Settlement process - Norway
Foreign denominated securities in the Oslo Stock Exchange are settled against their stated currency (USD or EUR).
Settlement cycles
Norwegian short-term instruments: | T+2 |
Equities and debt instruments traded on the Oslo Stock Exchange: | T+2 |
Participants may agree a different settlement period.
Settlement flows
VPS ASA offers clearing and settlement free of and against payment for the Norwegian market in NOK. Clearing is executed on a net basis once positions are calculated.
Settlement of transactions against payment is executed in Norwegian Krona via the Central Bank on a net basis.
VPS ASA runs three settlement batches for same-day settlement:
- A first settlement batch running at approximately 06:00, with a deadline to enter trades of 20:00 last day of trade before settlement day;
- A second settlement batch running at approximately 12:10, with a deadline to enter trades of 11:30.
- A third settlement batch running at approximately 14:15, with a deadline to enter trades of 14:00.
Settlement is carried out according to a regular, rolling cycle and free of payment transactions, between investor accounts are entered into accounts in real time.
Settlement instructions can be entered on SD-1 for value SD until 20:00 SD-1.
Finality is achieved at the end of each settlement batch. Cash settlement takes place through the accounts at the Central Bank or via the appointed settlement bank. Free of payment transactions have an immediate finality.
Failed Transactions
Settlement transactions that remain unmatched on settlement day will be resubmitted for settlement in the next cycle for 20 consecutive days. After this period, VPS ASA will reject any instructions that remain unmatched.
Matched settlement transactions that are still pending settlement will remain in the VPS ASA system until cancelled by the participant according to the market rules.
If a counterparty has failed to deliver securities on the agreed settlement date, the party not causing the fail can unilaterally cancel a transaction that has not settled on the contractual settlement date provided that it directly informs the counterparty before instructing the cancellation.
The counterparty instruction will remain pending and unmatched in the VPS ASA system.
Although matching is not binding, when transactions are confirmed, VPS ASA blocks the securities in the seller's account and subsequently the trade can only be changed or cancelled if both parties instruct a reverse trade.
Registration
Equities
An act of the Norwegian Parliament related to the Norwegian Central Securities Depository, (VPS ASA), requires all securities listed on the Stock Exchange to be registered electronically in the Registry. The majority of the most frequently traded, unlisted securities are also registered in the VPS ASA system. All Norwegian shares are in registered form.
The Public Limited Companies Act requires shares to be registered in the name of the beneficial owner. By law, owner registers are required to be publicly available. Upon request, a company is obliged to produce a list of all the registered owners.
According to this Act, foreign investors can, unlike Norwegian nationals, have their listed shares registered in the name of a trustee or nominee.
However, there are several conditions attached to such nominee registration, as follows:
- The nominee must be licensed as such by the Banking, Insurance and Securities Commission of Norway.
- Voting rights are "frozen" until the shares are registered in the name of the beneficial owner.
- The nominee will further be required to list the names of the beneficial owners upon request from the company or from governmental authorities.
The title and registration data of a securities account will be reflected similarly in the owner registers. Transfer of ownership is automatically updated in connection with the transfer of shares in the VPS ASA system.
Debt Instruments
Although Norwegian bonds are registered on the owner's account in the VPS ASA system, bond issuers are not generally aware of the identity of the bondholders. Transfer of ownership is achieved in the same way as for shares.
Stamp duty
Stamp duty is not applicable in the Norwegian market.
Penalties
Buy-in Rules
VPS ASA does not impose fees or penalties, although, according to the Norwegian Securities Dealers Association, if delivery has failed at the time of the original settlement, the buying member has the right to initiate buy-in (after a buy-in notice has been issued). However, such buy-in is not common market practice.
Recycling of pending transactions
Unmatched instructions will be cancelled automatically either after 20 working days starting from the intended settlement date or the date of the last status change of the instruction.
Matched, but not settled instructions will be recycled by VPS until cancelled by the clients.
Bilateral cancellation
This means that matched instructions can only be cancelled if both domestic counterparties request a cancellation of their instructions.
Until the cancellation confirmation is received from the market, the instruction will remain eligible for settlement, that is, the instruction may be provisioned and proposed for settlement and may be subject to cash penalties.
Hold and release
The hold and release mechanism enables customers to temporarily hold back a securities transaction from domestic settlement, even if cash or securities provision is available and to release it to the domestic market only when settlement is desired. The matching process applies independently of the “hold and release” status of the instruction.
Partial settlement
Partial settlement is available for domestic transactions and the customer’s decision to accept for the transaction to settle/not to settle partially will be systematically included in the instruction sent to the local market. Partial settlement will continue as it does today and Clearstream Banking will continue to report partial settlement feedbacks received from the markets.
Cash penalties (starting 1 March 2022)
Penalties will be calculated and applied on matched settlement instructions that fail to settle, in full or in part, on and after their intended settlement date (ISD), if both the settlement instruction and the relevant financial instrument are subject to cash penalties.
Instruments subject to cash penalties
Any financial instrument listed in the Financial Instruments Reference Data System (FIRDS) database maintained by ESMA will be subject to cash penalties. However, cash penalties will not apply to shares listed in the Short Selling Regulation (SSR) exemption listed in the Short Selling Regulation (SSR) exemption list.