Bilateral cancellation for internal trades and its implications

Further to our Announcement A12184, dated 12 October 2012, and effective

3 December 2012

Clearstream Banking¹ will amend its rules on “irrevocability and finality of transactions”.

Impact on customers

Currently, internal instructions can be cancelled at any time prior to settlement, without agreement from the counterparty.

We will now introduce “bilateral cancellation” for internal instructions that are irrevocable. Once an internal instruction is matched, has reached the requested settlement date and has been presented for settlement in the Clearstream system, both counterparties will have to agree before the instruction is cancelled.

This affects the following instruction types:

• Only internal (CBL-CBL) instructions. Bridge and domestic instructions are excluded.
• Only internal receipt and delivery instructions, free of or against payment, with matching.

If such cancellation agreement is not notified to Clearstream Banking via MT548, the customer will not be able to cancel an internal instruction once it has become irrevocable.

Instructions that are matched and that have not settled on Settlement Date will be failed.

For an internal instruction that has not settled at the end of the day, a new instruction will, unless otherwise advised by the customer, be re-presented for next-day settlement.

Customers will do one of the following:

• Accept that Clearstream Banking issues an instruction automatically for next-day settlement (“default option”).

or

• “Opt out” from the default option for all internal instructions on an identified account.
  
  A request must be sent via registered letter or authenticated free-format message (that is, an MT599 message) for the attention of Account Administration (OBC for CBL customers and OSM for CBF customers).
  
  All failed instructions for a customer that has opted out at account level will be cancelled after end of day processing.

or

• Change their default option on a case-by-case basis.
  
  A request must be sent via MT599 for the attention of Settlement Department at the latest by 18:00 CET on Settlement Date.
  
  Full details of the instructions and the market(s) impacted should be clearly mentioned.

Note: An additional fee will apply to customers that opt out from the default option as described above.

Reporting

Wehave enhanced our reporting via SWIFT (MT548, MT537 and MT94x) and CreationOnline. For bilateral cancellations, the following new “statuses” will be reported to the customer:

• Upon receipt of the cancellation request, an MT548 will be triggered.
  
  :23G::INST
  :25D::IPRC//CANP
  :24B::CANP//CONF
  
  In CreationOnline, the status will be translated by “awaiting counterparty cancellation”.
  
  
• Simultaneously, another MT548 is triggered to the counterparty advising them of the cancellation request.
  
  :23G::INST
  :25D::IPRC//CPRC
  
  In CreationOnline, the reason will be decoded into “Cancellation request”.
  
  
• Once both counterparties have sent their cancellation messages, the instruction is immediately cancelled and reported accordingly via MT548 IPRC//CAND or updated as “cancelled” in CreationOnline.

N.B.: Instructions are not put on hold until cancellation requests are received by both counterparties; settlement can still occur up until the second cancellation request is received.

The new reason codes will be available through all our Reporting media in SWIFT (MT548, MT537 and MT94x), CreationOnline and CreationDirect via Internet.

Further information

For further information, customers may contact Clearstream Banking Customer Service or their Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).