dvp settlement - Национальный ... · dvp 1, 2, 3 usd dvp settlement may be effected via...
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DVP (Delivery versus payment) links the delivery and payment obligations in such a way as to ensure that the final (i.e. irrevocable and unconditional) settlement of securities occurs if and only if the final settlement of the corresponding payment occurs. NSD offers its clients DVP settlement using three DVP models:
DVP SETTLEMENT
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• Settlement occurs on a trade by trade basis DVP 1:
• Securities are settled on a gross basis, but cash is settled on a net basis
DVP 2:
• Net settlement of both securities and cash DVP 3:
Accounts Custody account with NSD
DVP model Currency
Cash account with NSD DVP 1, 2, 3 RUB, USD, EUR, CNY, HKD, GBP, CHF
Cash account with Citibank N.A., NY, JP Morgan Chase Bank N.A.
DVP 1, 2, 3 USD
DVP settlement may be effected via cash accounts with NSD or with the foreign banks:
1. Clearing participants (Seller and Buyer) send DVP instructions to NSD;
2. NSD executes netting of liabilities in pool of matched instructions;
3. Securities blocking;
4. NSD on the basis of Power of Attorney sends instruction to debit Buyer’s/ Buyer’s client cash account opened with the foreign Bank.
5. Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York transfers funds from the Buyer’s/ Buyer’s client cash account to the account of NSD;
6. NSD sends instruction to transfer funds from the correspondence account opened with Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York to the account of Seller/Seller’s client;
7. NSD receives confirmation that the account of Seller/ Seller’s client has been credited;
8. NSD settles securities.
DVP: SETTLEMENT VIA ACCOUNTS WITH FOREIGN BANKS
* For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account.
Clearing participant (Seller)
Clearing participant (Buyer)
Seller’s trading securities account
Buyer's trading securities account
Account of Buyer/Buyer’s client
Citibank N.A., NY/ JP Morgan Chase Bank N.A., NY
Account of Seller/Seller’s client
Account of NSD
*Aggregate clearing account
for securities settlements
8 8
2
56
NSD
Cash Cash
11
7 4
3
1. Clearing participants (Seller and Buyer) send DVP instructions to NSD;
2. NSD executes netting of liabilities in pool of matched instructions;
3. Securities blocking;
4. NSD simultaneously settles funds and securities.
DVP: SETTLEMENT VIA ACCOUNTS WITH NSD
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* For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account.
Clearing participant (Seller)
Clearing participant (Buyer)
Trading securities account of Seller
Trading securities account of Buyer
*Aggregate clearing account
for securities settlements
4 4
2
NSD
11
Trading bank account of Seller/
Seller’s client
Trading bank account of Buyer/
Buyer’s client
Aggregate clearing account for cash
settlements
3
4 4
DVP: SETTLEMENT VIA ACCOUNT WITH A FOREIGN BANK AND ACCOUNT WITH NSD
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* For DVP-2 and DVP-3 settlements. DVP-1 settlements are conducted without Aggregate clearing account.
Clearing participant (Seller)
Clearing participant (Buyer)
Trading securities account of Seller
Trading securities account of Buyer
Account of Buyer/ Buyer’s client
Citibank N.A., NY/ JP Morgan Chase Bank N.A., NY
Account of NSD
*Aggregate clearing account
for securities settlements
7 7
2
5
NSD
Cash
11
4
Trading bank account of Seller/
Seller’s client
3
6
1. Clearing participants (Seller and Buyer) send DVP instructions to NSD;
2. NSD executes netting of liabilities in pool of matched instructions;
3. Securities blocking;
4. NSD on the basis of Power of Attorney sends instruction to debit Buyer’s/ Buyer’s client cash account opened with the foreign Bank.
5. Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York transfers funds from the Buyer’s/ Buyer’s client cash account to the account of NSD;
6. NSD reflects funds transfer from correspondence account opened with Citibank N.A., New York/ JP Morgan Chase Bank N.A., New York to trading bank account of Seller/ Seller’s client opened with NSD;
7. NSD settles securities.
• A clearing batch is based on matched instructions for which currency control documents have been received.
• A clearing batch may include obligations to be terminated and/or fulfilled using DVP
model 2 or DVP model 3.
During a business day, NSD runs 9 clearing batches:
CLEARING BATCHES
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Cash accounts with NSD Cash accounts with the foreign banks
10:00, 12:00, 13:00, 14:00, 15:00, 16:00, 18:00, 18:45, 19:40
10:00, 13:00, 15:00, 18:00, 18:45
Timeframes within which settlement of clearing batches with accounts with the foreign banks will be effected depends on foreign settlement banks’ efficiency of NSD’s instructions execution.
ACCOUNT LINKING OPTIONS
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1.1 Cash account and securities account belong to one entity
ICSD, CSD or Russian Custodian/Broker
ICSD, CSD or Russian Custodian/Broker
Non-resident ResidentResident
ICSD, CSD or Russian Custodian/Broker
1.3 (A) Several cash accounts, opened in the name of the Clients of ICSD, CSD or Russian Custodian/Broker are linked with omnibus securities account
Clearing participant X
Clearing participant X
Clearing participant/ The Client
1.5 Cash account is linked with several securities accounts, belonging to the same Clearing participant
Clearing participant/ The Client
1.4 Cash account is linked with segregated securities account.
Clearing participant X
Subaccount for Client A
Subaccount for Client B
Trading cash account opened with NSD or with the foreign bank
Trading securities account opened for NSD clearing
1.2 Cash account belongs to the Client of ICSD, CSD or Russian Custodian/Broker
The Client
ICSD, CSD or Russian Custodian/Broker
Client A
1.3 (B) Several cash accounts, opened in the name of the Clients of ICSD, CSD or Russian Custodian/
Broker are linked with segregated securities account
ICSD, CSD or Russian Custodian/Broker
Subaccount for Client A
Subaccount for Client B
Subaccount for Client C
Client В Client C
Clearing participant – ICSD, CSD or Russian Custodian/Broker.
Clearing Participants are allowed to set a priority order for the execution of their clearing instructions for the receipt of securities (transaction code 19/1).
Key Specifications
DVP SETTLEMENTS WITH CASH RESERVATION
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Such instruction has a priority in respect of the bank account to be debited. The priority order starts to be taken into account on the settlement date of both
matched and non-matched instructions. If there are several instructions with the same priority, they are queued on the ‘first-
come, first-served’ basis, subject to the time of their registration. If the cash available is insufficient to execute the first instruction in the queue, the
other instructions will not be executed. If there is no matching instruction available, other DVP2 and DVP3 instructions may be
executed during the last clearing session; other DVP1 instructions may be executed after the launch time of the last clearing session. This mechanism applies to settlements through trading bank accounts held with NSD.
To indicate that an instruction must be executed “with cash reservation”, the relevant box
must be ticked in the instruction (Form MF190), or the code /RSVD/ must be used in the
field :70E::SPRO// of the TRADDET block in an MT 541 message.
The application of a tolerance value allows to match and settle matching instructions if
any minor differences have been found between the amounts stated in the matching
instructions received from Clearing Participants.
For matching instructions for which the tolerance values were specified: if the trade values stated in the matching instructions differ, then the trade value stated in the instruction issued by the Clearing Participant acting as the transferee of the securities will prevail.
The trade value will be taken to be equal to:
the trade value specified by the Clearing Participant acting as the transferee of the securities, if the difference between the trade values specified in the matching instructions does not exceed the tolerance value established by the transferor of the securities; or
the trade value specified by the Clearing Participant acting as the transferor of the securities, if the difference between the trade values specified in the matching instructions does not exceed the tolerance value established by the transferee of the securities.
If the tolerance value is established only for one of the matching instructions, the trade value shall be taken to be equal to that specified in the instruction of the Clearing Participant who did not establish a tolerance value, provided that the difference between the two trade values specified in the matching instructions does not exceed the tolerance value established by the other Clearing Participant.
TOLERANCE PRINCIPLE (1/2)
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A tolerance value shall be determined by each Clearing Participant at his own
discretion and specified upon registration of bank account details.
The maximum tolerance value* is USD 25 or RUB 800.
The tolerance value must be stated in the account currency; otherwise, the tolerance
value will not be applied.
Examples:
TOLERANCE PRINCIPLE (2/2)
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A’s trade value: RUB 600
B’s trade value: RUB 500
Securities
1 A’s tolerance value – RUB 150
B’s tolerance value – RUB 150
The difference between the trade values is RUB 100. As 100<150, the trade will be executed at the B’s trade value of RUB 500.
2 A’s tolerance value – RUB 50
B’s tolerance value – RUB 120
The difference between the trade values is RUB 100. As 100>50<120, the trade can be executed at the A’s trade value of RUB 600 and cannot be executed at the B’s trade value of RUB 500. Therefore, the trade will be executed at the A’s trade value of RUB 600.
3 A’s tolerance value – RUB 150
B’s tolerance value – not established
The difference between the trade values is RUB 100. As 100<150, the trade will be executed at the B’s trade value of RUB 500.
4 A’s tolerance value – RUB 50
B’s tolerance value – not established
The difference between the trade values is RUB 100. As 100>50, the trade will not be executed.
* If a tolerance value is established in any other currency, it may not exceed the equivalent of USD 25 at the Bank of Russia ’s exchange
rate effective on the date immediately preceding the execution date of the relevant bank account details registration instruction.
Necessary to provide currency control documents*
Not necessary to provide currency control documents
By residents (not credit organisations) going to effect settlement in a foreign currency
By non-resident clients
By residents (not credit organisations) going to effect settlement in rubles with non-resident client
By credit organisations
CURRENCY CONTROL
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*Transaction basement documents for DVP settlement via cash accounts with NSD should
be submitted simultaneously with the DVP settlement instructions or in advance of the settlement date. For DVP settlement via cash accounts with foreign banks the client has to provide NSD only with a brokerage service agreement/agency agreement/accession agreement/ etc., confirming legal relationship between the foreign bank and the client only once in process of cash account details registration.
1. Reporting on potential counterparty
instruction (subscription to Electronic matching
required)
• MT548;
2. Reporting on absence/ existence of
matching instruction
• MT548, MT578;
3. Sending reports on the results of clearing
instructions matching:
• MT548, MT537;
4. Reporting on instruction execution:
• MT545, MT547;
5. Reporting on clearing batch settlement
results:
• MT575*;
6. Report on all unsettled deals with reason
description:
• MT537;
7. Report on securities transfer based
on clearing results:
• MT544, MT546;
8. Cash account statements:
• MT950 or via “bank-client system”;
9. Reporting on instruction failure
(expiration):
• MT548
10. Report on instruction
cancellation:
• MT541/MT543;
11. Transfer of cash from accounts
with the foreign banks:
• MT900.
MAIN REPORT TYPES SENT TO CLIENTS VIA SWIFT
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*To receive MT575 it is necessary to register in Message User Group (MUG). Registration can be made on web-site www.swift.com section Ordering > Order products and services > Message User Group, register to.
1. Why is it necessary to provide NSD with debit authority in respect of cash accounts opened with
NSD?
- For DVP deals via cash accounts with NSD as well as via cash accounts with foreign banks, the Client has to
provide NSD with an authority to debit his accounts. As of internal DVP, NSD being Clearing institution
conducting DVP netting has debit authority in respect of clients’ trading cash/securities accounts, but at the
same time NSD’s debiting authority is limited by carrying out only these functions. The client always has the
right to submit instruction and debit his account if cash or particular securities (as for securities account) are
not involved in current DVP settlement liabilities of the client. If the customer already has cash accounts with
the Foreign Banks, he will need to complete and send the relevant documents to the Foreign Bank
authorising NSD to operate the customer's account with the bank.
2. When should the client credit his accounts (cash and securities) with necessary amount of cash
and securities?
- At the time a deal is concluded, there is no need to have sufficient securities and/or cash in the accounts.
The securities and cash needed to settle the deal must be available in the accounts on the settlement date
stated in the instruction, 15 minutes in advance of the clearing session.
3. When DVP instructions will be executed?
- Instructions will be executed on the settlement date specified in the instruction or on the date the pairs of
instructions are matched, where one of the instructions is missing on the settlement date. Execution period
for DVP instructions is 30 days from the settlement date.
4. Is it possible to avoid transliteration in DVP reports?
- For DVP settlement NSD already does not require clients for transliteration and does not send reports with
transliteration.
QUESTIONS & ANSWERS
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NSD Hotline:
Tel.: +7 (495) 234-48-27
Client Services Division:
Tel.: +7 (495) 956-27-90/91;
Client Relations Development Department:
Tel.: +7 (495) 232-05-14
E-mail: [email protected]
Web-sites:
www.nsd.ru, www.isin.ru
Address:
12, Spartakovskaya str.,
Moscow, 105066, Russia
CONTACTS
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solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company
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markets – Competition increase from new players on the Russian market – The ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that
are popular with the Company's and its subsidiaries' customers – The ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the
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