dvp settlement

DVP SETTLEMENT
IN NSD
DVP SETTLEMENT
DVP (Delivery versus payment) links the delivery and payment obligations in such a way as to
ensure that the final (i.e. irrevocable and unconditional) settlement of securities occurs if and
only if the final settlement of the corresponding payment occurs.
NSD offers its clients DVP settlement using three DVP models:
DVP 1:
• Settlement occurs on a trade by trade basis
DVP 2:
• Securities are settled on a gross basis, but cash is
settled on a net basis
DVP 3:
• Net settlement of both securities and cash
DVP settlement may be effected via cash accounts with NSD or with the foreign banks:
Accounts
Custody account with NSD
DVP model
Currency
Cash account with NSD
DVP 1, 2, 3
RUB, USD, EUR, CNY
Cash account with J.P.
Morgan, NY/Citi,
NY/Deutsche Bank, NY
DVP 1, 2, 3
USD
2
DVP: SETTLEMENT VIA ACCOUNTS WITH
FOREIGN BANKS
1. Clearing participants (Seller and Buyer)
send DVP instructions to NSD;
J.P. Morgan & Co NY / Citibank, NY / Deutsche Bank, NY
Cash
Account of Seller/
Seller’s client
2. NSD executes netting of liabilities in pool
of matched instructions;
Cash
Account of NSD
6
7
5
Account of Buyer/
Buyer’s client
3. Securities blocking;
4
NSD
2
1
Seller’s trading
securities account
3
Clearing participant
(Seller)
8
*Aggregate
clearing account
for securities
settlements
8
Buyer's trading
securities account
1
Clearing participant
(Buyer)
* For DVP-2 and DVP-3 settlements.
DVP-1 settlements are conducted without Aggregate clearing
account.
4. NSD on the basis of Power of Attorney
sends instruction to debit Buyer’s/
Buyer’s client cash account opened with
the foreign Bank.
5. J. P. Morgan & Co., NY/CITIBANK, NY/
Deutsche Bank, NY transfers funds from
the Buyer’s/ Buyer’s client cash account
to the account of NSD;
6. NSD sends instruction to transfer funds
from the correspondence account opened
with J. P. Morgan & Co., NY/CITIBANK,
NY/ Deutsche Bank, NY to the account of
Seller/Seller’s client;
7. NSD receives confirmation that the
account of Seller/ Seller’s client has been
credited;
8. NSD settles securities.
DVP: SETTLEMENT VIA ACCOUNTS WITH
NSD
1. Clearing participants (Seller and Buyer)
send DVP instructions to NSD;
Trading bank
account of Seller/
Seller’s client
4
Aggregate clearing
account for cash
settlements
4
Trading bank
account of Buyer/
Buyer’s client
2. NSD executes netting of liabilities in pool
of matched instructions;
3. Securities blocking;
4. NSD simultaneously settles funds and
securities.
NSD
2
Trading securities
account of Seller
3
4
*Aggregate
clearing account
for securities
settlements
4
Trading securities
account of Buyer
1
1
Clearing participant
(Seller)
Clearing participant
(Buyer)
* For DVP-2 and DVP-3 settlements.
DVP-1 settlements are conducted without Aggregate clearing
account.
4
DVP: SETTLEMENT VIA ACCOUNT WITH A
FOREIGN BANK AND ACCOUNT WITH NSD
1. Clearing participants (Seller and Buyer)
send DVP instructions to NSD;
J.P. Morgan & Co NY / Citibank, NY / Deutsche Bank, NY
2. NSD executes netting of liabilities in pool
of matched instructions;
Cash
Account of NSD
5
Account of Buyer/
Buyer’s client
4
NSD
Trading bank
account of Seller/
Seller’s client
3. Securities blocking;
2
6
Trading securities
account of Seller
1
3
7
*Aggregate
clearing account
for securities
settlements
7
Trading securities
account of Buyer
1
4. NSD on the basis of Power of Attorney
sends instruction to debit Buyer’s/
Buyer’s client cash account opened with
the foreign Bank.
5. J. P. Morgan & Co., NY/CITIBANK, NY/
Deutsche Bank, NY transfers funds from
the Buyer’s/ Buyer’s client cash account
to the account of NSD;
6. NSD reflects funds transfer from
correspondence account opened with J.
P. Morgan & Co., NY/CITIBANK, NY/
Deutsche Bank, NY to trading bank
account of Seller/ Seller’s client opened
with NSD;
7. NSD settles securities.
Clearing participant
(Seller)
Clearing participant
(Buyer)
* For DVP-2 and DVP-3 settlements.
DVP-1 settlements are conducted without Aggregate clearing
account.
5
CLEARING BATCHES
•
•
A clearing batch is based on matched instructions for which currency control
documents have been received.
A clearing batch may include obligations to be terminated and/or fulfilled using DVP
model 2 or DVP model 3.
During a business day, NSD runs 8 clearing batches:
Cash accounts with NSD
Cash accounts with the foreign banks
10:00, 12:00, 13:00, 15:00, 16:00, 18:00,
18:45, 19:40
10:00, 13:00, 15:00, 18:00, 18:45
Timeframes within which settlement of clearing batches with accounts with the foreign
banks will be effected depends on foreign settlement banks’ efficiency of NSD’s
instructions execution.
6
ACCOUNT LINKING OPTIONS
1.1 Cash account and securities account
belong to one entity
1.2 Cash account belongs to the Client of ICSD,
CSD or Russian Custodian/Broker
ICSD, CSD or Russian
Custodian/Broker
The Client
ICSD, CSD or Russian
Custodian/Broker
ICSD, CSD or Russian
Custodian/Broker
1.3 (A) Several cash accounts, opened in the name
of the Clients of ICSD, CSD or Russian Custodian/
Broker are linked with omnibus securities account
Resident
Nonresident
Resident
ICSD, CSD or Russian
Custodian/Broker
1.3 (B) Several cash accounts, opened in the name
of the Clients of ICSD, CSD or Russian Custodian/
Broker are linked with segregated securities account
Client A
Client В
Subaccount
for Client A
Subaccount
for Client B
Trading cash account
opened with NSD or with
the foreign bank
Trading securities account
opened for NSD clearing
Client C
Subaccount
for Client C
ICSD, CSD or Russian Custodian/Broker
1.4 Cash account is linked with segregated
securities account.
Clearing participant/ The
Client
Subaccount
for Client A
Subaccount
for Client B
Clearing participant X
1.5 Cash account is linked with several securities
accounts, belonging to the same Clearing participant
Clearing participant/ The
Client
Clearing
participant X
Clearing participant –
ICSD, CSD or Russian
Custodian/Broker.
Clearing
participant X
7
TOLERANCE PRINCIPLE
Tolerance principle makes it possible to match and settle instructions if the
trade amounts specified in matching instructions by the Clearing Participants
differ insignificantly.
•
Tolerance value is determined by each Clearing Participant and is stipulated
in process of registration of bank account details.
•
Maximum tolerance value* - USD 25 or RUB 800;
•
Tolerance currency must be the same as the account currency. Otherwise
tolerance principle can not be applied.
*If tolerance value is indicated in another currencies, it can not exceed equivalent of USD 25 at the exchange rate
of the Bank of Russia which is prevailing at the date prior to the date of execution of instruction to register bank
account details.
8
CURRENCY CONTROL
Necessary to provide currency control
documents
Not necessary to provide currency
control documents
By residents (not credit organisations)
going to effect settlement in a foreign
currency*
By non-resident clients
For transactions executed via RTS
Electronic Agreements Centre
By credit organisations
*Transaction basement documents for DVP settlement via cash accounts with NSD should
be submitted simultaneously with the DVP settlement instructions or in advance of the
settlement date.
For DVP settlement via cash accounts with foreign banks the client has to provide NSD only
with a brokerage service agreement/agency agreement/accession agreement/ etc.,
confirming legal relationship between the foreign bank and the client only once in process
of cash account details registration.
9
REPORT TYPES SENT TO CLIENTS
VIA SWIFT
1. Reporting on potential counterparty
instruction (subscription to Electronic
matching required)
5. Report on all unsettled deals
with reason description:
• MT537, MT548;
• MT548;
2. Sending reports on the results of
clearing instructions matching:
• MT548, MT578, MT537;
3. Reporting on instruction execution:
• MT545, MT547;
4. Reporting on clearing batch
settlement results:
• MT575*;
6. Report on securities transfer
based on clearing results:
• MT544, MT546;
7. Cash account statements:
• MT950 or via “bank-client
system”;
8. Transfer of cash from
accounts with the foreign
banks:
• MT900.
*To receive MT575 it is necessary to register in Message User Group (MUG). Registration can be made on web-site
www.swift.com section Ordering > Order products and services > Message User Group, register to.
10
QUESTIONS & ANSWERS
1. Why is it necessary to provide NSD with debit authority in respect of cash accounts opened with NSD?
-
For DVP deals via cash accounts with NSD as well as via cash accounts with foreign banks, the Client has to provide
NSD with an authority to debit his accounts. As of internal DVP, NSD being Clearing institution conducting DVP netting
has debit authority in respect of clients’ trading cash/securities accounts, but at the same time NSD’s debiting authority
is limited by carrying out only these functions. The client always has the right to submit instruction and debit his
account if cash or particular securities (as for securities account) are not involved in current DVP settlement liabilities of
the client. If the customer already has cash accounts with the Foreign Banks, he will need to complete and send the
relevant documents to the Foreign Bank authorising NSD to operate the customer's account with the bank.
2. Will NSD provide the clients with automatic closing balance transfer from cash accounts with NSD as it is
done for cash accounts with the foreign banks?
-
Yes, in 2014. We will announce the date in advance.
3. When should the client credit his accounts (cash and securities) with necessary amount of cash and
securities?
-
At the time a deal is concluded, there is no need to have sufficient securities and/or cash in the accounts. The securities
and cash needed to settle the deal must be available in the accounts on the settlement date stated in the instruction,
15 minutes in advance of the clearing session.
4. When DVP instructions will be executed?
-
Instructions will be executed on the settlement date specified in the instruction or on the date the pairs of instructions
are matched, where one of the instructions is missing on the settlement date. Execution period for DVP instructions is
30 days from the settlement date.
5. Is it possible to avoid transliteration in DVP reports?
-
For DVP settlement NSD already does not require clients for transliteration and does not send reports with
transliteration.
11
CONTACTS
NSD Hotline:
Tel.: +7 (495) 234-48-27
Client Services Division:
Tel.: +7 (495) 956-27-90/91/92/93; (495) 956-09-40;
(495) 745-81-45; (495) 234-48-65
E-mail: [email protected]
Client Relations Development Department:
Tel.: +7 (495) 234 9960
E-mail: [email protected]
Web-sites:
www.nsd.ru, www.isin.ru
Address:
12, Spartakovskaya str.,
Moscow, 105066, Russia
THANK YOU!
DISCLAIMER
•
•
•
•
•
This presentation has been prepared and issued by NSD (the “Company”). Unless otherwise stated, the Company is the source for all data
contained in this document. Such data is provided as at the date of this document and is subject to change without notice
This document does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a
solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or
be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a
recommendation regarding the securities of the Company
The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and
no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the
Company, or any of its subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives,
accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or
otherwise arising in connection therewith
This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation,
including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations
are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which
may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by
these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future
business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results,
performance, achievements or industry results to differ materially from those in the forward-looking statements include, among other factors:
– Perception of market services offered by the Company and its subsidiaries
– Volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and
its subsidiaries operate
– Changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities
markets
– Competition increase from new players on the Russian market
– The ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that
are popular with the Company's and its subsidiaries' customers
– The ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the
competitiveness
– The ability to attract new customers on the domestic market and in foreign jurisdictions
– The ability to increase the offer of products in foreign jurisdictions
Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release
any update of, or revisions to, any forward-looking statements in this presentation as a result of any change in our expectations or any
change in events, conditions or circumstances on which these forward-looking statements are based

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