CFCL Settlement - U.S.A.

Settlement process

Please refer to the Settlement process - U.S.A. page for complete information about the Settlement process.

Settlement services

Pre-matching services

The table below summarises 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.

a. Eligible clients receive these messages in accordance with the frequency option to which they have subscribed.

b. In principle, these messages are generated by DTC approximately every 30 minutes from trade date through SD-1 during DTC’s operating time 08:00 to 15:00 EST (taking into consideration CFCL’s operating hours).

Description of the DTC ID service

Under the DTC ID service, CFCL will:

• Report ID confirmations received from clients' U.S. brokers;
• Enable clients to affirm ID confirmations via CFCL;
• Present affirmed ID confirmations for DTC settlement;
• Confirm settlement completion in conformity with the ID settlement cycle.

DTC's ID service provides a mechanism for seamless confirmation, affirmation and settlement of against payment transactions in DTC's books. U.S. brokers input confirmations of trades executed on behalf of their clients in the ID system. The confirmation is electronically forwarded to the client's custodian who will compare it against the receipt or delivery instruction received from the broker's and custodian's common client.

Provided that both sets of instructions match, the custodian will electronically affirm the broker's confirmation on the ID system. Affirmed ID confirmations will result in an automated settlement in DTC's books, with no need for the delivering party (that is, the broker or the custodian as the case may be) to input additional separate delivery instructions.

U.S. brokers generally input trade confirmations into DTC's ID system by 24:00 Eastern Standard Time (EST) on the Trade Date (later input is possible, however). Custodians are to affirm ID confirmations by 12:00 EST on SD-1. Provided the delivering party holds the required securities provision, DTC will settle affirmed ID confirmations in the early morning hours of SD and settlement results will be available to the broker and to the custodian at the start of the U.S. business day.

ID confirmations that are not affirmed by 12:00 EST on SD-1 cannot be affirmed afterwards. However, provided the delivering party inputs the appropriate DTC Delivery Order, the underlying trade can still settle on the Requested Settlement Date, but without the added convenience of prior trade affirmation.

CFCL's participation in the ID service

In its capacity as CBL's depository (CBL acting as a sub-custodian for CFCL), Citibank will forward ID trade confirmations to CBL. Following the client's trade affirmation, CBL will transmit settlement instructions to Citibank. Citibank will affirm the transaction in the ID system and confirm settlement completion to CBL/CFCL.

Clients who want to participate in CFCL’s ID service can choose between two options to affirm ID confirmations reported against their account(s):

• Positive affirmation: the client inputs receipt (61) and delivery (8M) instructions by 17:25 on SD-1 in order to affirm ID confirmations;
• Negative affirmation: CFCL generates and affirms ID confirmations for the client’s account unless the client has cancelled the instructions by 17:25 on requested SD-1.

Positive Affirmation Option 

Clients choosing the positive affirmation option will receive an ID Confirmation Message advising them of the details of their broker's ID confirmation. This advice is received as a Swift MT595 message. To affirm the ID confirmation, clients must input a corresponding external receipt or delivery instruction to CFCL.

Negative Affirmation Option

Clients adopting the negative affirmation option will see an external receipt (61) or delivery (8M) instruction that CFCL generates on their account upon receipt of their broker's ID confirmation. The Transaction Reference Number of such instructions will always correspond to DTCnnnn (where '“DTC” is a fixed value and “'nnnn” a number allocated by CFCL). In addition, clients choosing this option will receive an ID Confirmation Message advising them of supplementary details. This advice is received as a Swift MT595 message.

Under the negative affirmation option customers will not need to input their receipt or delivery instructions themselves. They will need to ensure, however, that the trade confirmed by their U.S. broker represents a valid trade. If they do not recognise the receipt or delivery instruction as a valid trade, they must input a corresponding cancellation by 15:00 on requested SD-1.

N.B.: Clients that adopt the negative affirmation option must check and cancel unrecognised instructions by the above-mentioned deadline on each CFCL business day - including those days that, while being a CFCL business day or a U.S. domestic business day, is a holiday in their own location. CFCL shall bear no responsibility if it settles any instruction that such clients have failed to cancel by the appropriate deadline.

Late ID confirmations

From time to time, Citibank and CFCL may receive late ID confirmations that can no longer be affirmed before the ID affirmation cut-off time. In practice, CFCL will not transmit ID Confirmation Messages (for accounts with a positive affirmation profile) or generate external receipt or delivery instructions (for accounts with a negative affirmation profile) on ID confirmations submitted later than approximately 06:00 EST on the U.S. domestic business day preceding the requested SD. In these cases, CFCL will nevertheless send a Late ID Confirmation.

Late ID Confirmation Messages (sent as Swift MT595) are sent to all clients, regardless of their chosen affirmation profile.

Settlement confirmations

Please refer to Settlement times - U.S.A. Cancellations initiated by the U.S. broker

From time to time, brokers may cancel ID confirmations that have not been affirmed by the CFCL client and by Citibank yet. DTC will inform Citibank and Citibank will inform CFCL of such cancellations. Depending on the impacted client's affirmation profile, CFCL will take the following actions:

• For accounts with a negative affirmation profile, the corresponding receipt or delivery instruction will be cancelled automatically. CFCL will report the instruction's status update (Cancelled) to the client. Such cancellations will be reported in the MT537 Statement of Pending Transactions Report.
• For accounts with a positive affirmation profile, CFCL will attempt to automatically cancel the corresponding receipt or delivery instruction. If cancellation is successful, CFCL will report the instruction's status update (Cancelled) to the client. The cancellation can only occur if the underlying client had already input the receipt or delivery instruction with the appropriate DTC control number (DTCIDnnnnnnnnn) when CFCL received the broker's cancellation.

Cancellations initiated by the CFCL client

Clients can cancel receipt or delivery instructions with the DTCIDnnnnnnnnn reference in the narrative field of Swift MT54x messages as long as such instructions have not yet undergone CFCL's provision check or collateral check. Clients can no longer cancel such instructions once released to Citibank as a result of the successful completion of CFCL's provision or collateral check.

How to register for the DTC ID service

To participate in CFCL's ID service, clients must complete the DTC ID Registration form in Forms to use in the U.S. market page, indicating the following:

• Their chosen affirmation profile - positive or negative;
• Their U.S. broker account details, to enable CFCL to map ID confirmations received from Citibank against their CFCL account.
  Clients using multiple U.S. brokers or servicing multiple underlying clients will be able to link their multiple broker accounts to one or to several CFCL accounts;
• Their chosen reporting medium for the ID Confirmation Messages and for the Late ID Confirmation messages.

Reporting on settlement

Any delivery to the U.S. market is subject to approval by the receiving party in DTC, using the DTC RAD function. The table below describes the scenarios that need to be considered and the corresponding reporting that is provided.

Securities delivery by CFCL clients

Securities receipt by CFCL client

No Clearstream Fund Centre client receipt instruction in place

Clearstream Fund Centre client receipt instruction in place

Procedures for domestic counterparties - Book-entry transfers

Receipts in CFCL (general, for free of and against payment)

Note: Please ensure that "CSC" is in capital letters to avoid settlement delays.

Securities allocated to Citibank must be delivered as follows:

Through DTC

RECV-PT: 0908
RCVR-ACCT: 089154 CSCxxxxx

or

RECV-PT: 0908
RCVR-ACCT: 089154
First comment line: CSCxxxxx

Through DTC's ID service

INST: 64005
ID AGT: 57569
A/C: 089154
Special instruction 5: CSCxxxxx
DEL AGT: 0908

Through FBE

CONTRA: CITIBANK NYC/CUST ABA 021000089
INF1 line: 089154 CSCxxxxx

where 64005=CBL's Institution ID number; 57569=Citibank's Agent ID number; 089154=CBL Agent's internal account number; xxxxx=5-digit CBL account number.

Investment fund securities are not being transferred physically through CFCL.

Receipts in CFCL (specific, for free of payment only)

Receipts free of payment in CFCL from a U.S. counterparty require a receipt instruction from our client.

Note: No DK (Don't Know) will be initiated by CFCL on its behalf, bearing in mind that the delivery could be DK'ed in turn by the U.S. counterparty in the absence of appropriate communication between said counterparty and our client.

Our clients are also recommended to request timely instructions from their underlying clients for entries of securities free of payment in order to allow our clients to send in turn timely receipt free of payment instructions to CFCL. This should further improve the booking process of security receipts free of payment and limit the risk of wrong allocation.

Deliveries from CFCL (other than against payment deliveries via DTC’s ID service) and risk of DK

Local market practice allows the receiving party to reverse a receipt (under the “Don't Know” - DK - procedure). If this happens, the securities are re-credited (and any sales proceeds are re-debited value settlement date) for same-day DKs on SD+1 and for later DKs as soon as the reversal has been processed. The reason of the DK is passed on from the counterparty to the customer in field :70D: of MT548 and MT537. The quality of the DK information depends on what the U.S. counterparty has input in its DK DTC ticket.

The risk of DK is limited to transactions that are not subject to RAD approval in DTC.
Transactions that are subject to RAD approval are as follows:

• All against payment deliveries of DTC-eligible securities where the countervalue is greater than USD 0.01;
• Free of payment deliveries of DTC-eligible MMIs.

To avoid DK (Don't Know) settlement failures, counterparties receiving securities from a CFCL client must instruct their U.S. or Canadian custodian by its agreed deadline to accept securities delivered by CFCL's depository Citibank via FBE, DTC, CDS, as appropriate.

Transactions initiated via DTC’s Institutional Delivery System (ID System)

CFCL participates in DTC's ID service with respect to against payment transactions with counterparties in DTC for securities allocated to depository Citibank. U.S. brokers initiating confirmations against Citibank and CFCL must submit their ID confirmations with the following data:

• (Mandatory) Citibank's Agent ID number: 57569;
• (Mandatory) CFCL's Agent Internal Account Number: 089154;
• (Optional) CFCL's Institution ID Number: 64005.

Allowed countervalue difference

In transactions with domestic counterparties for standard DTC and FED transactions as well as DTCID transactions, a maximum difference in countervalue of USD 25 is allowed.

Where there is a difference in the settlement amount within this limit for standard DTC and FED transactions as well as DTCID transactions, the cash amount of the delivering party will prevail.

Summary of available services by security type and client

All security types can be held in custody for non-U.S. clients and for U.S. clients.

Settlement services vary according to security type and category of client, as follows:

Note: In the following table, I=Internal, E=External, B=Bridge.

a. Book-entry DTC settlement may not be possible due to a DTC “chill” initiated by the issuer of the security. For “chill” time frames, “chill” removals or other specific details, clients must contact the issuer or transfer agent in charge.

Transfer of shares in open-end mutual funds

Transfers of shares in open-end mutual funds eligible on Vestima can be instructed via standard Swift MT540/542 message formats. These instructions should be alleged against a receiving/delivering agent REAG/DEAG 50613 and contain the counterparty's standard settlement instructions (SSIs) in the BUYR/SELL field as described below:

• PSET// CEDELLUXXX
• DEAG/REAG// 50613
• BUYR/SELL// Counterparty BIC
• SAFE// Account of the counterparty at their custodian

In addition, the client must send to the counterparty the number of CFCL’s account in the register of the mutual fund. Clients who do not have this detail on file are advised to contact Clearstream Fund Centre Investment Funds Client Services.

Change of distribution option on open-end mutual funds

The client instructs a change of distribution option on open-end mutual funds eligible on Vestima by means of Swift MT540/542 message.

Clients who wish to amend their dividend option should instruct via a transfer out (MT542) of the common code/ISIN linked to their current holding and to the common code/ISIN of the new distribution option (MT540). 

Back-to-back processing

Back-to-back processing is available for transactions in all DTC-eligible equities in this market. If both the client and the domestic counterparty meet their settlement obligations and fulfil the market's back-to-back requirements within the relevant deadlines, the linked receipt and the linked delivery will settle with same-day value. The automated back-to-back functionality cannot be used in combination with the DTC ID service (with which clients can already achieve same-day turnaround).

To benefit from this functionality, clients must ensure that their back-to-back instructions are formatted as follows, according to the connectivity medium used:

a. The reference (16x) must neither start nor end with a single slash (/) character nor must it contain two consecutive slash (//) characters.

Management of failed instructions

Receipt instructions remain in suspense until they settle or until they are cancelled. CFCL reserves the right to cancel an instruction with a domestic counterparty that has not settled by the 30th domestic business day after the contractual settlement date or the instruction date, whichever is later.

Delivery instructions that have not settled by the requested settlement date are cancelled and the securities are re-credited to the client's account in the night-time processing for the following settlement date (SD+1 (n)).

To avoid settlement failure of DWAC instructions (withdrawals and deposits) due to delays caused by a failure to complete and return the necessary documents in time, these instructions will be re-submitted during each of the five business days following the requested settlement date if they are formatted as specified in the relevant instruction specifications.

New issues settlement

If the distribution of a new issue is confirmed by DTC before 18:00 CET, the distribution of that issue will be settled in CFCL during the overnight processing following the closing date in the U.S.A. Cash will be debited in the same processing with back value to closing date.

MMI new issues are subject to an earlier cut-off time in DTC and are exclusively settled via the DTC - Receiver Authorised Delivery (RAD) function.

The MMI valued new issuance (DTC reason code 82 - issuance DO) submission DTC cut-off is changed to 14:00 EST from 15:20 EST for settlement on the current date.

All Reg S issues held in DTC are subject to a “chill period” of 40 days after issuance. During that period, these issues cannot be moved in DTC nor transferred to the corresponding 144A tranche through a regular delivery. Nevertheless, it will still occasionally be possible to transfer securities via DWAC. It is the agent's responsibility to request DTC to lift the chill DTC after the 40 days have elapsed.

All TEFRA D issues are subject to a restricted period of 40 days after issuance, during which period certification of beneficial ownership will be requested from clients.

• Clients will be responsible for informing CFCL of U.S. non-qualified holder positions, which will be blocked to allow for the exchange of the temporary global note for definitive notes or for a permanent global note.
• Non-U.S. and qualified U.S. holder positions will not be blocked and will be eligible for exchange of the temporary global note for definitive notes or for a permanent global note.