example of securities service level agreement978-0-230-59244-5/1.pdfkey control objectives ... under...

The text sets out the minimum standards for CLIENT SLA and has been provided courtesy and withpermission of Thomas Murray.

The Service Level Agreement is divided into functional areas.

SettlementThe settlement of securities transactions in all instruments where a client invests, according to theclient’s settlement instructions. This service may include bulk settlement, where an asset manager blockdeals with brokers on behalf of its different clients/portfolios. Actual settlement is where a client’saccount is credited/debited with cash or securities on the date settlement actually takes place.Contractual settlement service* is where a [CUSTODIAN] conditionally commits to credit cashproceeds to a client’s account on an agreed due date in freely available (i.e. cleared) funds. Provision ofa contractual service will be contingent on [CUSTODIAN] receiving ‘clean’ trade instructions (i.e.complete, properly formatted and authenticated instructions), before pre-specified cut-off times. Relatedservices provided by [CUSTODIAN]’s include trade affirmation and matching, failed trade notification(by type of fail) and resolution.

Key control objectives� All settlement instructions received are properly authenticated;

� All authorised settlement transactions are recorded and processed completely, accurately and on atimely basis;

� All transactions, including failed trades, should be dealt with on a timely basis;

� All settlement transactions are pre-matched prior to settlement date.

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Example of SecuritiesService Level Agreement

APPENDIX I

Control objective: All authorised settlement transactions are recorded and processed completely,accurately and on a timely basis.

APPENDIX I 271

Activity: Contractual settlement date accounting for securities purchases and sales

Description of [CLIENT]’s requirements:

To receive contractual settlement date accounting in all markets where [CLIENT] invests. Theservice should cover cash debits and credits related to all bonds and equities. Accounting andmemorandum entries must be properly posted by [CUSTODIAN] to reflect contractualsettlement.

[CUSTODIAN]’s service commitment

1. All settlement instructions are properlyauthorised and authenticated and sent by theagreed method of communication.

2. To pass all cash debits and credits related toall transactions on the contractual settlementdate, provided that:i. [CUSTODIAN] receives instructions

before the stated cut-off times and,ii. There are no external impediments in

settling the transactions.

3. [CUSTODIAN] reserves the right to reversecash proceeds should the trade not settlehowever, the bank will give [CLIENT]written confirmation of not less than 5 days.

4. If [CLIENT]’s trade instructions are receivedafter [CUSTODIAN]’s timeframes,[CUSTODIAN] will apply CSDA shouldtheir sub-custodian achieve settlement forthe contracted date. In such instances[CLIENT] will send notification to[CUSTODIAN] advising the specifictrade(s) to which this should be applied.

5. To provide [CLIENT] with a tradesettlement confirmation message MT54X onsettlement date with the original transactionreference number (TRN) allocated by[CLIENT].

To advise immediately by telephone of anysettlement confirmation sent to [CLIENT] inerror.

[CLIENT]’s service commitment

1. To instruct [CUSTODIAN] of purchases andsales within agreed deadlines

2. To use the agreed method of deliveringinstructions.

3. For sales the securities will be available fordelivery and cleared funds in settlementcurrency available for purchases.

APPENDIX I272

Activity: Trade amendments


To receive contractual settlement date accounting on the stated value date where there areamendments – for example, where a failed trade requires amendment.

[CUSTODIAN]’s service commitment [CLIENT]’s service commitment

1. Not to change the value date in 1. If a failing trade requires an markets where contractual amendment to facilitate settlement,settlement is applied. [CLIENT] will communicate the

amendment to [CUSTODIAN] via 2. To action within the same day all SWIFT, proprietary link, or any other

amendments received within the agreed method to the Client Service deadlines delivered by the agreed Administrator, when it is close to the method of communication. agreed deadline.

Control objective: All authorised settlement transactions are recorded and processed completely,accurately and on a timely basis.

Activity: Actual settlement of securities purchases and sales


To receive actual settlement where [CLIENT] elects to receive actual settlement rather thancontractual or where contractual settlement is unavailable. The service should cover all cash debitsand credits related to all transactions.


1. To instruct [CUSTODIAN] of purchases andsales in accordance with agreed deadlinesand delivered by the agreed method ofcommunication.

2. [CLIENT] should ensure that cleared fundsare made available by value date to coverpurchases. Actual settlement date accountingsale proceeds should not be utilised orremitted until the proceeds are confirmed on[CLIENT]’s account.

1. To debit purchase costs on the expected settlement date, and credit sale proceeds within [24] hours of receiving confirmationof the receipt of funds from[CUSTODIAN]’s agent with good value.

2. To credit and debit [CLIENT]’s ledgerswith [CUSTODIAN]’s transactionreference to reflect purchased and soldsecurities within 24 hours of settlement.

3. To report trade status information showingdifferent codes for settlement and failingtrades.

4. To clearly flag the day before thatproceeds are due from a sale, through thecash projection/pending trade report.

5. To provide [CLIENT] with a tradesettlement confirmation message MT54Xon settlement date with the originaltransaction reference number (TRN)allocated by [CLIENT].

6. To advise immediately by telephone ofany settlement confirmation sent to[CLIENT] in error.

APPENDIX I 273

Control objective: Settlement transactions are pre-matched prior to settlement date.

Activity: Matching trades, and on-line reporting of matched and un-matched trades.


To receive up-to-date, on-line reports of the status of trades, including confirmed trades,outstanding trades, failed trades and reasons for failed trades.


1. No responsibility exists for [CLIENT] tocontact [CUSTODIAN] about status ofunsettled trades.

2. To contact counterparties to resolveunmatched trades when requested by[CUSTODIAN] to do so.

1. On receipt [CUSTODIAN] will pre-matchall trade instructions with [CLIENT]’sbroker’s clearing agent, in accordance withlocal market practices.

2. A pre-matching report will be sent dailyto [CLIENT] by SWIFT MT54X, showingthe standard SWIFT reason codes for themismatch in field 23 for all unmatchedtransactions that are likely to fail unlessremedial action is taken. CSA will verballyadvise [CLIENT] in addition to any pre-matching report.

3. [CUSTODIAN] will notify [CLIENT]immediately by telephone if a matchingproblem is detected that requires immediateattention or is a large value transaction.

4. Settled trade details will be updated within 24 hours of settlement.

5. Any transactions alleged against [CLIENT]for which no instruction has been sent willbe immediately reported by e-mail ortelephone. This is in instances wherecounterparty has provided client details to[CUSTODIAN]’s sub custodian, thusidentifying [CLIENT].

6. [CUSTODIAN] will match all instructionswithout reference to [CLIENT] with cashdifferences within the standard markettolerances.

7. [CLIENT] will be advised immediately ofsettlement date of all failed trades by theagreed method of communication.

8. [CUSTODIAN] will only act on verbalinstructions from mandated personnel foragainst payment transactions where such aninstruction is followed up with an authorisedinstruction.

APPENDIX I274

Control objective: All transactions, including failed trades, should be settled on a timely basis.

Activity: Failed trade procedures


To be informed by [CUSTODIAN], of actions required to complete a failed trade, as soon as[CUSTODIAN] becomes aware of a potential settlement difficulty.


1. To liaise with the counterparty to gather theinformation needed to complete the trade.

2. To settle any interest claim or market finecaused as a result of the fault of [CLIENT].

1. To advise [CLIENT] of unmatchedinstructions for trades prior to value date, aswell as those that have reached, and remainoutstanding after value date.

2. To take full responsibility for following upall unmatched trades on [CUSTODIAN]’ssystem after 24 hours, and seek resolutionbefore contractual settlement date.

3. To inform [CLIENT] of the actions requiredto complete a failed trade.

� Critical items will be referred to[CLIENT] immediately.

� Trades that are not due to settle for severaldays are referred no later than 24 hoursafter [CUSTODIAN] becomes aware ofthe potential settlement difficulty.

4. To resolve all interest claims on latesettlement with the counterparties/brokers.

5. Covered under GCA.

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Activity: Daily reporting on the progress of failed trades


To be up-dated, on a daily basis, of the progress of failed trades.


1. To take any reasonable action necessary toresolve failed trades, as requested by[CUSTODIAN].

1. In addition to verbal communication, alltrades that fail to settle on value date will belisted on the ‘outstanding trades’ reportMT54X within 24 hours of the value date.This report will include standard reasoncodes in field 23 and will be updated on adaily basis until the trade has settled.

2. To ensure that no outstanding transaction isoverlooked by [CUSTODIAN]’s agents

3. To send [CLIENT] daily reports on thesituation until it is resolved.

4. To provide a reason for each failed trade toalert [CLIENT]’s staff as to the originalreason and current status.

5. [CUSTODIAN] will report any potentialbuy-in situations as a result of a filed tradeat least 24 hours prior to execution of a buy-in and also on the day of the buy-in.

Category Description Performance standard

1 General Business hours Sub-Custodian will be operative fromMonday to Friday from 7:30 a.m. to 5:00p.m. EST (Eastern Standard Time). Closedon weekends and on market statutoryholidays.

2 Account Account opening Sub-Custodian will open the following administration types of securities accounts:

a single omnibus account

an omnibus account for each taxstatus/treaty rate/tax pool

an individual account for each client

Title(s) of securities account(s) are to be inthe name of the client and are linked to anindividual/single cash account.

Sub-Custodian will confirm the opening ofa securities account by SWIFT MT 599within 1 business day after receipt ofinstruction to open the account, providingthe new account name(s) and number(s).

Sub-Custodian will maintain a cash accountwhich is linked to its securities account(s).

3 Client Services Inquiries Sub-Custodian will provide either anacknowledgement of receipt or a responsewithin 24 hours of receipt of the inquiry.Where no complete response can be sent anexplanation with an estimated time framewill be provided.

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APPENDIX II

Example of a ServiceLevel Standards

Statement

Continued

4 Client services Market update Sub-Custodian will notify NetworkManagement department via fax, e-mail ortelephone of any material changesimpacting Sub-Custodian’s performanceunder the terms of the Sub-CustodianAgreement and this Service Level Standard

5 Client services Market update Sub-Custodian will send notices of marketevents, identified below, via e-mail or faxto the Network Management departmentwithin 24 hours of receipt as it pertains tothe service provided:

any changes in local market practices,settlement procedures, registrationprocesses and local market changes

any changes in regulations affectingforeign investment

any changes in foreign exchangeregulations and/or general bankingpractices

any market participant which in theopinion of Sub-Custodian could affect theholdings of the Clients’, or the localsecurities market in general

any significant political, economic orcivic event that may, in the opinion ofSub-Custodian affect local financialmarkets

6 Safekeeping of Asset statement Sub-Custodian will send a statement of securities holdings via SWIFT MT535, identifying

all assets which include the securitydescription, availability of shares andmarket value (if available). The statementis sent overnight after close of business.

7 Settlement Cancellation Sub-Custodian will accept cancellation ofservices instructions via SWIFT MT54X. Sub-

Custodian will provide confirmation ofcancellation via SWIFT MT548 (real-time). Please note that automatedcancellation via qualified MT54X is notpossible at any point after the trade hasbeen confirmed/matched or already settledat the depository.

8 Settlement Settlement Sub-Custodian will report confirmation of services confirmation settlement results real time using SWIFT

MT54X. Please refer to the Sub-CustodianISO 15022 Reference Guide.

APPENDIX II 277


Continued


9 Settlement Settlement status Sub-Custodian will report failing/pending services trades via SWIFT MT548 (real-time).

(Please note that all code words will bereceived in Field Tag 25D or Tag 24B ofthe MT548)

10 Settlement Buy-in Sub-Custodian will inform of potential services buy-ins and will provide all necessary

assistance to expedite the transaction. IfSub-Custodian receives notification of abuy-in, Sub-Custodian will communicateimmediately the details, including allpenalty charges incurred. The telephoneconversation is confirmed via a SWIFTMT599, email or fax.

11 Income Entitlement On declaration date, ex date, record date or collection and confirmation books-closed date, whichever isredemptions applicable, Sub-Custodian will send a

notice of entitlement via SWIFT MT564identifying the account(s) (with theirentitled position) eligible to participate inthe income or redemption distribution.

12 Income Income Sub-Custodian will provide the following collection and confirmation details, on pay date – 5 business days, via redemptions SWIFT MT564 (for income) or maturity

date – 3 business days, via MT566 (forredemption), upon crediting income:

account name and number

full security description (incl. ISIN code)

pay date

dividend or interest rate

gross amount payable

total collected

amount of tax withheld

Sub-Custodian will pay income based onthe currency of income, i.e. USD or CAD.If a USD account has not been opened withSub-Custodian, Sub-Custodian willautomatically convert to CAD. For foreignincome and redemptions, Sub-Custodianwill credit Client’s account upon receipt offunds.

13 Income Income claims Sub-Custodian will debit Client’s cash collection and and adjustments account on 3rd business day after advising redemptions all legitimised claims against Client’s

entitlement.

14 Corporate Preliminary Preliminary notices are communicated actions notice of within 24 hours of receipt of information

APPENDIX II278

Continued

corporate actions and Official notices are based on record entitlements date holdings and are communicated within

24 hours (record date � 1). Sub-Custodianwill send a notice of entitlement viaSWIFT MT564 identifying the account(s)(with their entitled position) eligible toparticipate in the corporate action as wellas the nature of the action.

15 Corporate Corporate action – Sub-Custodian will provide the followingactions notification information on all notifications within

requirement 1 business day of receipt of the officialpublication via SWIFT MT564 formandatory corporate actions and voluntarycorporate actions:

security name and security identifier

account name, account number andholdings corporate action type

relevant dates: announcement date, exdate, record date, effective date, debitdate, payment/debit amount, sub-custodian and market deadlines,expected receivable date (if any), expiredate security identifier

all options available (in case of electiveevents)

foreign investor restrictions

fees related to corporate actions,commission and tax details (whenapplicable)

16 Corporate Rights offering For subscription rights offerings, Sub-actions Custodian will provide the following via

MT564:

subscription period and price

the first day on which the rights becomeavailable trading period rights

allotment ratio

new entitlement ratio upon request

Sub-Custodian will send any originaldocuments received from the companies(e.g. allotment letters) within 1 businessday of receipt. Corporate action noticeswill identify whether Solicitation fees areapplicable on specific issues.

17 Corporate Responses to Sub-Custodian’s deadline for response to actions voluntary voluntary corporate actions for securities

corporate actions held in book-based form at CDS is 10:00 am (EST) on the (CDS) marketDepository for Securities’ deadline.

APPENDIX II 279


Continued

The response deadlines for all othersecurities are as stated in the corporateaction notification. Standardcommunication of corporate actionsinstructions is via SWIFT MT565. Sub-Custodian will acknowledge receipt ofinstructions via SWIFT MT567 (sameday).

Sub-Custodian will accept faxedinstructions sent to the attention ofCorporate Action Department at(416–955–3031), in urgent situations aswell as for contingency purposes.

Two authorised signatures are required onfaxed instructions. Both signatures must beincluded in the Authorised Signatures list.

18 Corporate Reminders Sub-Custodian will monitor the receipt of actions client instructions required for voluntary

events and will attempt to follow up wheninstructions have not been received.

Earlier Reminder: Response Deadline Date – 3

Reminder Notice: Response DeadlineDate – 1

Final Reminder: Legal Expiry

——-REMINDER NOTICE——-SUB-CUSTODIAN HAS NOTRECEIVED YOUR INSTRUCTIONS INRESPECT TO THE ABOVECORPORATE ACTION. IF WE RECEIVEYOUR INSTRUCTION IT WILL BEPROCESSED WITHOUT LIABILITY ONTHE PART OF SUB-CUSTODIAN ANDWITHOUT THE GUARANTEE OFSUCCESSFUL COMPLETION.

Instructions received after sub-custodian’sresponse deadlines are processed on a bestefforts basis. It is not possible to guaranteesuccessful completion of the action.

19 Corporate Corporate action Sub-Custodian will book all relevant actions related entries entries in the cash and custody account(s)

and reporting with same-day value on payment, credit,distribution or settlement date, notifying bymeans of the appropriate detailed SWIFTadvice. Cash advices provided and willhave sufficient detail and/or reference to asecurity transaction.

If a security received as a result of acorporate action is not immediately

APPENDIX II280


Continued

tradeable (e.g. new shares out forregistration), Sub-Custodian will credit theshares upon receipt, clearly mentioning onthe credit advice that the shares areunavailable for sale. As soon as theybecome tradeable, notification is sent viaSWIFT MT508.

20 Corporate Corporate actions Corporate Action inquiries can be directed actions client services to Sub-Custodian’s hotline during business

entitlement hours Monday to Friday, between protection 7:00 a.m. – 6:00 p.m. at (XXX) XXX

XXXX or by e-mail.

Sub-Custodian will respond to all inquirieswithin 24 hours or will provide anacknowledgement of receipt and estimatedcompletion time within 24 hours.

21 Taxes Tax withholding/ Sub-Custodian will provide the relief at source withholding of tax with respect to the

crediting of interest and dividends to theaccount which will depend on the accuracyof the beneficial owner’s residency,nationality and tax status provided to Sub-Custodian.

The amount of tax withheld can be locatedon the income confirmation sent via MT566.

Withholding tax information can beobtained in the Sub-Custodian GlobalServices market Withholding Tax Guide,which is available through the client’saccount representative or the sub-Custodian’s website.

22 Fees and Invoicing and Sub-Custodian will provide Transaction expenses payment process and Custody fees calculated by the 7th

business day and will send by email ormail. Fees are debited on the date agreedupon with the client. The fee invoicecontains the following:

A summary cover page containing thefollowing information:

sender and addressee name

invoice number

contact name, telephone and fax

account number for which the chargesapply

invoice period covered

subtotals by fee category (transactions,safekeeping, money transfer, others)

subtotals by sub-accounts

APPENDIX II 281


Continued

23 Cash account Account opening Sub-Custodian will provide clients with theadministration necessary forms and instructions to

complete for identify verification and otherdue diligence requirements.

New accounts will be opened within twoBusiness Days after required informationand documentation are received.

24 Cash account Account Sub-Custodian will implement changes,administration maintenance such as changes to signing officers, address

and existing arrangements, within 48 hoursof receiving such instructions

25 Cash account Back valuation Sub-Custodian will dispatch Back administration and interest Valuation and Interest statements by the 4th

statements business day of each month. The statementwill outline daily account balances, anyvalue date adjustments made, applicableinterest rates plus interest charges andpayments.

26 Reporting MT940/MT950 Sub-Custodian will transmit MT940 or statement MT950 “Early Bird” statements by

22:00 hrs EST on date of transaction andthe regular MT940 or MT950 statement by5:30 hrs EST on the day followingtransaction date.

The MT904/MT950 “Early Bird”statements will list all electronictransactions in increasing amount order(not chronologically) with debits followedby credits and opening and closingbalances. The regular MT940/MT950 willinclude additional transactions such ascheques and internal debits.

27 Reporting Confirmation of Sub-Custodian will upon request transmitdebits/credits MT900/MT910 on a “real” time basis.MT900/MT910

28 Payment Cut-off times for Sub-Custodian will process payments on processing payments value dates when received by the following

cut-off times: Payments to a market bankwith a bank/non-bank as ultimatebeneficiary:

Fully qualified – 17:30 hours

Unqualified – 17:00 hours

USD payments to a market bank (includingSub-Custodian) with a non-bank asultimate beneficiary:



APPENDIX II282


Continued

USD payments to a beneficiary in the USA:



Payments for credit to an account withSub-Custodian’s bank (book transfers):

Qualified or Unqualified – 19:00 hours

Instructions received after cut-off timeswill be handled on a best-effort basis. Inthe event Sub-Custodian is unable toprocess a payment instruction due to lackof or insufficient instructions, Sub-Custodian will notify the client by SWIFTbefore the end of the business day.

29 Payment Cut-off times Sub-Custodian will process requests for processing amendments & same day amendment and cancellation by

cancellations established cut-off times as follows:

Same day cancellation of payments thathave not yet been processed providingthe instructions are:

sent via MT295, MT292, MT299 orMT199

sent to “BICXXXXXXXX”

received by Sub-Custodian before02:00 hours EST on value date

Process requests for same-dayamendment/cancellation received atBICXXXXXXX after 02:00 hours ESTon value date on a best-efforts basis.

Process requests for same dayamendment or cancellation of paymentsthat have already been executed only ifthe beneficiary agrees.

Process requests for amendment andcancellation for future value paymentssent to Sub-Custodian SWIFT BIC otherthan BICXXXXXXXX before 17:30EST one day prior to value date

30 Payment Payment repairs Sub-Custodian will make every effort to processing repair unqualified payment instructions and

advise by SWIFT 299 on the followingbusiness day, of incorrectly formattedpayments that have been successfullyrepaired.

Where repairs cannot be completed, Sub-Custodian will contact the client for furtherinstructions.

APPENDIX II 283


Continued

31 Payment Investigations Sub-Custodian will reply to all “in-house”processing investigations (i.e. where Sub-Custodian

does not need information from outsidesources) within 24 hours of receipt.

Where information is required from a non-Sub-Custodian source or is off-premises,Sub-Custodian will acknowledge receipt ofthe investigation within 24 hrs and follow-up and report on pending files every 5 business days.

Sub-Custodian will upon request providewith notification of Sub-Custodian Primerate change via MT935 within 24 hours ofsuch rate change.

Interest rate Rate changes

APPENDIX II284


Reproduced with permission of ISLA. Please note: inter-paragraph references have been removed andsome re-formatting performed to assist the objective of providing the reader with a summary view of thecontents of a securities lending agreement.

AGREEMENT BETWEEN: A & B

APPLICABILITY

From time to time the parties may enter into transactions in which one party (“Lender”) will transfer to theother (“Borrower”) securities and financial instruments (“Securities”) against the transfer of Collateral witha simultaneous agreement by Borrower to transfer to Lender Securities equivalent to such Securities on afixed date or on demand against the transfer to Borrower by Lender of assets equivalent to such Collateral.

Each such transaction shall be referred to in this Agreement as a “Loan” and shall be governed bythe terms of this Agreement, including the supplemental terms and conditions contained in the Scheduleand any Addenda or Annexes attached hereto, unless otherwise agreed in writing.

Either party may perform its obligations under this Agreement either directly or through a Nominee.

INTERPRETATION

In this Agreement:

“Act of Insolvency” means in relation to either Party

� It is making a general assignment for the benefit of, or entering into a reorganisation, arrange-ment, or composition with creditors; or

� It is stating in writing that it is unable to pay its debts as they become due; or

� It is seeking, consenting to or acquiescing in the appointment of any trustee, administrator,receiver or liquidator or analogous officer of it or any material part of its property; or

� the presentation or filing of a petition in respect of it (other than by the other Party to thisAgreement in respect of any obligation under this Agreement) in any court or before anyagency alleging or for the bankruptcy, winding-up or insolvency of such Party (or any

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APPENDIX III

analogous proceeding) or seeking any reorganisation, arrangement, composition, re-adjust-ment, administration, liquidation, dissolution or similar relief under any present or futurestatute, law or regulation, such petition not having been stayed or dismissed within 30 days ofits filing (except in the case of a petition for winding-up or any analogous proceeding in respectof which no such 30 day period shall apply); or

� the appointment of a receiver, administrator, liquidator or trustee or analogous officer of suchParty over all or any material part of such Party’s property; or

� the convening of any meeting of its creditors for the purpose of considering a voluntary arrange-ment as referred to in Section 3 of the Insolvency Act 1986 (or any analogous proceeding).

“Alternative Collateral” means Collateral having a Market Value equal to the Collateral deliveredand provided by way of substitution;

“Base Currency” means the currency indicated in paragraph 2 of the Schedule;“Business Day” means a day other than a Saturday or a Sunday on which banks and securities

markets are open for business generally in each place stated in paragraph 3 of the Schedule and, in rela-tion to the delivery or redelivery of any of the following in relation to any Loan, in the place(s) where therelevant Securities, Equivalent Securities, Collateral or Equivalent Collateral are to be delivered;

“Cash Collateral” means Collateral that takes the form of a transfer of currency;“Close of Business” means the time at which the relevant banks, securities exchanges or depositaries

close in the business centre in which payment is to be made or Securities or Collateral is to be delivered;“Collateral” means such securities or financial instruments or transfers of currency as are referred to

in the table set out under paragraph 1 of the Schedule as being acceptable or any combination thereof asagreed between the Parties in relation to any particular Loan and which are delivered by Borrower toLender in accordance with this Agreement and shall include Alternative Collateral;

“Defaulting Party” shall have the meaning given in paragraph 0;“Designated Office” means the branch or office of a Party which is specified as such in paragraph 4

of the Schedule or such other branch or office as may be agreed to in writing by the Parties;“Equivalent” or “equivalent to” in relation to any Securities or Collateral provided under this

Agreement means securities, together with cash or other property (in the case of Collateral) as the casemay be, of an identical type, nominal value, description and amount to particular Securities orCollateral, as the case may be, so provided. If and to the extent that such Securities or Collateral, as thecase may be, consists of securities that are partly paid or have been converted, subdivided, consoli-dated, made the subject of a takeover, rights of pre-emption, rights to receive securities or a certificatewhich may at a future date be exchanged for securities, the expression shall include such securities orother assets to which Lender or Borrower, as the case may be, is entitled following the occurrence ofthe relevant event, and, if appropriate, the giving of the relevant notice in accordance with paragraph6.4 and provided that Lender or Borrower, as the case may be, has paid to the other Party all and anysums due in respect thereof. In the event that such Securities or Collateral, as the case may be, havebeen redeemed, are partly paid, are the subject of a capitalisation issue or are subject to an event simi-lar to any of the foregoing events described in this paragraph, the expression shall have the followingmeanings:-

� in the case of redemption, a sum of money equivalent to the proceeds of the redemption;

� in the case of a call on partly paid securities, securities equivalent to the relevant LoanedSecurities or Collateral, as the case may be, provided that Lender shall have paid Borrower, inrespect of Loaned Securities, and Borrower shall have paid to Lender, in respect of Collateral,an amount of money equal to the sum due in respect of the call;

� in the case of a capitalisation issue, securities equivalent to the relevant Loaned Securities orCollateral, as the case may be, together with the securities allotted by way of bonus thereon;

� in the case of any event similar to any of the foregoing events described in this paragraph, secu-rities equivalent to the Loaned Securities or the relevant Collateral, as the case may be, togetherwith or replaced by a sum of money or securities or other property equivalent to that receivedin respect of such Loaned Securities or Collateral, as the case may be, resulting from suchevent;

APPENDIX III286

“Income” means any interest, dividends or other distributions of any kind whatsoever with respect toany Securities or Collateral;

“Income Payment Date”, with respect to any Securities or Collateral means the date on whichIncome is paid in respect of such Securities or Collateral, or, in the case of registered Securities orCollateral, the date by reference to which particular registered holders are identified as being entitled topayment of Income;

“Letter of Credit” means an irrevocable, non-negotiable, letter of credit in a form, and from a bank,acceptable to Lender;

“Loaned Securities” means Securities which are the subject of an outstanding Loan;“Margin” shall have the meaning specified in paragraph 1 of the Schedule with reference to the table

set out therein.“Market Value” means:

in relation to the valuation of Securities, Equivalent Securities, Collateral or EquivalentCollateral (other than Cash Collateral or a Letter of Credit):

� such price as is equal to the market quotation for the bid price of such Securities, EquivalentSecurities, Collateral and/or Equivalent Collateral as derived from a reputable pricing infor-mation service reasonably chosen in good faith by Lender; or

� if unavailable the market value thereof as derived from the prices or rates bid by a reputabledealer for the relevant instrument reasonably chosen in good faith by Lender.

in each case at Close of Business on the previous Business Day or, at the option of either Partywhere in its reasonable opinion there has been an exceptional movement in the price of the asset inquestion since such time, the latest available price; plus (in each case) the aggregate amount ofIncome which has accrued but not yet been paid in respect of the Securities, Equivalent Securities,Collateral or Equivalent Collateral concerned to the extent not included in such price,

(provided that the price of Securities, Equivalent Securities, Collateral or Equivalent Collateral thatare suspended shall (for the purposes of paragraph 0) be nil unless the Parties otherwise agree and (forall other purposes) shall be the price of such Securities, Equivalent Securities, Collateral or EquivalentCollateral, as the case may be, as of Close of Business on the dealing day in the relevant market lastpreceding the date of suspension or a commercially reasonable price agreed between the Parties);

in relation to a Letter of Credit the face or stated amount of such Letter of Credit; and

in relation to Cash Collateral the amount of the currency concerned;

“Nominee” means an agent or a nominee appointed by either Party to accept delivery of, hold ordeliver Securities, Equivalent Securities, Collateral and/or Equivalent Collateral or to receive or makepayments on its behalf;

“Non-Defaulting Party” shall have the meaning given in paragraph 0;“Parties” means Lender and Borrower and “Party” shall be construed accordingly;“Posted Collateral” has the meaning given in paragraph 5.4;“Required Collateral Value” shall have the meaning given in paragraph 5.4;“Settlement Date” means the date upon which Securities are transferred to Borrower in accordance

with this Agreement.

HEADINGS

All headings appear for convenience only and shall not affect the interpretation of this Agreement.

Market terminologyNotwithstanding the use of expressions such as “borrow”, “lend”, “Collateral”, “Margin”,

“redeliver” etc. which are used to reflect terminology used in the market for transactions of the kind

APPENDIX III 287

provided for in this Agreement, title to Securities “borrowed” or “lent” and “Collateral” provided inaccordance with this Agreement shall pass from one Party to another as provided for in this Agreement,the Party obtaining such title being obliged to redeliver Equivalent Securities or Equivalent Collateral asthe case may be.

CURRENCY CONVERSIONS

For the purposes of determining any prices, sums or values (including Market Value, Required CollateralValue, Relevant Value, Bid Value and Offer Value of this Agreement) prices, sums or values stated incurrencies other than the Base Currency shall be converted into the Base Currency at the latest availablespot rate of exchange quoted by a bank selected by Lender (or if an Event of Default has occurred inrelation to Lender, by Borrower) in the London interbank market for the purchase of the Base Currencywith the currency concerned on the day on which the calculation is to be made or, if that day is not aBusiness Day the spot rate of exchange quoted at Close of Business on the immediately precedingBusiness Day.

The parties confirm that introduction of and/or substitution (in place of an existing currency) of anew currency as the lawful currency of a country shall not have the effect of altering, or discharging, orexcusing performance under, any term of the Agreement or any Loan thereunder, nor give a party theright unilaterally to alter or terminate the Agreement or any Loan thereunder. Securities will for the pur-poses of this Agreement be regarded as equivalent to other securities notwithstanding that as a result ofsuch introduction and/or substitution those securities have been redenominated into the new currency orthe nominal value of the securities has changed in connection with such redenomination.

MODIFICATIONS ETC. TO LEGISLATION

Any reference in this Agreement to an act, regulation or other legislation shall include a reference to anystatutory modification or re-enactment thereof for the time being in force.

LOANS OF SECURITIES

Lender will lend Securities to Borrower, and Borrower will borrow Securities from Lender inaccordance with the terms and conditions of this Agreement. The terms of each Loan shall be agreedprior to the commencement of the relevant Loan either orally or in writing (including any agreed formof electronic communication) and confirmed in such form and on such basis as shall be agreed betweenthe Parties. Any confirmation produced by a Party shall not supersede or prevail over the prior oral,written or electronic communication (as the case may be).

DELIVERY

Delivery of Securities on commencement of LoanLender shall procure the delivery of Securities to Borrower or deliver such Securities in accordance withthis Agreement and the terms of the relevant Loan. Such Securities shall be deemed to have been deliv-ered by Lender to Borrower on delivery to Borrower or as it shall direct of the relevant instruments oftransfer, or in the case of Securities held by an agent or within a clearing or settlement system on theeffective instructions to such agent or the operator of such system which result in such Securities beingheld by the operator of the clearing system for the account of the Borrower or as it shall direct, or by suchother means as may be agreed.

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Requirements to effect deliveryThe Parties shall execute and deliver all necessary documents and give all necessary instructions toprocure that all right, title and interest in:

� any Securities borrowed;

� any Equivalent Securities redelivered;

� any Collateral delivered;

� any Equivalent Collateral redelivered.

shall pass from one Party to the other subject to the terms and conditions set out in this Agreement, ondelivery or redelivery of the same in accordance with this Agreement with full title guarantee, free fromall liens, charges and encumbrances. In the case of Securities, Collateral, Equivalent Securities orEquivalent Collateral title to which is registered in a computer based system which provides for therecording and transfer of title to the same by way of book entries, delivery and transfer of title shall takeplace in accordance with the rules and procedures of such system as in force from time to time. The Partyacquiring such right, title and interest shall have no obligation to return or redeliver any of the assets soacquired but, in so far as any Securities are borrowed or any Collateral is delivered to such Party, suchParty shall be obliged, subject to the terms of this Agreement, to redeliver Equivalent Securities orEquivalent Collateral as appropriate.

Deliveries to be simultaneous unless otherwise agreedWhere under the terms of this Agreement a Party is not obliged to make a delivery unless simultaneouslya delivery is made to it, subject to and without prejudice to its rights under paragraph 8.6 such Party mayfrom time to time in accordance with market practice and in recognition of the practical difficulties inarranging simultaneous delivery of Securities, Collateral and cash transfers waive its right under thisAgreement in respect of simultaneous delivery and/or payment provided that no such waiver (whetherby course of conduct or otherwise) in respect of one transaction shall bind it in respect of any othertransaction.

Deliveries of IncomeIn respect of Income being paid in relation to any Loaned Securities or Collateral, Borrower in the caseof Income being paid in respect of Loaned Securities and Lender in the case of Income being paid inrespect of Collateral shall provide to the other Party, as the case may be, any endorsements or assign-ments as shall be customary and appropriate to effect the delivery of money or property equivalent to thetype and amount of such Income to Lender, irrespective of whether Borrower received the same inrespect of any Loaned Securities or to Borrower, irrespective of whether Lender received the same inrespect of any Collateral.

COLLATERAL

Delivery of Collateral on commencement of LoanSubject to the other provisions of this paragraph 0, Borrower undertakes to deliver to or deposit withLender (or in accordance with Lender’s instructions) Collateral simultaneously with delivery of theSecurities to which the Loan relates and in any event no later than Close of Business on the SettlementDate. In respect of Collateral comprising securities, such Collateral shall be deemed to have beendelivered by Borrower to Lender on delivery to Lender or as it shall direct of the relevant instruments of

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transfer, or in the case of such securities being held by an agent or within a clearing or settlement system,on the effective instructions to such agent or the operator of such system, which result in such securitiesbeing held by the operator of the clearing system for the account of the Lender or as it shall direct, or bysuch other means as may be agreed.

Deliveries through payment systems generatingautomatic paymentsUnless otherwise agreed between the Parties, where any Securities, Equivalent Securities, Collateral orEquivalent Collateral (in the form of securities) are transferred through a book entry transfer or settle-ment system which automatically generates a payment or delivery, or obligation to pay or deliver,against the transfer of such securities, then:-

such automatically generated payment, delivery or obligation shall be treated as a payment ordelivery by the transferee to the transferor, and except to the extent that it is applied to discharge anobligation of the transferee to effect payment or delivery, such payment or delivery, or obligation to payor deliver, shall be deemed to be a transfer of Collateral or redelivery of Equivalent Collateral, as the casemay be, made by the transferee until such time as the Collateral or Equivalent Collateral is substitutedwith other Collateral or Equivalent Collateral if an obligation to deliver other Collateral or redeliverEquivalent Collateral existed immediately prior to the transfer of Securities, Equivalent Securities,Collateral or Equivalent Collateral; and

the party receiving such substituted Collateral or Equivalent Collateral, or if no obligation to deliverother Collateral or redeliver Equivalent Collateral existed immediately prior to the transfer of Securities,Equivalent Securities, Collateral or Equivalent Collateral, the party receiving the deemed transfer ofCollateral or redelivery of Equivalent Collateral, as the case may be, shall cause to be made to the otherparty for value the same day either, where such transfer is a payment, an irrevocable payment in theamount of such transfer or, where such transfer is a delivery, an irrevocable delivery of securities (orother property, as the case may be) equivalent to such property.

Substitutions of CollateralBorrower may from time to time call for the repayment of Cash Collateral or the redelivery of Collateralequivalent to any Collateral delivered to Lender prior to the date on which the same would otherwisehave been repayable or redeliverable provided that at the time of such repayment or redelivery Borrowershall have delivered or delivers Alternative Collateral acceptable to Lender and Borrower is incompliance with paragraph 0 or paragraph 5.5, as applicable.

Marking to Market of Collateral during the currency of a Loan on aggregated basisUnless otherwise agreed between the Parties:-

� the aggregate Market Value of the Collateral delivered to or deposited with Lender (excludingany Equivalent Collateral repaid or redelivered under Paragraphs 5.4(ii) or 5.5(ii) (as the case may be))(“Posted Collateral”) in respect of all Loans outstanding under this Agreement shall equal the aggregateof the Market Value of the Loaned Securities and the applicable Margin (the “Required CollateralValue”) in respect of such Loans;

� if at any time on any Business Day the aggregate Market Value of the Posted Collateral inrespect of all Loans outstanding under this Agreement exceeds the aggregate of the Required CollateralValues in respect of such Loans, Lender shall (on demand) repay and/or redeliver, as the case may be, toBorrower such Equivalent Collateral as will eliminate the excess;

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� if at any time on any Business Day the aggregate Market Value of the Posted Collateral inrespect of all Loans outstanding under this Agreement falls below the aggregate of Required CollateralValues in respect of all such Loans, Borrower shall (on demand) provide such further Collateral toLender as will eliminate the deficiency.

Marking to Market of Collateral during the currency of a Loan on a Loan by Loan basisThe Posted Collateral in respect of any Loan shall bear from day to day and at any time the same pro-portion to the Market Value of the Loaned Securities as the Posted Collateral bore at the commencementof such Loan. Accordingly:

� the Market Value of the Posted Collateral to be delivered or deposited while the Loan continues shallbe equal to the Required Collateral Value;

� if at any time on any Business Day the Market Value of the Posted Collateral in respect of any Loanexceeds the Required Collateral Value in respect of such Loan, Lender shall (on demand) repayand/or redeliver, as the case may be, to Borrower such Equivalent Collateral as will eliminate theexcess; and

� if at any time on any Business Day the Market Value of the Posted Collateral falls below theRequired Collateral Value, Borrower shall (on demand) provide such further Collateral to Lender aswill eliminate the deficiency.

Requirements to redeliver excess CollateralIf a Party (the “first Party”) would be required to provide further Collateral or redeliver EquivalentCollateral in circumstances where the other Party (the “second Party”) would be required to provideCollateral or redeliver Equivalent Collateral, then the Market Value of the Collateral or EquivalentCollateral deliverable by the first Party (“X”) shall be set-off against the Market Value of the Collateralor Equivalent Collateral deliverable by the second Party (“Y”) and the only obligation of the Parties shallbe, where X exceeds Y, an obligation of the first Party, or where Y exceeds X, an obligation of the secondParty to repay and/or (as the case may be) redeliver Equivalent Collateral or to deliver further Collateralhaving a Market Value equal to the difference between X and Y.

Where Equivalent Collateral is repaid or redelivered (as the case may be) or further Collateral isprovided by a Party, the Parties shall agree to which Loan or Loans such repayment, redelivery or furtherprovision is to be attributed and failing agreement it shall be attributed, as determined by the Partymaking such repayment, redelivery or further provision to the earliest outstanding Loan and, in the caseof a repayment or redelivery up to the point at which the Market Value of Collateral in respect of suchLoan equals the Required Collateral Value in respect of such Loan, and then to the next earliestoutstanding Loan up to the similar point and so on.

Timing of repayments of excess Collateral or deliveries of further CollateralWhere any Equivalent Collateral falls to be repaid or redelivered (as the case may be) or furtherCollateral is to be provided, unless otherwise agreed between the Parties, it shall be delivered on thesame Business Day as the relevant demand. Equivalent Collateral comprising securities shall be deemedto have been delivered by Lender to Borrower on delivery to Borrower or as it shall direct of the relevantinstruments of transfer, or in the case of such securities being held by an agent or within a clearing orsettlement system on the effective instructions to such agent or the operator of such system which resultin such securities being held by the operator of the clearing system for the account of the Borrower or asit shall direct or by such other means as may be agreed.

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Substitutions and extensions of Letters of CreditWhere Collateral is a Letter of Credit, Lender may by notice to Borrower require that Borrower, on theBusiness Day following the date of delivery of such notice, substitute Collateral consisting of cash orother Collateral acceptable to Lender for the Letter of Credit. Prior to the expiration of any Letter ofCredit supporting Borrower’s obligations hereunder, Borrower shall, no later than 10.30a.m. UK time onthe second Business Day prior to the date such Letter of Credit expires, obtain an extension of theexpiration of such Letter of Credit or replace such Letter of Credit by providing Lender with a substituteLetter of Credit in an amount at least equal to the amount of the Letter of Credit for which it issubstituted.

DISTRIBUTIONS AND CORPORATE ACTIONS

Manufactured PaymentsWhere Income is paid in relation to any Loaned Securities or Collateral (other than Cash Collateral)on or by reference to an Income Payment Date, Borrower, in the case of Loaned Securities, andLender, in the case of Collateral, shall, on the date of the payment of such Income, or on such otherdate as the Parties may from time to time agree, (the “Relevant Payment Date”) pay and deliver a sumof money or property equivalent to the type and amount of such Income that, in the case of LoanedSecurities, Lender would have been entitled to receive had such Securities not been loaned toBorrower and had been retained by Lender on the Income Payment Date, and, in the case ofCollateral, Borrower would have been entitled to receive had such Collateral not been provided toLender and had been retained by Borrower on the Income Payment Date unless a different sum isagreed between the Parties.

Income in the form of SecuritiesWhere Income, in the form of securities, is paid in relation to any Loaned Securities or Collateral, suchsecurities shall be added to such Loaned Securities or Collateral (and shall constitute Loaned Securitiesor Collateral, as the case may be, and be part of the relevant Loan) and will not be delivered to Lender,in the case of Loaned Securities, or to Borrower, in the case of Collateral, until the end of the relevantLoan, provided that the Lender or Borrower (as the case may be) fulfils their obligations with respect tothe additional Loaned Securities or Collateral, as the case may be.

Exercise of voting rightsWhere any voting rights fall to be exercised in relation to any Loaned Securities or Collateral, neitherBorrower, in the case of Equivalent Securities, nor Lender, in the case of Equivalent Collateral, shallhave any obligation to arrange for voting rights of that kind to be exercised in accordance with theinstructions of the other Party in relation to the Securities borrowed by it or transferred to it by way ofCollateral, as the case may be, unless otherwise agreed between the Parties.

Corporate actionsWhere, in respect of any Loaned Securities or any Collateral, any rights relating to conversion, sub-division, consolidation, pre-emption, rights arising under a takeover offer, rights to receive securities or

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a certificate which may at a future date be exchanged for securities or other rights, including thoserequiring election by the holder for the time being of such Securities or Collateral, become exercisableprior to the redelivery of Equivalent Securities or Equivalent Collateral, then Lender or Borrower, as thecase may be, may, within a reasonable time before the latest time for the exercise of the right or optiongive written notice to the other Party that on redelivery of Equivalent Securities or Equivalent Collateral,as the case may be, it wishes to receive Equivalent Securities or Equivalent Collateral in such form aswill arise if the right is exercised or, in the case of a right which may be exercised in more than onemanner, is exercised as is specified in such written notice.

Rates applicable to loaned securities and cash collateral

Rates in respect of Loaned SecuritiesIn respect of each Loan, Borrower shall pay to Lender, in the manner prescribed, sums calculated byapplying such rate, as shall be agreed between the Parties from time to time, to the daily Market Valueof the Loaned Securities.

Rates in respect of Cash CollateralWhere Cash Collateral is deposited with Lender in respect of any Loan, Lender shall pay to Borrowersums calculated by applying such rates as shall be agreed between the Parties from time to time to theamount of such Cash Collateral. Any such payment due to Borrower may be set-off against any paymentdue to Lender.

Payment of ratesIn respect of each Loan, the payments shall accrue daily in respect of the period commencing on andinclusive of the Settlement Date and terminating on and exclusive of the Business Day upon whichEquivalent Securities are redelivered or Cash Collateral is repaid. Unless otherwise agreed, the sums soaccruing in respect of each calendar month shall be paid in arrear by the relevant Party not later than theBusiness Day which is one week after the last Business Day of the calendar month to which suchpayments relate or such other date as the Parties shall from time to time agree.

Redelivery of Equivalent Securities

Delivery of Equivalent Securities on termination of a LoanBorrower shall procure the redelivery of Equivalent Securities to Lender or redeliver EquivalentSecurities in accordance with this Agreement and the terms of the relevant Loan on termination ofthe Loan. Such Equivalent Securities shall be deemed to have been delivered by Borrower to Lenderon delivery to Lender or as it shall direct of the relevant instruments of transfer, or in the case ofEquivalent Securities held by an agent or within a clearing or settlement system on the effectiveinstructions to such agent or the operator of such system which result in such Equivalent Securitiesbeing held by the operator of the clearing system for the account of the Lender or as it shall direct,or by such other means as may be agreed. For the avoidance of doubt any reference in this Agreementor in any other agreement or communication between the Parties (howsoever expressed) to an obli-gation to redeliver or account for or act in relation to Loaned Securities shall accordingly be con-strued as a reference to an obligation to redeliver or account for or act in relation to EquivalentSecurities.

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Lender’s right to terminate a LoanLender shall be entitled to terminate a Loan and to call for the redelivery of all or any EquivalentSecurities at any time by giving notice on any Business Day of not less than the standard settlement timefor such Equivalent Securities on the exchange or in the clearing organisation through which the LoanedSecurities were originally delivered. Borrower shall redeliver such Equivalent Securities not later thanthe expiry of such notice in accordance with Lender’s instructions.

Borrower’s right to terminate a LoanSubject to the terms of the relevant Loan, Borrower shall be entitled at any time to terminate a Loan andto redeliver all and any Equivalent Securities due and outstanding to Lender in accordance with Lender’sinstructions and Lender shall accept such redelivery.

Redelivery of Equivalent Collateral on termination of a LoanOn the date and time that Equivalent Securities are required to be redelivered by Borrower on the termi-nation of a Loan, Lender shall simultaneously repay to Borrower any Cash Collateral or, as the case maybe, redeliver Collateral equivalent to the Collateral provided by Borrower in respect of such Loan. Forthe avoidance of doubt any reference in this Agreement or in any other agreement or communicationbetween the Parties (however expressed) to an obligation to redeliver or account for or act in relation toCollateral shall accordingly be construed as a reference to an obligation to redeliver or account for or actin relation to Equivalent Collateral.

Redelivery of Letters of CreditWhere a Letter of Credit is provided by way of Collateral, the obligation to redeliver EquivalentCollateral is satisfied by Lender redelivering for cancellation the Letter of Credit so provided, or wherethe Letter of Credit is provided in respect of more than one Loan, by Lender consenting to a reductionin the value of the Letter of Credit.

Redelivery obligations to be reciprocalNeither Party shall be obliged to make delivery (or make a payment as the case may be) to the otherunless it is satisfied that the other Party will make such delivery (or make an appropriate payment as thecase may be) to it. If it is not so satisfied (whether because an Event of Default has occurred in respectof the other Party or otherwise) it shall notify the other party and unless that other Party has madearrangements which are sufficient to assure full delivery (or the appropriate payment as the case may be)to the notifying Party, the notifying Party shall (provided it is itself in a position, and willing, to performits own obligations) be entitled to withhold delivery (or payment, as the case may be) to the other Party.

Failure to redeliver

Borrower’s failure to redeliver Equivalent SecuritiesIf Borrower does not redeliver Equivalent Securities, Lender may elect to continue the Loan providedthat if Lender does not elect to continue the Loan, Lender may either by written notice to Borrower ter-minate the Loan forthwith and the Parties’ delivery and payment obligations in respect thereof (in whichcase sub-paragraph (ii) below shall apply) or serve a notice of an Event of Default.

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Upon service of a notice to terminate the relevant Loan:-� there shall be set-off against the Market Value of the Equivalent Securities concerned such amount

of Posted Collateral chosen by Lender (calculated at its Market Value) as is equal thereto;

� the Parties delivery and payment obligations in relation to such assets which are set-off shallterminate;

� in the event that the Market Value of the Posted Collateral set-off is less than the Market Value of theEquivalent Securities concerned Borrower shall account to Lender for the shortfall; and

� Borrower shall account to Lender for the total costs and expenses incurred by Lender as a resultthereof as set out in paragraphs 9.3 and 9.4 from the time the notice is effective.

Lender’s failure to Redeliver Equivalent CollateralIf Lender does not redeliver Equivalent Collateral, Borrower may either by written notice to Lender ter-minate the Loan forthwith and the Parties’ delivery and payment obligations in respect thereof or servea notice of an Event of Default.

Upon service of a notice to terminate the relevant Loan pursuant to paragraph 9.2(i):-

� there shall be set-off against the Market Value of the Equivalent Collateral concerned the MarketValue of the Loaned Securities;

� the Parties’ delivery and payment obligations in relation to such assets which are set-off shall termi-nate;

� in the event that the Market Value of the Loaned Securities held by Borrower is less than the MarketValue of the Equivalent Collateral concerned Lender shall account to Borrower for the shortfall; and

� Lender shall account to Borrower for the total costs and expenses incurred by Borrower as a resultthereof from the time the notice is effective.

Failure by either Party to redeliverThis provision applies in the event that a Party (the “Transferor”) fails to meet a redelivery obliga-tion within the standard settlement time for the asset concerned on the exchange or in the clearingorganisation through which the asset equivalent to the asset concerned was originally delivered orwithin such other period as may be agreed between the Parties. In such situation, in addition to theParties’ rights under the general law and this Agreement where the other Party (the “Transferee”)incurs interest, overdraft or similar costs and expenses the Transferor agrees to pay on demand andhold harmless the Transferee with respect to all such costs and expenses which arise directly fromsuch failure excluding (i) such costs and expenses which arise from the negligence or wilful defaultof the Transferee and (ii) any indirect or consequential losses. It is agreed by the Parties that anycosts reasonably and properly incurred by a Party arising in respect of the failure of a Party to meetits obligations under a transaction to sell or deliver securities resulting from the failure of theTransferor to fulfil its redelivery obligations is to be treated as a direct cost or expense for thepurposes of this paragraph.

Exercise of buy-in on failure to redeliverIn the event that as a result of the failure of the Transferor to fulfil its redelivery obligations a “buy-in”is exercised against the Transferee, then the Transferor shall account to the Transferee for the total costsand expenses reasonably incurred by the Transferee as a result of such “buy-in”.

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Set-Off etc.In this paragraph:

“Bid Price” in relation to Equivalent Securities or Equivalent Collateral means the best available bidprice on the most appropriate market in a standard size;

“Bid Value” means:-

� in relation to Collateral equivalent to Collateral in the form of a Letter of Credit zero and inrelation to Cash Collateral the amount of the currency concerned; and

� in relation to Equivalent Securities or Collateral equivalent to all other types of Collateral theamount which would be received on a sale of such Equivalent Securities or Equivalent Collateral at theBid Price at Close of Business on the relevant Business Day less all costs, fees and expenses that wouldbe incurred in connection therewith, calculated on the assumption that the aggregate thereof is the leastthat could reasonably be expected to be paid in order to carry out such sale or realisation and addingthereto the amount of any interest, dividends, distributions or other amounts, in the case of EquivalentSecurities, paid to Borrower and in respect of which equivalent amounts have not been paid to Lender andin the case of Equivalent Collateral, paid to Lender and in respect of which equivalent amounts have notbeen paid to Borrower, prior to such time in respect of such Equivalent Securities, Equivalent Collateralor the original Securities or Collateral held, gross of all and any tax deducted or paid in respect thereof;

“Offer Price” in relation to Equivalent Securities or Equivalent Collateral means the best availableoffer price on the most appropriate market in a standard size;

“Offer Value” means:-

� in relation to Collateral equivalent to Collateral in the form of a Letter of Credit zero and inrelation to Cash Collateral the amount of the currency concerned; and

� in relation to Equivalent Securities or Collateral equivalent to all other types of Collateral theamount it would cost to buy such Equivalent Securities or Equivalent Collateral at the Offer Price atClose of Business on the relevant Business Day together with all costs, fees and expenses that would beincurred in connection therewith, calculated on the assumption that the aggregate thereof is the least thatcould reasonably be expected to be paid in order to carry out the transaction and adding thereto theamount of any interest, dividends, distributions or other amounts, in the case of Equivalent Securities,paid to Borrower and in respect of which equivalent amounts have not been paid to Lender and in thecase of Equivalent Collateral, paid to Lender and in respect of which equivalent amounts have not beenpaid to Borrower, prior to such time in respect of such Equivalent Securities, Equivalent Collateral or theoriginal Securities or Collateral held, gross of all and any tax deducted or paid in respect thereof.

Termination of delivery obligations upon Event of DefaultIf an Event of Default occurs in relation to either Party, the Parties’ delivery and payment obligations(and any other obligations they have under this Agreement) shall be accelerated so as to requireperformance thereof at the time such Event of Default occurs (the date of which shall be the“Termination Date” for the purposes of this clause) so that performance of such delivery and paymentobligations shall be effected only in accordance with the following provisions:

the Relevant Value of the securities which would have been required to be delivered but for suchtermination (or payment to be made, as the case may be) by each Party shall be established; and

on the basis of the Relevant Values so established, an account shall be taken (as at the TerminationDate) of what is due from each Party to the other and (on the basis that each Party’s claim against theother in respect of delivery of Equivalent Securities or Equivalent Collateral or any cash payment equalsthe Relevant Value thereof) the sums due from one Party shall be set-off against the sums due from the

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other and only the balance of the account shall be payable (by the Party having the claim valued at thelower amount pursuant to the foregoing) and such balance shall be payable on the Termination Date.

If the Bid Value is greater than the Offer Value, and the Non-Defaulting Party had delivered to theDefaulting Party a Letter of Credit, the Defaulting Party shall draw on the Letter of Credit to the extentof the balance due and shall subsequently redeliver for cancellation the Letter of Credit so provided.

If the Offer Value is greater than the Bid Value, and the Defaulting Party had delivered to the Non-Defaulting Party a Letter of Credit, the Non-Defaulting Party shall draw on the Letter of Credit to the extentof the balance due and shall subsequently redeliver for cancellation the Letter of Credit so provided.

In all other circumstances, where a Letter of Credit has been provided to a Party, such Party shallredeliver for cancellation the Letter of Credit so provided.

Determination of delivery values upon Event of Default“Relevant Value”:-

� of any securities to be delivered by the Defaulting Party shall equal the Offer Value of suchsecurities; and

� of any securities to be delivered to the Defaulting Party shall equal the Bid Value of such securities.

The Bid Value and Offer Value of any securities shall be calculated for securities of the relevantdescription (as determined by the Non-Defaulting Party) as of the first Business Day following theTermination Date, or if the relevant Event of Default occurs outside the normal business hours of suchmarket, on the second Business Day following the Termination Date (the “Default Valuation Time”);

Where the Non-Defaulting Party has following the occurrence of an Event of Default but prior to theclose of business on the fifth Business Day following the Termination Date purchased securities form-ing part of the same issue and being of an identical type and description to those to be delivered by theDefaulting Party or sold securities forming part of the same issue and being of an identical type anddescription to those to be delivered by him to the Defaulting Party, the cost of such purchase or the pro-ceeds of such sale, as the case may be, (taking into account all reasonable costs, fees and expenses thatwould be incurred in connection therewith) shall be treated as the Offer Value or Bid Value, as the casemay be, of the amount of securities to be delivered which is equivalent to the amount of the securities sobought or sold, as the case may be, so that where the amount of securities to be delivered is more thanthe amount so bought or sold as the case may be, the Offer Value or Bid Value as the case may be, of thebalance shall be valued.

Any reference in this paragraph to securities shall include any asset other than cash provided by wayof Collateral.

Other costs, expenses and interest payable inconsequence of an Event of DefaultThe Defaulting Party shall be liable to the Non-Defaulting Party for the amount of all reasonable legaland other professional expenses incurred by the Non-Defaulting Party in connection with or as a conse-quence of an Event of Default, together with interest thereon at the one-month London Inter BankOffered Rate as quoted on a reputable financial information service (“LIBOR”) as of 11.00 am, LondonTime, on the date on which it is to be determined or, in the case of an expense attributable to a particu-lar transaction and where the parties have previously agreed a rate of interest for the transaction, that rateof interest if it is greater than LIBOR. The rate of LIBOR applicable to each month or part thereof thatany sum payable remains outstanding is the rate of LIBOR determined on the first Business Day of anysuch period of one month or any part thereof. Interest will accrue daily on a compound basis and will becalculated according to the actual number of days elapsed.

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Transfer taxesBorrower hereby undertakes promptly to pay and account for any transfer or similar duties or taxeschargeable in connection with any transaction effected pursuant to or contemplated by this Agreement,and shall indemnify and keep indemnified Lender against any liability arising as a result of Borrower’sfailure to do so.

Lender’s WarrantiesEach Party hereby warrants and undertakes to the other on a continuing basis to the intent that such war-ranties shall survive the completion of any transaction contemplated herein that, where acting as aLender:

it is duly authorised and empowered to perform its duties and obligations under this Agreement;

it is not restricted under the terms of its constitution or in any other manner from lending Securities inaccordance with this Agreement or from otherwise performing its obligations hereunder;

it is absolutely entitled to pass full legal and beneficial ownership of all Securities provided by it here-under to Borrower free from all liens, charges and encumbrances; and

it is acting as principal in respect of this Agreement or as agent and the conditions will be fulfilled inrespect of any Loan which it makes as agent.

Borrower’s WarrantiesEach Party hereby warrants and undertakes to the other on a continuing basis to the intent that such war-ranties shall survive the completion of any transaction contemplated herein that, where acting as aBorrower:

� it has all necessary licenses and approvals, and is duly authorised and empowered, to perform itsduties and obligations under this Agreement and will do nothing prejudicial to the continuation ofsuch authorisation, licences or approvals;

� it is not restricted under the terms of its constitution or in any other manner from borrowing Securitiesin accordance with this Agreement or from otherwise performing its obligations hereunder;

� it is absolutely entitled to pass full legal and beneficial ownership of all Collateral provided by ithereunder to Lender free from all liens, charges and encumbrances; and

� it is acting as principal in respect of this Agreement.

Events of DefaultEach of the following events occurring in relation to either Party (the “Defaulting Party”, the other Partybeing the “Non-Defaulting Party”) shall be an Event of Default but only where the Non-Defaulting Partyserves written notice on the Defaulting Party:-

� Borrower or Lender failing to pay or repay Cash Collateral or deliver Collateral or redeliverEquivalent Collateral or Lender failing to deliver Securities upon the due date;

� Lender or Borrower failing to comply with its obligations;

� Borrower failing to comply with its obligations to deliver Equivalent Securities;

� an Act of Insolvency occurring with respect to Lender or Borrower, an Act of Insolvency which isthe presentation of a petition for winding up or any analogous proceeding or the appointment of aliquidator or analogous officer of the Defaulting Party not requiring the Non-Defaulting Party toserve written notice on the Defaulting Party;

APPENDIX III298

� any representation or warranty made by Lender or Borrower being incorrect or untrue in anymaterial respect when made or repeated or deemed to have been made or repeated;

� Lender or Borrower admitting to the other that it is unable to, or it intends not to, perform any of itsobligations under this Agreement and/or in respect of any Loan;

� Lender (if applicable) or Borrower being declared in default or being suspended or expelled frommembership of or participation in, any securities exchange or association or suspended or prohibitedfrom dealing in securities by any regulatory authority;

� any of the assets of Lender or Borrower or the assets of investors held by or to the order of Lenderor Borrower being transferred or ordered to be transferred to a trustee (or a person exercising simi-lar functions) by a regulatory authority pursuant to any securities regulating legislation; or

� Lender or Borrower failing to perform any other of its obligations under this Agreement and not rem-edying such failure within 30 days after the Non-Defaulting Party serves written notice requiring itto remedy such failure.

Each Party shall notify the other (in writing) if an Event of Default or an event which, with the passageof time and/or upon the serving of a written notice as referred to above, would be an Event of Default,occurs in relation to it.

The provisions of this Agreement constitute a complete statement of the remedies available to eachParty in respect of any Event of Default.

Neither Party may claim any sum by way of consequential loss or damage in the event of failure bythe other party to perform any of its obligations under this Agreement.

Interest on Outstanding PaymentsIn the event of either Party failing to remit sums in accordance with this Agreement such Party herebyundertakes to pay to the other Party upon demand interest (before as well as after judgment) on the netbalance due and outstanding, for the period commencing on and inclusive of the original due date forpayment to (but excluding) the date of actual payment, in the same currency as the principal sum.Interest will accrue daily on a compound basis and will be calculated according to the actual number ofdays elapsed.

Transactions Entered Into As Agent

Power for Lender to enter into Loans as agentSubject to the following provisions of this paragraph, Lender may (if so indicated in paragraph 6 of theSchedule) enter into Loans as agent (in such capacity, the “Agent”) for a third person (a “Principal”),whether as custodian or investment manager or otherwise (a Loan so entered into being referred to in thisparagraph as an “Agency Transaction”).

Conditions for agency loanA Lender may enter into an Agency Transaction if, but only if:-

� it specifies that Loan as an Agency Transaction at the time when it enters into it;

� it enters into that Loan on behalf of a single Principal whose identity is disclosed to Borrower(whether by name or by reference to a code or identifier which the Parties have agreed will be usedto refer to a specified Principal) at the time when it enters into the Loan or as otherwise agreedbetween the Parties; and

APPENDIX III 299

� it has at the time when the Loan is entered into actual authority to enter into the Loan and to performon behalf of that Principal all of that Principal’s obligations under the agreement.

Notification by Lender of certain events affecting the principalLender undertakes that, if it enters as agent into an Agency Transaction, forthwith upon becomingaware:-

� of any event which constitutes an Act of Insolvency with respect to the relevant Principal; or

� of any breach of any of the warranties given in paragraph 0 or of any event or circumstance which hasthe result that any such warranty would be untrue if repeated by reference to the then current facts;

� it will inform Borrower of that fact and will, if so required by Borrower, furnish it with suchadditional information as it may reasonably request.

Status of agency transactionEach Agency Transaction shall be a transaction between the relevant Principal and Borrower and no per-

son other than the relevant Principal and Borrower shall be a party to or have any rights or obligations underan Agency Transaction. Without limiting the foregoing, Lender shall not be liable as principal for the per-formance of an Agency Transaction, but this is without prejudice to any liability of Lender under any otherprovision of this clause; and

all the provisions of the Agreement shall apply separately as between Borrower and each Principal forwhom the Agent has entered into an Agency transaction or Agency Transactions as if each such Principalwere a party to a separate agreement with Borrower in all respects identical with this Agreement other thanthis paragraph and as if the Principal were Lender in respect of that agreement;

PROVIDED THAT

� if there occurs in relation to the Agent an Event of Default or an event which would constitutean Event of Default if Borrower served written notice, Borrower shall be entitled by giving writtennotice to the Principal to declare that by reason of that event an Event of Default is to be treated as occur-ring in relation to the Principal. If Borrower gives such a notice then an Event of Default shall be treatedas occurring in relation to the Principal at the time when the notice is deemed to be given; and

� if the Principal is neither incorporated in nor has established a place of business in GreatBritain, the Principal shall for the purposes of the agreement be deemed to have appointed as its agent toreceive on its behalf service of process in the courts of England the Agent, or if the Agent is neitherincorporated nor has established a place of business in Great Britain, the person appointed by the Agentfor the purposes of this Agreement, or such other person as the Principal may from time to time specifyin a written notice given to the other Party.

The foregoing provisions of this paragraph do not affect the operation of the Agreement as betweenBorrower and Lender in respect of any transactions into which Lender may enter on its own account asprincipal.

Warranty of authority by Lender acting as agentLender warrants to Borrower that it will, on every occasion on which it enters or purports to enter into atransaction as an Agency Transaction, have been duly authorised to enter into that Loan and perform theobligations arising under such transaction on behalf of the person whom it specifies as the Principal inrespect of that transaction and to perform on behalf of that person all the obligations of that person underthe agreement.

APPENDIX III300

Termination of this agreementEach Party shall have the right to terminate this Agreement by giving not less than 15 Business Days’notice in writing to the other Party (which notice shall specify the date of termination) subject to anobligation to ensure that all Loans which have been entered into but not discharged at the time suchnotice is given are duly discharged in accordance with this Agreement.

Single AgreementEach Party acknowledges that, and has entered into this Agreement and will enter into each Loan in con-sideration of and in reliance upon the fact that, all Loans constitute a single business and contractualrelationship and are made in consideration of each other. Accordingly, each Party agrees:

� to perform all of its obligations in respect of each Loan, and that a default in the performance of anysuch obligations shall constitute a default by it in respect of all Loans; and

� that payments, deliveries and other transfers made by either of them in respect of any Loan shall bedeemed to have been made in consideration of payments, deliveries and other transfers in respect ofany other Loan.

SeveranceIf any provision of this Agreement is declared by any judicial or other competent authority to be void orotherwise unenforceable, that provision shall be severed from the Agreement and the remainingprovisions of this Agreement shall remain in full force and effect. The Agreement shall, however, there-after be amended by the Parties in such reasonable manner so as to achieve as far as possible, withoutillegality, the intention of the Parties with respect to that severed provision.

Specific PerformanceEach Party agrees that in relation to legal proceedings it will not seek specific performance of the otherParty’s obligation to deliver or redeliver Securities, Equivalent Securities, Collateral or EquivalentCollateral but without prejudice to any other rights it may have.

NoticesAny notice or other communication in respect of this Agreement may be given in any manner set forthbelow to the address or number or in accordance with the electronic messaging system details set out inparagraph 4 of the Schedule and will be deemed effective as indicated:

� if in writing and delivered in person or by courier, on the date it is delivered;

� if sent by telex, on the date the recipient’s answerback is received;

� if sent by facsimile transmission, on the date that transmission is received by a responsible employeeof the recipient in legible form (it being agreed that the burden of proving receipt will be on the senderand will not be met by a transmission report generated by the sender’s facsimile machine);

� if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receiptrequested), on the date that mail is delivered or its delivery is attempted; or

� if sent by electronic messaging system, on the date that electronic message is received;

� unless the date of that delivery (or attempted delivery) or the receipt, as applicable, is not a BusinessDay or that communication is delivered (or attempted) or received, as applicable, after the Close of

APPENDIX III 301

Business on a Business Day, in which case that communication shall be deemed given and effectiveon the first following day that is a Business Day.

Either party may by notice to the other change the address, telex or facsimile number or electronicmessaging system details at which notices or other communications are to be given to it.

AssignmentNeither Party may charge assign or transfer all or any of its rights or obligations hereunder without theprior consent of the other Party.

Non-WaiverNo failure or delay by either Party (whether by course of conduct or otherwise) to exercise any right,power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise ofany right, power or privilege preclude any other or further exercise thereof or the exercise of any otherright, power or privilege as herein provided.

Governing Law and JurisdictionThis Agreement is governed by, and shall be construed in accordance with, English law.

The courts of England have exclusive jurisdiction to hear and decide any suit, action or proceedings,and to settle any disputes, which may arise out of or in connection with this Agreement (respectively,“Proceedings” and “Disputes”) and, for these purposes, each party irrevocably submits to the jurisdictionof the courts of England.

Each party irrevocably waives any objection, which it might at any time have, to the courts ofEngland being nominated as the forum to hear and decide any Proceedings and to settle any Disputes andagrees not to claim that the courts of England are not a convenient or appropriate forum.

Each of Party A and Party B hereby respectively appoints the person identified in paragraph 5 of theSchedule pertaining to the relevant Party as its agent to receive on its behalf service of process in thecourts of England. If such an agent ceases to be an agent of Party A or party B, as the case may be, the rel-evant Party shall promptly appoint, and notify the other Party of the identity of, its new agent in England.

TimeTime shall be of the essence of the Agreement.

RecordingThe Parties agree that each may record all telephone conversations between them.

Waiver of ImmunityEach Party hereby waives all immunity (whether on the basis of sovereignty or otherwise) fromjurisdiction, attachment (both before and after judgement) and execution to which it might otherwise beentitled in any action or proceeding in the courts of England or of any other country or jurisdiction relat-ing in any way to this Agreement and agrees that it will not raise, claim or cause to be pleaded any suchimmunity at or in respect of any such action or proceeding.

MiscellaneousThis Agreement constitutes the entire agreement and understanding of the Parties with respect to itssubject matter and supersedes all oral communication and prior writings with respect thereto.

APPENDIX III302

The Party (the “Relevant Party”) who has prepared the text of this Agreement for execution (as indi-cated in paragraph 7 of the Schedule) warrants and undertakes to the other Party that such text conformsexactly to the text of the standard form Global Master Securities Lending Agreement posted by theInternational Securities Lenders Association on its website on 7 May 2000 except as notified by theRelevant Party to the other Party in writing prior to the execution of this Agreement.

No amendment in respect of this Agreement will be effective unless in writing (including a writingevidenced by a facsimile transmission) and executed by each of the Parties or confirmed by an exchangeof telexes or electronic messages on an electronic messaging system.

The obligations of the Parties under this Agreement will survive the termination of any Loan.The warranties contained in paragraphs 0, 0, 16 and 28.2 will survive termination of this Agreement

for so long as any obligations of either of the Parties pursuant to this Agreement remain outstanding.Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this

Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges providedby law.

This Agreement (and each amendment in respect of it) may be executed and delivered in counter-parts (including by facsimile transmission), each of which will be deemed an original.

A person who is not a party to this Agreement has no right under the Contracts (Rights of ThirdParties) Act 1999 to enforce any terms of this Agreement, but this does not affect any right or remedy ofa third party which exists or is available apart from that Act.

EXECUTED by the PARTIES

Schedule

CollateralThe securities, financial instruments and deposits of currency set out in the table below with a crossmarked next to them are acceptable forms of Collateral under this Agreement.

Unless otherwise agreed between the Parties, the Market Value of the Collateral delivered byBorrower to Lender under the terms and conditions of this Agreement shall on each Business Dayrepresent not less than the Market Value of the Loaned Securities together with the percentage containedin the row of the table below corresponding to the particular form of Collateral, referred to in thisAgreement as the “Margin”.

APPENDIX III 303

Security/FinancialInstrument/Deposit of Mark “X” if acceptable Margin

Currency form of collateral (%)

Basis of Margin Maintenance:

Aggregation shall not apply* �

Aggregation applies unless the box is ticked.

Netting of obligations to deliver Collateral and redeliver

Equivalent Collateral shall not apply* �

Netting applies unless the box is ticked.

Base CurrencyThe Base Currency applicable to this Agreement is

Places of Business(See definition of Business Day.)

Designated Office and Address for Notices

(A) Designated office of Party A:

Address for notices or communications to Party A:

Address:

Attention:

Facsimile No:

Telephone No:

Electronic Messaging System Details:

(B) Designated office of Party B:

Address for notices or communications to Party B:

Address:

Attention:

Facsimile No:

Telephone No:

Electronic Messaging System Details:

(A) Agent of Party A for Service of Process

Name:

Address:

(B) Agent of Party B for Service of Process

Name:

Address:

APPENDIX III304

Simmons, Michael, Securities Operations – A Guide to Trade & Position Management, John Wiley &Sons Ltd

McGill & Sheppey, Global Regulatory Landscape – Impacts on Finance & Investment, PalgraveMacmillan 2005

McGill, Ross, International Withholding Tax – A Practical Guide to Best Practice & Benchmarking,Euromoney Books 2004

McGill & Sheppey, Sarbanes-Oxley – Building Working Strategies for Compliance, Palgrave 2007

305

Bibliography

.NETMicrosoft Corporation, 23AQ4, 235

AccessMicrosoft Access, 136, 214, 215, 243, 250

accounttransaction, 248

administrationprocesses, 139

ADP. See ADP Brokerage ServicesADP Brokerage Services, 144, 164, 173ADR. See American Depositary Receiptsagency lending

growth in, 156agent

ability to aggregate, 156network, 209

AGM, 140, 141, 206algorithmic

trading models, 265Allied Irish Bank, 176Alternative Investment Strategies

as a long term trend, 25American Depositary Receipts, 31, 103, 172,

189, 210AML. See anti-money launderingAncillary Products

offered by custodians, 138ANNA, 53Annex to the Stock Borrowing and Lending

Code, 153anti-money laundering, 95, 103, 175, 186applications service provider, 161, 164, 166, 167,

253and automated corporate actions, 162

ASP. See applications service providerASCII, 172

asset managementfirms, 62, 73, 74

asset managers, 116, 140, 160, 173, 241, 246,262

and hedge fund convergence, 154and STN, 161as intermediaries, 142

asset servicing, 18, 24, 61, 63, 85, 130complexities in, 201market size, 66

assetssafekeeping, 22seizure of, 8, 19, 20, 21, 62, 69, 74, 80, 89, 213under custody, 204

Assets Under Management, 61, 67, 71, 73, 74,80, 90

geographic breakdown, 66audit, 43, 81, 106, 244

and reconciliation, 243internal, 192, 264sub-custodian, 203trail, for exception management, 247

audit trail, 257, 258for regulation, 251

AUM. See Assets Under ManagementAustralia, 8, 16, 94, 210Austria, 94, 206automation, 82, 130

as the way forward, 265software, entry level costs, 162adverse factors of, 162trading, 57

backlogscreating risk, 94

back-office, 28, 29, 35–42, 113, 164, 213, 214,241, 243, 253–256, 264, 266

307

Index

BAI, 137BAM. See business activity monitoringBank of England, 177Bank of New York, 4, 9, 16, 17, 100banks, 22, 65, 116, 176, 215

and controls, 241Barclaygroup, 89Barings (UK Growth Trust), 9

See also trading, fraudulentBasel Accords, 78Basel II, 76, 77, 78, 84, 155, 175, 177, 178, 179,

186, 187, 215, 241, 265and III Accords, 176controls, 265exposure requirement, 187

BBH. See Brown Brothers HarrimanBDA. See browser delivered applicationBelgium, 52, 94, 110, 206benchmarking, 106, 115

custodian, 211Foreign Exchange, 211international for withholding tax, 34user-defined, 247

beneficial owner, 92, 98, 102, 103, 107, 141, 143,144, 149, 150, 152–154, 203, 205

and outsourcing, 146other influential factors, 145types of, 145

bilateral agreements, 123BOT. See business object typesBPEL. See business process execution languageBPM. See businss process management.BPO. See business process outsourcing.Brady Bonds, 131Brown Brothers Harriman, 3, 6, 21browser delivered application, 166business

key drivers, 262business activity monitoring, 181exception notification, 185strategy and mediation, 236supported by IT, 233

business activity monitoring, 181–185, 243business object types, 223business process execution language, 234

management, 181outsourcing, 252

buyerscustody market, 20

CA, 62, 66, 67, 76, 77, 78, 171, 264, 265and payback period, 82

California Public Employees Retirement System, 5

Californian State Teachers Retirement System, 5

CalPERS. See California Public EmployeesRetirement System

CalSTERS. See Californian State TeachersRetirement System

CAMA. See information mosaicCapital Accord. See Basel IIcapital markets, 49, 171cash

balances, and reconciliation, 239flow, 212management, 22

CCF. See common contractual fundsCCP. See central counterpartyCDS. See credit default swapsCDX, 113Cedel, 6, 8, 49, 52, 56central counterparty, 44central securities depositories, 13, 14, 15, 20, 44,

49, 52, 56, 171, 204, 209, 256central and national, 45

CESR. See committee for european securitiesregulators

Chase (Manhattan), 3, 4, 5, 6, 7, 8, 16CheckFree, 163, 164checks

value-time, 258chief information officer, 212, 221CIO. See chief information officerCitibank, 3, 4, 8, 9, 100Citigroup, 19, 20, 21, 73class

trading, cross-asset, 264Class Action Fairness Act, 201class actions, 104, 196, 198, 199

and class members, 201filings, 200securities, 198

class member, 197, 198clearing, 1, 3, 8, 17, 40–43, 50, 52–56, 85, 97,

101, 105, 108, 112–116, 175, 187, 195, 198,239, 256

defined, 44derivative clearing houses, 21electronic trading, 44european securities specialist, 40firms, 65house, 44managing risk, 43, 157retail activities, 65technology, 217development in the US, 58EU Commission (2004), 50local depository, 204separate house in the US, 58and settlement in Europe, national systems, 50

INDEX308

Clearstream, 52closed user group, 27CLS. See continuous linked settlementCOBOL, 228collateral, 27, 41, 45, 113, 114, 121–124,

140–145, 147, 186, 207, 246and securities, 148as revenue for securities, 207cash as, 151for managing risks in securities lending, 150requirements, 207securities as, 151

comma separated value, 229commission

recapture, 23committee for european securities regulators, 180common contractual funds, 131competency, 31complexity, and withholding tax, 31compliance, 32, 62, 157, 306

departments, 215fund, 134regulatory, and reconciliation, 251and recoverable tax, 32

conduct of business rules, 210confirmations, 115, 117, 120, 159, 243, 254, 263

processing, 161written or electronic, 147

contingency arrangements, 37continuous linked settlement, 212contract maintenance, 120control, 30, 56, 77, 78, 103, 106, 139, 148, 154,

157, 160, 177, 188, 189, 190, 192, 235proactive, 194security objectives, 192

controls, 15, 27, 78, 94, 104, 109, 155, 175, 176,177, 188, 189, 190

activities, 191administrative, 190and validation process, 230Basel II, 265classs action focus, 199coactive, 195costs, 257costs of, 193deficiencies, 191demonstrated, 215design limitations, 191documentation, 216environment, 190internal, and reconciliation, 239management models, 194objectives, 271operational, 233

and neutral divisions, 241process, 192

resources and, 193version, 232

corporate policy, 194corporate actions, 75–86, 91–92, 95–97, 101

activity chain, 64advice to asset manager, 150automated processing, 97,161and CAMA, 167and reconciliation, 242and regulatory structures, 95and withholding tax, 171and Xcitek, 164automation, 74, 84, 162

spending and demand, 163common types, 79configurable, CAMS, 173cost and risk, 76custodian services, 65disseminating information, 163diversity of, 82front-to-back, 173lack of standards, 75lager banks and brokers, 65mandatory, 80manual, 81numbers worldwide, 80processing, 205, 264routine, 81small to mid-size firms, 65types of, 22, 28, 30, 32, 39, 53, 61–65, 85,

101, 107, 203vendors, 164voluntary, 79withhoding tax as a, 90workflow, 265

corporate governance, 33, 156, 174–75,196–197

international network, 153principles of, 196

corrupt foreign practices act, 95cost reduction

and outsourcing, 32costs

fixed, 36for failed returns, 149

counterpartyand SWIFT, 27data, 185–189risk defined, 44

counterparts, 82, 118, 146, 156types of, 144

command and control, 194credit facilities, 41credit default swaps, 113–116, 118, 120, 262credit derivatives, 116, 263Creditex. See trading platforms

INDEX 309

CreditMatch. See trading platformsCreditXpress, 116, 118CREST, 50, 52, 56, 148, 246cross border

assets, under custody, 21european regulated industry, 130systems, challenge for, 52

CSD. See central securities depositoriesCSV. See comma separated valueCUG. See closed user groupcurrency, 246

management, 136CUSIP. See custom securities identificationcustodial agency model, 153custodian, 3–5, 9, 10–19, 28–29, 37–38, 42–43,

47, 49, 64, 76, 79, 85, 91–92, 96–112, 116,121–122, 125–133, 154, 172, 196, 203–208,211, 221, 226, 250, 265

accounting services, 92, 131as a fiduciary, 23as intermediate depositaries, 46as providers, 25banks, 45

and securities lending, 142as intermediaries, 142

cash management, 206duties and responsibilities, 22fees, variable nature of, 36functions, 15, 17–20, 29, 37–38, 48, 61,

65–66, 75, 84, 90, 92, 106, 113, 117,120–127, 129–134, 175, 208

G30 group, 105global, 23, 39, 252, 144institutional investors, service types, 48non-US, 189outsourcing models, 26, 28payment and settlement, 122reconciliation, 239regulation, offering limited by, 176standardisation, 26SWIFT, 27tailored portfolios, 136technology, 217withholding tax, 30, 86

custody, 3–21, 40, 43, 45, 47, 53, 85, 89, 101,104–106, 108, 112, 116, 133, 145, 159, 175,198, 205, 239. See also global custody

impact of regulation, 176agreement, 210, 220as an information business, 5and European securities specialist, 40and regulation, 95and standards, 27and technology, 217as a product, 23as a technological process, 155

business, and securities lending, advantages, 142domestic obligations, 47fund administration, 154risks, mitigated, 202software tools, 243sub-custody, 42transformation checklist, 220worldwide assets, 19

custom securities identification, 160, 249customisation

and transferability, 26

dashboard, 81, 243, 250and trade status, 247configurable, 268management, 247operational intelligence, 267

data, 21, 27, 31–38, 42, 63, 65, 75, 77–81, 84, 90,101, 103, 106, 108, 109, 112, 117–127,131–138, 162, 166, 168, 172–173, 175, 177,185–193, 205, 211, 214–215, 220, 222–225,226, 227, 228, 230–232, 236, 239, 242–245,248, 259

archiving, 250acquisition

vendors, 253common model, 245control, 228counterparty, 185custodial, 247dictionary, 173, 220–223, 254

and message dictionary, 228and message representation, 223

format diversity, 246item tables, 250liability, ownership, 188matching, types, 248normalisation, 245reconciling, 188repositories, 186static codes, 249validation rules, 247warehouse, 187

data protection, 103, 106data scrubbing, 165datasets, 268dealers, 19, 43, 55, 116, 117, 118, 140, 141, 146,

264as principals, 142borrowed securities, 143broker, 173major players, 263

dealer-to-dealer. See trading platformsdelivery versus payment, 44demand side

members, 21

INDEX310

deposit accounts, 46depository receipts, 92depository trust and clearing, 115, 118, 121,

126–127, 159, 163, 263US settlement systems, 58

depository trust corporationconsolidation of US depositories, 58

derivative contracts, 113defined, 113

derivatives, 19, 35, 44, 114, 117–118, 124–127,131, 241, 262–263, 266

credit, 115credit transactions, 188regulatory interest in, 160US markets, 58

Deutsche Bank, 100Deutsche Börse, 52, 56Deutsche Kassenverein

German CSD, 52dividend, 34, 63, 67, 79, 86–92, 95, 97, 99, 109,

110–112, 138, 143, 149, 152, 205, 207, 269double taxation

agreements, 87, 103treaties, 39

Doug Bonnar, 3DR. See depository receiptsDTA. See double tax agreementDTC. See depository trust corporationDTCC. See depository trust and clearingdual warehouses, 187DVP. See delivery versus payment

EAI. See enterprise application integratione-Commerce Directive, 175ECSDA. See european central securities

depositories associationEEA. See european economic areaEGM. See extraordinary general meetingEJB. See enterprise javabeansemail, 63, 81, 157, 244, 279

and messaging standards, 219secure, 172

Enron, 188, 196, 197. See also trading,fraudulent

enterprise application integration, 245enterprise javabeans, 237enterprise service bus, 233

characteristics, 234contrasted with SOA, 235functional aspects of, 233

entitlements, 22, 64, 76, 84, 88, 97, 99, 104,110–111

to withholding tax, 87web-based, 167withheld, 30

environment

regulatory, 257equilend. See also lending, automatedequity

active, strategies, 136allocation by country, 70allocation by sector, 66, 70strategies

fixed income, 136passive, 136private, 136

ESCB-CESR. See ECB and the committee ofeuropean securities regulators

ECB and the committee of european securitiesregulators, 53

Estonia, 110EU. See european unionEurex Clearing, 50Eurobond, 91Euroclear, 6, 8, 45, 49, 52, 56, 219, 221

bank, as an ICSD, 45european central securities depositories

association, 53, 83, 264european union

data protection, 95savings directive, 95

european economic area, 110event processing, 121Excel

Microsoft Excel, 214, 243, 250exception

automated management, 247management, 239, 244processing, 82, 84

execution, 17, 58, 115, 117, 126, 134, 179,181–185, 203, 206, 211, 213, 242–243, 247,251

electronic, 264expert provider, 39extraordinary general meeting, 141

failed return, 149FCP. See fund commun de placement,federal reserve, 115, 265Fedwire

and US government bonds, 58file transfer protocol, 77, 80, 245financial models company, 160financial information exchange, 161, 178, 219,

220–226, 228, 229, 264and normalisation, 246

financial information exchange markup language,224, 226

financial products markup language, 118financial services action plan

and MiFID, 179financial services authority, 210

INDEX 311

firms, 4, 7, 10, 19, 30–33, 44, 61–62, 65, 67, 75,79, 81–84, 100, 101, 103–105, 116, 125,126, 152, 155, 157, 159, 161–163, 169, 179,185–189, 194, 210, 213, 243, 251–252, 256,257, 263

buy-side, 264equities-based, 264global securities, 265investment, 266securities, 270

FIX. See financial information exchangefixed income characteristics, 137FIXMLFMC. See financial models companyFord foundation, 3foreign exchange, 22, 206, 212

benchmarking, 211FpML. See financial products markup languagefraud, 151, 174–176, 193, 203, 213, 242

and class action securities filings, 199exposure to, 259

front-office, 26, 213–214, 256, 264, 270exception information, 269inventories, 269

FSA. See financial services authorityFTE, 62FTP. See file transfer protocolFTR, 175fund accounting, 41, 131fund commun de placement, 135fund managers

European, 74UK, 72US, 73

funds, 6–9, 17, 23, 31–32, 35, 47–48, 61, 67,70–72, 76, 95, 98, 101, 104, 116–117, 131

administrators, 263and asset segregation, 135cleared, 258eligible for class actions, 198fund of, 131in a unitised structure, 135investment, 133master-feeder, 133multimanager, 132pension, and class actions, 173, 199recouped through legislation, 198recovering, 198reporting requirements, 135responsiblities for, 199supply of securities, 141

FX. See foreign exchange

G30, 105G7, 145GCA. See global corporate actions

general ledger, 252Giovannini Group, 39, 83

and significant barriers to integration, 52GL. See general ledgerglobal corporate actions

validation service, 163global securities, 9, 15GlobeTax, 30, 89, 109, 112, 164, 167,

171, 172GoldenSource, 163governance, 33, 63, 107

and custodians, 33and regulation, 157and transparency, 152as an ideal, 197corporate, 33, 141data, 188securities lending, 156good, eight characteristics of, 197

harmonisation, 53, 81, 110of securities, 249lack of, in Europe, 52

Harvard Business School, 5hedge funds, 35, 116–117, 133, 143, 146,

154, 262, 264and asset management convergence, 154securities

borrowed, 141lending markets, 140

hedge funds, 16, 113, 116HSBC, 4, 5, 16, 19

IBM DB2, 227ICSD. See international central securities

depositoryand CSDs, 49

IDas case identifier, 249

IFRS, 175IFSRA. See international financial services

regulatory authorityIM. See Information Mosaicincome

from portfolios, 22income collection

custodian responsibility, 204India, 18, 103, 169information, 5, 12, 16, 29, 35, 37, 45, 48, 53,

63–64, 69, 75, 79, 81, 83, 84, 103, 105–106,108, 120, 125, 127, 134, 137–139, 150, 152,156, 163, 166–167, 170, 175, 176, 180,181–193, 196, 199, 205, 206, 214–215, 225,269

and business data, 220and central databases, 222

INDEX312

information – continuedas intelligence, 215lack of access to, 215management support for, 233quality of, business intelligence, 259

information management, 215information mosaic, 163, 166institutional investor, 17, 33, 42, 87, 117, 124,

136, 139, 154voting rights, 174

institutional lenders, 153instrument (financial), 91, 92, 178, 187, 205

types, 263integration

and standards, 220inter-dealer. See trading platformsintermediaries, 12, 41, 45, 54, 55, 63, 87, 91, 98,

139, 142, 143, 149, 196, 204and mediation service, 231as sub-custodian, 45multiple and redundant, 63principal, categories, 142types of, 45

internal control, 175, 192accountability, 195administration, responsibility, 189and auditing, 189and business re-engineering, 194and processes, 195employee responsibility, 189monitoring systems, 191systems of, 189types of, 190

international central securities depository, 14, 20,52, 45

eEuroclear and Cedel, 49international financial services regulatory

authority, 133international swaps and derivatives association,

263internet, 6, 109, 152, 219

as enquiry tool, 39investment

vehicles, 31banks, 140, 241, 246, 263companies with variable capital, 130

investment manager, 10, 13, 16, 21, 23, 28–30,33, 37–38, 61, 113, 116, 120, 125, 130,135–136, 140, 156, 167, 174, 178, 208, 243,251, 253, 267

buy-side firm, 116outsourcing with custodians, 29and global expansion, 243and the challenge of reconciliation, 252beneficial developments, 37mid-size and small, 254

mitigating transaction risks, 37partnering with, 130top-tier, 252

investment strategy, 145adopion of, 221

IRB (internal ratings), 186, 187Ireland, 94, 112, 133, 135, 166–167, 206IRS, 95, 105, 106, 113–114, 118, 121ISDA, 114–115, 122–125, 127, 263ISITC, 178ISO 15022, 27, 76, 78, 81–84, 101, 109, 167,

172, 219, 220, 222, 224, 225, 254, 256, 265messaging standards, 219

ISO 20022, 27, 101, 220, 222, 224ISO 17799, 175issuers, 13, 63, 84, 86, 90–91, 196, 198

and risk, 90IT protocols

MQ, FTP, and XML, 77Italy, 56, 67, 89, 94, 206items, 117, 162, 184, 211, 244, 247–250

ledger-to-ledger, 250open, 250statement-to-statement, 250

iTraxx, 113

J2EE, 168, 170, 171, 223, 233–234, 237and other standards, 221mediation service support, 232

Japan, 66, 70, 72, 112, 175, 206java, 173, 223, 234, 237JPMorgan, 4, 100, 124JSOX, 175

key performance indicators, 183know-your-customer, 105KYC. See know-your-customer

LCH Clearnetmerger (2003), 52

ledger-to-ledgeritems, 250

legal remedies, 149lending

exposure in securities markets, 141automated, 147

LIBOR, 71, 298licenses

vendor, types of, 254liquidity, 45, 57, 140, 156, 257

affected by lender recall, 149borrowers, 146intermediaries, 142prime broker access to, 154and trade desks, 264risk, and intermediaries, 143

INDEX 313

loans, 47, 144, 146, 148domestic, 207specified or open, 147termination of, 148the IMF and good governance, 197

logicconstructs, 226

Luxembourg, 4, 8, 94, 110, 135

MACUG. See member administered closed usergroups

management informationtools, 41

marginand lender protection, 150

market, 3–7, 11–20, 24–25, 28, 31, 33–40, 42,44–45, 55–58, 61, 63, 69, 75–83, 85, 87,88–91, 93–102, 105, 106, 107, 109,113–118, 120–127, 131–132, 134–136, 138,140–142, 150, 159, 161, 163

advantages of, 237and FIN, 219and fraud, 151and regulatory pressure, 265and SWIFT, 219bond, 140bad practices, 157consumer, 201costs of regulation, 176custodian’s report on, 203hybrid nature of, 143integration, global, 263IT fundamentals, 217lending, 145makers, 146money, instruments, 160practice, 267

in securities lending, 146route to, 146securities, and term trades, 147service provided by intermediaries, 143settlement periods, 152swaps, 188time to, 220voting rules of, 205

MarketAxess. See trading platformsmarket data definition language, 83, 224, 226markets in financial instruments directive, 78, 95,

105, 175, 178–182, 215, 265, 266and objective setting, 182and record keeping, 184and transparency, 183articles, 179as part of regulated environment, 182compliance, 184demands on IT integration, 180

impact on IT, 179implementation issues, 185investment companies, 185investor protection, 182size of challenge, 178

MDDL. See market data definition langaugemediation, 219

technology, 227mediation service, 227, 228, 229, 230, 231, 233,

236, 237, 238and security, encryption, 232as part of IT architecture, 233embedded, 237managing definitions, 231standards handling methods, 226testing facilities, 231

Megacor. See Vermeg MegacorMellon Financial, 9, 73, 100member administered closed user groups, 27message

data definition, 225definitions, reuse, 231dictionary, 228, 237and validation service, 230

functions, 229enrichment, 227formats, 254identifying, 227lifecycle, 222logical and physical, 227standards co-exist, 223structure, 225testing, 223validation, 222

message mediation, 224, 228features of, 225

message transformation, 173, 222, 223, 227, 267and STP, 220

message user groups, 27messaging, 75, 77–79, 97, 101, 109, 118,

127, 160–161, 217, 219, 226,229, 233

and SWIFT, 219asynchronous, 234challenges of, 220electronic, 264financial, 224formats, 264post-trade, 267single standard, 222standards, 102tactical, 221upgrades and migration, 221

meta-data, 228methodologies, 31, 52, 109, 248middle-office, 215, 253

INDEX314

middleware, 245and FMCNet, 160message oriented, 235

MiFID. See markets in financial instrumentsdirective

MS SQL Server, 227MT599, 277MT535, 278MT564, MT565, MT566, MT567. See also

messaging standardsMT574, 102MT575, 257MT900, MT950. See also messaging standardsMUG. See message user groupsmutual funds, 22, 145

national register of archives, 95, 103, 106, 175national securities clearing corporation and the

SEC, 58NAV, 42, 132, 207

calculations, 42, 132near-real-time

reconciliation, 252Netherlands, 9, 52, 94, 110netting, 44, 54, 114, 121, 122, 150, 152, 186,

255, 257and risk management, 152legal focus on, 152of transactions, 44

network management, 157, 213–215defined, 202factors, 209significance of, 216

network manager, 202, 208–209, 212and custody agreements, 202primary role, 208

New Capital Accord. See Basel IInon-qualified intermediary, 105non-XML, 223Northern Trust, 3, 4, 16, 19–21, 73Norway, 94, 110, 112nostro, 257notification

corporate actions, 22proxy, 22

NQI. See non-qualified intermediaryNRA. See national register of archivesNSCC. See national securities clearing

corporation

OASIS. See organization for the advancement ofstructured information standards

OCC. See options clearing corporationOmgeo, 118, 127, 159, 161, 224, 226

options for asset managers, 160omgeo central trade manager

Omgeo CTM. See omgeo central trade managerone-stop shopping

and the lending process, 155operational controls, 259

risk managementstrategy, 177

options, clearing corporation, 58Oracle, 227order management, 41

system, 270organization for the advancement of structured

information standards, 234OTC. See over the counteroutsourcingoutsourcing, 10, 23, 29, 78, 108

and STP. See straight through processingadministration, 42and regulation, 32as a growth service, 25as a custodian solution, 28back-office functions, 28contract, 25competitive advantage of, 33data cleansing, 189defined, 28investment operations, 25value for withholding tax, 31

over the counter, 113–115, 120derivatives

challenges, 125industry participants, 115

ownershipof clearing and settlement, 52

Parmalat, 197parsing, 229partner, custodian, 30partnership, 36, 42, 82, 263patriot act, 95, 175, 186PCA. See principal components analysispension fund pooling vehicle, 135pension funds

self-managed, 22trustees, 21

performance, 22, 79, 281attribution, 137calculations, 137

PFPV. See pension fund pooling vehiclePID. See property income dividendPOA. See power of attorneypolicy, corporate, 194pooling, 97

internal and external, 133pension fund, 135pension, multinational, 135virtual, 135

INDEX 315

portfolios, 13, 15, 19, 22, 41, 48, 75, 118, 131,133, 136, 137, 138, 141, 142, 143, 145

access discouraged, 144size and complexity, 253valuation, 131

positionaccount, 248

post-settlement, 251post-trade, 113, 118, 126, 127, 159, 160, 161,

183, 262–263, 265–266, 269and foreign exchange, 268gateway, 266integration with other systems, 269messaging, 267operational intelligence, 270processes, 266transaction and exception management, 266utilities, connecting to, 267

power of attorney, 108primary suppliers

of services, 21prime broker, 154principal components analysis, 268private securities litigation reform act, 198products, 5, 10, 16, 17, 24, 26, 35, 36, 38, 40,

113, 114, 117, 118, 124, 130, 160, 226and STeP, 161CDX, 113innovative investment, 35investment, 38post-trade, 160vendor solutions, 159white-label, 220

property income dividend, 111proxy, 33, 90, 106

and shareholder voting, 205and withholding tax, 33

PSLRA. See private securities litigation reformact

QA. See quality assuranceQI. See qualified intermediaryqualified intermediary, 91, 105quality assurance, 232

RAS. See relief at sourceRDBMS, 170, 171real-time, 118, 133–134, 165, 173, 257

and MiFID, 183and operatinal efficiency, 242as objective for transactions, 176front-office view of, 270regulatory requirements, 191transaction management, 161transaction processing, 176

recall, 141, 143, 144avoiding, 144lender rights of recall, 149rights, 144, 147

reconciliation, 43, 47, 79, 117, 161, 168, 169,208, 217, 239, 248, 250–251, 259

and audit trails, 243and custodians and brokers, 239and data archiving, 250and exception management, 247and net items, 249and outsourcing, 241and exception management, 242automated, exception systems, 257buy-side approaches, 257cash and securities, 243challenge for investment managers, 252complexity of, 252data capture and normalisation, 242event types, 246inappropriate, consequences of, 241integrated, 250ledger comparisons, 239message types, 255multi-way, 245near-real-time, 251normalisation, 253outsourced, service levels, 253process

batch, 257business rules and logic, 245 collaboration, 243electronic, 254explained, 244manual intervention, 247ownership, 241post-settlement trade, 242post-trade systems, 269software and systems, 243types of, 249

securities, 239staff allocation to, 251technological advances, 242third party trends, 242

recordkeeping servicesshareholder, 138

recordsexternal, 243

RED. See reference entity databasereference entity database, 117reference data, 90, 172, 175, 178, 185–188, 265Reg NMS. See regulation national market systemregulation, 175, 251, 266regulation national market system, 266regulatory reporting, 129, 187, 259

INDEX316

relationship management, 24relief at source, 23, 31, 32, 87, 101, 105–107, 207

recovery time, 89reportreporting

historical, 268report of combined activity, 257

representation, 227research information exchange markup language,

220, 224rights issue, 269risk, 22, 48, 78, 83, 90, 104, 157

and illiquid securities, 151adjusted returns, 137and performance measurement, 206and liquidity through intermediaries, 143and regulatory frameworks, 157and vendor selection, 83assessment, and internal controls, 190credit, 212counterparty, 23enterprise, 241liquidity, 213market, 213management, 150mispricing, 151mitigation strategy, 239operational, and reconciliation, 213, 250, 258profile, 208reputation, 239settlement, 212, 213systemic, 213transactional, 38types of, 212weighting, 268withholding tax, 213

risk based capital directive, 179risk management

as outsourcing advantage, 37operational, 177policies, 259

RIXML. See research information exchangemarkup language

Rulesprocessing, 225

S&P. See standard and poor’sS.1441, 175Safe Harbor, 175Sarbanes-Oxley, 95, 157, 175, 191

and messaging standards, 221SEC. See securities and exchange commissionSecFinex. See also automated lendingsecondary suppliers

of services, 21

securitiesclass actions, 196cross-border transactions, 40multiplier, 47on hold, 148services

as specialist services, 39settlement, 22, 44

securities acts amendmentspassed in US by congress (1975), 58

securities and exchange commission, 58securities borrowing and lending code of

guidance, 141securities industry association, 177securities lending, 23, 64, 156, 207

and corporate governance, 156and liquidity, 140defined, 141monitored, 212part of investment management, 140transaction consequences, 140–141

securities market practice group, 76, 83, 264securities settlement system, 44securitisation companies, 116segregation of assets, 46

defined, 47segregation of duties, 193sellers custody market, 20SEPA. See single euro payments areaservice

custodian, 22providers, 252

as partners for institutional investors, 155types of, 117utility style of, 215

service level agreement, 208, 210, 271service oriented architectureand transparency, 184contrasted with ESB, 235and J2EE, 223

service scope exceptions, 92settlement, 13, 14, 17, 22, 28, 40–43, 48, 49,

50, 52–58, 91, 97, 104–105, 113, 118,120–123, 126, 129, 139, 140, 143, 144,147, 204, 206

and class actions, 198and loans, 148and managing risk, 157and securities, 148automation, 164cross border, 209defined, 44interbank, 46instructions, 208manula, reliance on, 263

INDEX 317

settlement – continuednet, 257of shares, 205Omgeo CTM notification engine, 159post, and reconciliation, 242pre-settlement risk, 212recovery, 198sending, 161shorter cycles, 177trade, 204trade-to-settlement, 176

SFTP. See simple file transfer protocolshares, 12, 31, 63, 90–92, 99–100, 103, 110–111,

153, 189and normalisation, 245borrowing for voting, 141custodian as safe-keeper of, 198voting notice, 152

short position, 143, 148, 249Sicovam, 52simple file transfer protocol, 172SIIA\fISD. See software & information industry

association/financial information servicesdivision

Singapore, 210single euro payments area, 75, 105,

178, 215SLA. See service level agreementSlovenia, 111SmartStream, 163, 168SMPG. See securities market practice groupSOA. See service oriented architecturesociety for worldwide interbank financial

telecommunications, 27, 39, 53, 63,76–78, 84, 97, 101, 109, 118, 125, 127,157, 171–172, 202, 219, 220- 230, 237,245–246, 252, 254, 256–257, 265

accreditation, 236and counterparties, 27and normalisation, 246

software & information industryassociation\financial information servicesdivision, 178

South Korea, 111SOX. See Sarbanes-OxleySpain, 56, 94, 111specialist provider, 20, 108

independent, 42vendor alliances, 164

specialist securities servicesin the value chain, 40

splits, 66, 81, 211spreads

interest, 146, 211SS&C technologies, 160, 161

SSS. See securities settlement systemstandard and poor’s, 132, 212standardisation, 76, 81

of operations, 23and flexibility, 26lack of, 63

standards, 27, 39, 75–79, 81, 101, 125, 127, 178,186, 189, 200, 217, 219, 221, 224, 226,228–230, 233–237, 252, 254

agreed, 226and market consolidation, 219diversity of, 228incompatible, 224legacy and proprietary, 221managing the complexity of, 224multiple versions, 221promotion of, 224

state street, 3–6, 8, 19–21, 73statement-to-statement

items, 250static data management, 42statute of limitations, 34STeP. See straight through enterprise processingSTN. See SunGard transaction networkStockbrokers, 21, 22STP. See straight through processingstraight through enterprise processing, 161straight through processing, 27, 32

positive market impact, 222sub-custodian, 20, 204, 205and CSD, 46duties for corporate actions, 203Virtual, 264

SUN, 223SunGard transaction network, 161supply chain, 154supply side, 20suspense accounts

and reconciliation, 239swaps, 118, 125, 188, 262SwapsWire, 115, 118, 121, 263as market platform, 118

SWIFT. See society for worldwide interbankfinancial telecommunications

SWIFTNet, 127, 161, 172, 219, 221, 245, 259Switzerland, 66, 86, 94

T 1, 177, 242trade settlement cycle, 177

T30, 138tata consultancy services, 163, 170, 169Tata Group. See tata consultancy servicestax, 9, 28, 30–34, 39, 52, 76, 85–92, 99, 103, 109

advantage of pension fund status, 135authorities, 265

INDEX318

tax – continuedcontractual, 205deduction, 99domestic, 108general, 106institutional position, 146investment funds, 133investor’s, 105rates, 265reclaim, 93, 167, 211

service, 39, 207recovered, 93, 104, 109relief at source, 207statutory, 99treaty rate, 98

TCS. See tata consultancy servicestechnology

custodian investments in, 36as a cost, 35

term, of loan, 147tools

management information, 41TQM, 194trace financial, 164, 172trade

failed, 149life-cycle, 251settlement, 204warehouse, 126

TradeWeb. See trading platformstrading

and settlement, 143cost analysis, 138fraudulent, 176integrated network, 134

trading platforms, 117trading systems

and central counterparty, 57electronic, 56

transactions, 10, 22, 37, 40, 42, 50, 101,113–114, 121, 161, 188, 206, 242, 244,256–257, 288

equity, 177harmonised, 40increase in volume, 177individual, 249loan, 145mediation service, 232netted for CCPs, 44positions in reconciliation, 239protection of, 192risks from securities, 151stock exchange, 45volume and size of, 241

transparency, 152, 184

TRAX, 225, 229treasury services, 41TriOptima, 118, 121Trust

and outsourcing, 33Trustees, pension funds, 21T-Zero, 118, 126

UK, 111, 186ub custodian bank, 42UCITS, 175UK-REIT, 111Unit Trusts, 72, 130, 145

managers, 9UNIX, 170, 182unstructured communications, 157US markets, 57US Patriot Act. See patriot actUS S.1441, 95

variable capital companies, 130validation, 107, 163, 187, 214, 222–223, 229,

230, 237and parsing, 229exceptions, 230of data, 247

valuation and payment, 121value-at-risk, 138VCC. See variable capital companiesvendor, 162Vermeg Megacor, 171virtual pooling

as substitute for investing, 136virtual-STP, 264vote

blocked shares, 206voting rights, 140

web services, 223, 227, 233, 234, 235, 237web services descriptor language, 223WebLogic BEA, 223WebSphere IBM, 223white-label, 78withholding tax, 22–23, 30–31, 76, 85, 88, 91,

93, 97–101, 103–104, 106–107, 109–111,135, 143

agent, 54, 98–99, 105and corporate actions, 265and outsourcing, quality, 30GlobeTax, 171impact on custodians and investors, 87over-withheld, 205principle of, 86proxy voting, 33reclaim, 207

INDEX 319

withholding tax – continuedrelief at source, future model, 105rules, 105

Word, Microsoft, 214, 215workflow, 43, 75, 81, 83, 134, 165, 259, 266

advantages of, 83as transactions in workgroups, 249automated, 84, 164, 222automated software, 186configurable, 168integrated, 169technology, 83

WorldCom, 196, 197WSDL. See web services descriptor language

Xcitek, 163, 164XML, 77–78, 83, 127, 168–169, 173, 220–224,

227, 228–229, 233–234, 245, 259and non-XML technologies, 220bi-directional capability, 227common interface, 221schema, 229

yield book, 138

INDEX320

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