payment in cash. In relation to domestic (external) FOP settlement, the cash payment may take place either in Malaysian Ringgit (MYR) or in a foreign currency.

This information has been provided by the Malaysian central bank, Bank Negara Malaysia (BNM), and confirmation of effective payments as well as satisfactory proof of payment are required in practice by local custodians.

Therefore, when instructing a domestic (external) FOP transaction where there is a change of beneficial ownership, clients must specify in the second row of the Narrative field of their instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal):

• “Underlying cash settlement via onshore payment” or “Underlying cash settlement via offshore payment”

to confirm that payment has been made.

Example:

:70E::SPRO///SAFE/318-NNNNNN-085

//Underlying cash settlement via onshore payment

This information is required in order to provide sufficient elements to Clearstream Fund Centre's depository in Malaysia to confirm that payment has been or will be effected between both the delivering and receiving parties to the transaction. If this information is missing, the domestic (external) FOP transfer will remain open until the requested elements are provided.

Clients are also advised that, in the event of doubt, either Clearstream Fund Centre or its depository may request additional proof of the transfer of cash funds.

Clearstream Fund Centre will not assume any liability if customers do not comply with effective payment, or have not communicated, in due time, proper documents establishing effective payment.

For transactions of SSDS-eligible securities where there is no change of beneficial owner, there is a need to ensure that the transfer is for the same end beneficiary, that is, NCBO basis, and that it is non-SBL (securities borrowing and lending) programme related. Therefore, when instructing a domestic (external) FOP transaction where there is no change in beneficial ownership, clients must specify in the second row of the Narrative field of their instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal):

• "//NCBO ASSET TRANSFER for <beneficiary’s name> and non-SBL programme related"

Example:

:70E::SPRO///SAFE/318-NNNNNN-085

//NCBO ASSET TRANSFER for <beneficiary’s name> and non-SBL programme related

This information will then be verified with the counterparty and is in line with the requirement from BNM, where supporting confirmation from customers is to be evidenced for such FOP transactions.

In the event of a mismatch between the beneficiary names, the counterparty and Clearstream’s depository will put on hold the FOP transfer until the discrepancy can be resolved. As such, clients are advised that in the event of doubt, either Clearstream Fund Centre or its depository may request additional details of the beneficiary. Clearstream Fund Centre will not assume any liability if clients do not comply, or have not communicated in due time, with the request for additional details of the beneficiary.

Clients should bear in mind that the above-mentioned transactions form part of the audits conducted on local custodians by BNM and the provision of such information is mandatory.

Please refer to the instruction specifications for CFC via Swift and CFC File Transfer and CFC Web Portal in relation to domestic (external) settlement of SSDS-eligible securities.

5. Clearstream Fund Centre client internal settlement instructions

a. To conduct internal settlement of SSDS-eligible securities in Clearstream Fund Centre, the buyer and seller must both be clients of Clearstream Fund Centre, obtain a LEI (see point 1. above) and have the required accounts opened at Clearstream’s depository and at RENTAS (see point 2. above).

b. The client’s segregated securities account number opened at the depository (see point 2b. above) as well as the counterparty’s RENTAS segregated securities account number must always be mentioned in the client’s internal settlement instructions so that this data can be transmitted to Clearstream Fund Centre’s depository for the purpose of realigning the internally settled securities positions in the domestic market.

Where there is a change in beneficial owner, a declaration that the underlying cash settlement is via offshore or onshore payment must also be included (see point 5e. below for more details). Where there is no change in beneficial owner (NCBO), a declaration that it is a NCBO transfer for the particular beneficiary and that it is not related to a securities borrowing lending programme must also be included (see point 5e. below for more details).

In the narrative of internal settlement instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal), the segregated securities account number at Clearstream Fund Centre’s depository of the ordering party (on deliveries) or the beneficiary (on receipts) must be indicated in the first row as follows:

“/SAFE/318-NNNNNN-085” (where NNNNNN is 6 digits),

Example:

:70E::SPRO///SAFE/318-NNNNNN-085

whilst the buying/selling counterparty’s RENTAS segregated securities account number must be indicated in the second row of the narrative of the internal settlement instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal) as follows:

“0222N318xxxxxx085” or “0222R318xxxxxx085”

Example:

:70E::SPRO///SAFE/318-NNNNNN-085
//0222N318xxxxxx085

In the case of internal settlement instructions where there is a change in beneficial owner, the declaration that the underlying cash settlement is via offshore or onshore payment must be indicated in the third row of the narrative of internal settlement instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal) as follows:

“Underlying cash settlement via offshore payment” or “Underlying cash settlement via onshore payment”

Example:

:70E::SPRO///SAFE/318-NNNNNN-085
//0222N318xxxxxx085
//Underlying cash settlement via offshore payment

In the case of internal settlement instructions where there is no change in beneficial owner, the declaration that it is a NCBO transfer for the particular beneficiary and that it is not related to a securities borrowing lending programme must be indicated in the third row of the narrative of internal settlement instructions (:70E::SPRO// in CFC via SWIFT and CFC File Transfer; Settlement instruction processing additional details in CFC Web Portal) as follows:

“//NCBO ASSET TRANSFER for <beneficiary’s name> and non-SBL programme related”

Example:

:70E::SPRO///SAFE/318-NNNNNN-085
//0222N318xxxxxx085
//NCBO ASSET TRANSFER for <beneficiary’s name> and non-SBL programme related

Note: Failure to adhere to the above requirements will lead to a failure or delay in the realignment of the internally settled securities positions in the domestic market.

c. Clients must communicate their RENTAS segregated securities account (see point 2c. above) details to their internal counterparties prior to trading.

The RENTAS segregated securities account is a matching criterion for the realignment in the Malaysian market.

d. With regards to internal against payment settlement:

Note: Clients should also take note of the holdings restrictions of MYR as indicated in Cash services.

e. In principal, transactions of SSDS-eligible securities must be settled against payment when there is a change of beneficial owner. However, transactions of SSDS-eligible securities where there is a change of beneficial ownership, may settle through the use of a free of payment (FOP) instruction provided that there is a separate payment in cash. In relation to internal FOP settlement in Clearstream Fund Centre, the cash payments that may take place:

This information has been provided by BNM and confirmation of effective payments as well as satisfactory proof of payment are required in practice by local custodians.

Therefore, when instructing an internal FOP transaction where there is a change of beneficial ownership, customers must specify in the Narrative field of their instructions (see point 5b. above for more details):

• “Underlying cash settlement via offshore payment” or “Underlying cash settlement via onshore payment”

to confirm that payment has been made.

This information is required in order to provide sufficient elements to Clearstream Fund Centre's depository in Malaysia to confirm that payment has been or will be effected between both the delivering and receiving parties of the transaction. If this information is missing, the realignment in the domestic market of the internally settled securities positions will remain open until the requested elements are provided.

Clients are also advised that, in the event of doubt, either Clearstream Fund Centre or its depository may request additional proof of the transfer of cash funds. Clearstream Fund Centre will not assume any liability if clients do not comply with effective payment, or have not communicated, in due time, proper documents establishing effective payment.

For transactions of SSDS-eligible securities where there is no change of beneficial owner, there is a need to ensure that the transfer is for the same end beneficiary, that is, NCBO basis, and that it is non-SBL (securities borrowing and lending) programme related. Therefore, when instructing an internal FOP transaction where there is no change in beneficial ownership, customers must specify in the Narrative field of their instructions (see point 5b. above for more details):

• “//NCBO ASSET TRANSFER for <beneficiary’s name> and non-SBL programme related”

This information will then be verified with the internal counterparty and is in line with the requirement from BNM, where supporting confirmation from customers is to be evidenced for the realignment in the domestic market of such internally settled securities positions.

In the event of a mismatch between the beneficiary names, the realignment in the domestic market of the internally settled securities positions will be put on hold until the discrepancy can be resolved. As such, clients are advised that in the event of doubt, either Clearstream Fund Centre or its depository may request additional details of the beneficiary. Clearstream Fund Centre will not assume any liability if clients do not comply, or have not communicated in due time, with the request for additional details of the beneficiary.

Clients should bear in mind that the above-mentioned transactions form part of the audits conducted on local custodians by BNM and the provision of such information is mandatory.

f. Clients should take note that internally settled positions will not be reflected on their RENTAS segregated securities accounts on a real-time basis, due to the realignment reporting requirements imposed on Clearstream Fund Centre by Bank Negara Malaysia. For any positions that settle internally outside of RENTAS operating hours, the realignments will only be reflected within RENTAS on the next available business day in Malaysia. As such, delays should be anticipated if internally settled positions need to be re-delivered to a domestic counterparty.

Management of failed instructions

Clearstream Fund Centre will advise the defaulting client of all failed receipts that become subject to a sell-out and of all failed deliveries that become subject to a buy-in. HSBC will continue to attempt to settle failed transactions that do not become subject to a sell-out or buy-in as long as such instructions have not been cancelled by the client. Clearstream Fund Centre reserves the right to cancel these instructions as of the third business day following the first attempted settlement date.