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     LCH.Clearnet SA                           PROCEDURE FOR SETTLING NET FAILS
                                  III.4-2      ON TRANSACTIONS EXECUTED ON
     Instruction                               MARKETS OPERATED BY A MARKET
                                               UNDERTAKING



Pursuant to Articles 3.4.1.19 to 3.4.1.21, and 3.4.1.19 of the Clearing Rule Book.


In this Instruction, the terms “selling Clearing Member” are referring to the selling Open Positions
belonging to the Clearing Member and the terms “buying Clearing Member” are referring to the buying
Open Positions belonging to the Clearing Member.


CHAPTER 1         BUY IN PROCEDURES


Article 1
Except for Open Positions related to non-novated Transactions, LCH.Clearnet SA initiates a buy-in for
any selling Open Position (and subject to articles 16 and 17, for any buying net Open Positions), which
remains wholly or partially unsettled the evening of the seventh Clearing Day following the intended
Settlement Date.

Article 2
LCH.Clearnet SA can reduce the timeframe for a buy-in, at its discretion, if it deems that excessive
risk would be incurred otherwise. An alert is made to the concerned Clearing Member by
LCH.CLEARNET SA.

Article 3
On the evening of the sixth Clearing Day following the intended Settlement Date (intended Settlement
Date + 6), the selling Clearing Member to which a Net Fail belongs receives an alert from
LCH.Clearnet SA, electronically, through its access solution.

Such alert requires the Clearing Member to settle the relevant Open Position by making sufficient
provision on its central Securities depository, or Securities settlement system account, to allow the Net
Fail to be settled in the normal daily settlement process, at the latest on the evening of the seventh
Clearing Day following the intended Settlement Date (intended Settlement Date + 7) otherwise
LCH.Clearnet SA initiates the buy-in procedure for the quantity of Securities necessary to settle the
Net Fails.

Article 4
On the evening of the seventh Clearing Day following the intended Settlement Date (intended
Settlement Date + 7), the selling Clearing Member to which a Net Fail belongs and the corresponding
buying Clearing Member(s) receive a confirmation that the buy-in will be initiated.




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Instruction III.4-2                               1/7                      Published on April 14 , 2009
Article 5
LCH.Clearnet SA charges a flat fee to the Clearing Member to which the Net Fail belongs, even if
such Clearing Member delivers the Securities under Article 9.

Article 6
Neither the alert mentioned in Article 3 nor the confirmation mentioned in Article 4, is a condition
precedent to the buy-in. Failure to receive such alert or confirmation does not prevent LCH.Clearnet
SA from executing the buy-in and charging it.

Article 7
On the morning of the eighth Clearing Day following the intended Settlement Date (intended
Settlement Date + 8), a buy-in attempt is launched using a tender price.

For any type of Security the tender price is deemed to be a maximum amount above which no offer of
buy-in will be made. It is defined as follow:

-   120% of the opening price of the Clearing Day following the day of the alert, mentioned in article 3,
    (intended Settlement Date + 7).

The tender price, together with the list of Securities to be bought in, and for each Security the relevant
quantity are posted on LCH.Clearnet SA website.

Article 8
During the eighth Clearing Day following the intended Settlement Date (intended Settlement Date + 8),
the Securities provider or the Clearing Member to which the Net Fail belongs, can notify LCH.Clearnet
SA by fax, using exclusively LCH.Clearnet SA standard document, and within the timeframe set out in
a Notice, that they can deliver part or all of the relevant Securities.

Article 9
After having received the fax, LCH.Clearnet SA determines the conditions under which the buy-in can
be executed, under the two following principles:

-   If the Clearing Member to which the Net Fail belongs executes wholly or partially its obligation to
    deliver the Securities then LCH.Clearnet SA gives priority to its full or partial delivery upon any
    other Security provider offer.

-   If the Clearing Member to which the Net Fail belongs does not deliver at all the Securities or
    delivers partially, LCH.Clearnet SA chooses for the whole or remaining quantity the cheapest
    provider and if there is more than one Securities provider with the same price and quantity,
    LCH.Clearnet SA will choose the first one presented.

Article 10
LCH.Clearnet SA requests by any means the chosen Securities provider and/or Clearing Member to
deliver the relevant Securities, to LCH.Clearnet SA's buy-in account opened in the books of the central
Securities depository or Securities settlement system, free of payment.

If the Securities provider and/or the Clearing Member does not receive the request to deliver from
LCH.Clearnet SA before the time set out in a Notice, LCH.Clearnet SA shall be deemed to have
rejected the proposal and therefore the obligation is void.

Article 11
The delivery of the relevant Securities occurs the eighth Clearing Day following the intended
Settlement Date. The timing within which the Securities provider and/or the Clearing Member shall
deliver the Securities depends on the settlement cycles of the Securities settlement system and/or
central Securities depository. Such timing is described in a Notice.

If the defaulting Clearing member and/or the Securities Provider credits too many Securities, in such
exceptional case, LCH.Clearnet SA will credit back the unused Securities within the same Clearing
Day.




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Instruction III.4-2                                2/7                      Published on April 14 , 2009
Article 12
After receiving the Securities, LCH.Clearnet SA performs the buy-in, either partly or fully, by sending,
for intended Settlement Date + 9 value:

-   an instruction to credit the cash account belonging to the Securities provider and/or the Clearing
    Member which has provided the Securities, of the relevant amount using the tender price, and;
-   a delivery versus payment instruction to the relevant cash and Securities accounts of the buying
    Clearing Member(s) which has suffered the Net Fail and;
-   an instruction to debit the cash account of the Clearing Member to which the Net Fail belongs,
    corresponding to the amount of the Net Fail minus the amount credited to the entity which has
    provided Securities when appropriate.




CHAPTER 2         CONTINUOUS NET SETTLEMENT

Article 13
The “continuous net settlement” objective is to reduce the number of Net Fails.

Within each Delivery Account the continuous net settlement works as follows.

Open Positions to be settled, calculated as described in the Article 3.1.2.1 of the Clearing Rule Book,
are netted with Net Fails on the same Security, under the following conditions:

-   Oldest Net Fails are offset in priority;
-   The amounts are netted together independently from the quantities and;
-   The intended Settlement Date, of the Open Positions and/or Net Fails having the greatest amount
    in absolute value is applied to the result.

Article 14
Remaining Open Positions related to the same Security, for which the intended Settlement Date is
before or on the next Clearing Day, are aggregated into one unique delivery versus payment
instruction. This instruction is sent to the Settlement Addresses corresponding to this Delivery
Account.

Article 15
A buy-in procedure is triggered to process the remaining Net Fails when they have reached the
deadline mentioned in article 1, subject to articles 16 to 18, when applicable. If so, the relevant Net
Fails are removed from the next process dedicated to the preparation of the settlement instruction.

Article 16
As a consequence of the process described in article 13, the age of selling and buying Net Fails can
be different and the quantity of Securities that are not delivered (across all the Delivery Accounts) per
intended Settlement Date may be unbalanced.

Hence, the buy-in algorithm will match together Net Fails having potentially different intended
Settlement Dates. A buying Net Fail can be recycled for seven (7) days but not necessarily the
corresponding selling Net Fail, or vice versa.

Article 17
In theory, a buy-in is possible for a selling Open Position from the first Clearing Day after the intended
Settlement Date as described in Annex 1 “anticipated buy-in procedure”. In such a case, the
timeframe mentioned in Articles 1 to 4 included is not applicable.

However, when the selling Open Positions are of an age of one or two Clearing Days after the
intended Settlement Date, LCH.Clearnet SA will delay the settlement of the Open Position by two
Clearing Days.

When the selling Open Positions are of an age of three Clearing Days after the intended Settlement
Date, no delay will be granted by LCH.Clearnet SA to perform the buy-in procedure.



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Instruction III.4-2                                3/7                      Published on April 14 , 2009
The selling Clearing Member will not receive the corresponding alert, and therefore any reference to
the day of alert is deemed to refer to the eve of the day when the buy-in is triggered.

Article 18
In course of an anticipated buy-in procedure, the corresponding buying Clearing Member does not
receive the confirmation on the Clearing Day sets out in Article 4. It will receive this confirmation at the
latest on the eve of the ninth Clearing Day following the intended Settlement Date. Then, any
reference to days set out herein is not applicable to the corresponding buying Clearing Member.


CHAPTER 3         CASH COMPENSATION

Article 19
Open Positions, for which Securities remain undelivered after the performance of buy-in in the evening
of the eight Clearing Day following the intended Settlement Date, or at an earlier timeframe as set out
in Chapter 2, are settled by cash compensation. The defaulting Clearing Member pays the cash
compensation to LCH.Clearnet SA, on the intended Settlement Date + 9 Clearing Days. On the same
Clearing Day, LCH.Clearnet SA passes on the entire amount to the Clearing Member(s) suffering from
the Net Fail(s).

Article 20
Cash compensation can be performed earlier if the relevant Securities are not listed anymore or have
expired before the evening of the eighth Clearing Day following the intended Settlement Date.

In case of faillure to deliver warrants, or any similar Financial Products, that have expired prior to the
maturity date defined by the issuer (notably but not only knock-out warrant), the cash compensation is
performed on the Clearing Day following the intended Settlement Date.

As an exception to the above principle, for warrants that were negociated and have expired on the
same Clearing Day, the cash compensation is performed up-to the third Clearing Day following the
intended Settlement Date on request of the defaulting Clearing Member subject that:
    • the Securities are registered in the accounts opened in the books of the relevant CSD in the
        name of the defaulting Clearing Member but the latter is prevented from delivering such
        Securities on intended Settlement Date due to internal technical/operational faillure; and
    • the relevant (I)CSD maintains the Securities available in their system for settlement.

Article 21
For any type of Security, the cash compensation is equal to 120% of the opening price of the Clearing
Day following the day of the alert, mentioned in article 3, (intended Settlement Date + 7).

In order to limit the damages suffered by the buying Clearing Member, notably in case of high market
volatility, the cash compensation cannot be inferior to the amount corresponding to the application of
the Transaction date purchase price on the Open Position remaining on the evening of the eighth
Clearing Day following the intended Settlement Date (Intended Settlement Date +8).

Article 22
By exception to paragraph 1 of Article 21 and without prejudice to the indemnity amount (if any)
mentioned in the issuer notice, for warrants which have expired at the date of cash compensation, the
cash compensation is equal to 120% of the value of the Buying Net Failed Open Position at expiry
date.

Article 23
The cash compensation amount derived by applying the relevant formula is not capped.




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Instruction III.4-2                                 4/7                      Published on April 14 , 2009
CHAPTER 4         SETTLEMENT FOR NET FAILS ON RIGHTS

Article 24
Regarding Financial Instruments giving rights to a Security (e.g subscription rights, warrants,
convertibles etc…), a Clearing Member suffering from a Net Fail on those Securities or can ask
LCH.Clearnet SA to be delivered:

-   the relevant Financial Instrument, if they are still traded and available on the market or;
-   corresponding new Securities, if the Financial Instruments are no longer available on the market,
    in which case LCH.Clearnet SA can require the Clearing Member suffering from the Net Fail to
    adjust its relevant Open Position or;
-   existing Securities, if the subscription rights are not available on the market and the corresponding
    new Securities have not yet been issued.

LCH.Clearnet SA will comply with this request and within a timeframe subject to the market conditions.

Regarding Net Fails on coupons LCH.Clearnet SA shall pay to the buying Clearing Member the
following amounts:
     • the net amount of the coupon fixed by the issuer, and
     • If as a result of the different tax regimes of coupon payments and compensation payments,
        the buying Clearing Member is due to pay taxes, therefore, in addition to the amount above
        mentioned an indemnity will be paid to neutralise the tax effects under the conditions set out in
        a Notice.


CHAPTER 5         SELL-OUT PROCEDURES

Article 25
For Net Fails due to a lack of payment for which Securities have been received from the selling
Clearing Member but have not been delivered to the buying Clearing Member, LCH.Clearnet SA sells
out the Securities corresponding to any buying Open Position which remains unsettled on the morning
of the first Clearing Day following the intended Settlement Date (intended Settlement Date + 1).

Article 26
On the Clearing Day when the cash failure occurs, the buying Clearing Member to which a Net Fail
belongs receives an alert from LCH.Clearnet SA, either electronically through its access solution or by
fax.

Article 27
This alert requires the Clearing Member to settle the relevant Open Position by crediting its central
bank or commercial bank account to allow the Net Fail to be settled in the normal daily settlement
process at the latest on the following Clearing Day otherwise LCH.Clearnet SA initiates the sell-out
procedure and sells the quantity of Securities necessary to settle the Net Fails.

Article 28
LCH.Clearnet SA can change the timeframe for a sell-out, at its discretion, if it deems that excessive
risk would be incurred otherwise.




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Instruction III.4-2                               5/7                      Published on April 14 , 2009
                                                                      ANNEX 1 – Anticipated buy-in procedure

        A first Clearing Member (CM A) holds a buying Open Position of 100 λ Securities to be received on day S from LCH.Clearnet SA. Another Clearing Member (CM B)
        holds a selling net Open Position of 100 λ Securities to be delivered on S to LCH.Clearnet SA. The settlement of these two net Open Positions fails on S and therefore
        they are included in the recycling process. The buying Open Position of CM A remains a Net Fail in its Delivery Account while the selling Open Position of CM B
        remains a Net Fail in its Delivery Account.

        Another Clearing Member (CM C) is due for delivery of 100 λ Securities on day S+4 while CM B has to receive 100 Securities on S+4.

        In application of the continuous net settlement, CM B benefits on S+3 evening from the netting of its Open Positions, as described in Article 14, resulting in no Open
        Position to deliver/to receive and therefore in the cancellation of its Net Fail.

        As a consequence, until CM C does not deliver the requested Securities, the original buying Open Position of CM A remains a Net Fail while the selling Open Position
        of CM C remains a Net Fail.

        On S+7, the buying Net Fail of CM A will become eligible for buy-in and will match the selling Open Position of CM C as if it was a seven-day Net Fail.

                                                                                                                 CM A                                          CM C
                                                                                                                                       CM B
DATE                                                              EVENT                                        DELIVERY                                       DELIVERY
                                                                                                                                 DELIVERY ACCOUNT
                                                                                                               ACCOUNT                                        ACCOUNT
S-3                                                               Transaction where CM A is buyer and        Buy 100          Sell 100
                                                                  CM B seller against LCH.Clearnet SA.
S      morning                                                    Instructions sent to the settlement        +/+ 100          -/- 100
                                                                  platform are unsettled and thus
                                                                  recycled for the next day (Net Fails).
S+1 morning                                                       Both instructions unsettled.               +/+ 100          -/- 100
                                                                                                             (1st day of      (1st day of
                                                                                                             Net Fail)        Net Fail)
                                                                  Transaction where CM B is buyer and                                        Buy 100       Sell 100
                                                                  CM C is seller against LCH.Clearnet
                                                                  SA.
S+2 morning                                                       The Net Fails remain (instructions         +/+ 100          -/- 100
                                                                  unsettled) for CM A and CM B.              (2nd day of      (2nd day of
                                                                                                             Net Fail)        Net Fail)
                                                                                                                                             +/+ 100       -/- 100
                                                                  CM B and CM C Open Position
                                                                  remains.



        Instruction III.4-2                                                     6/7                                                         Published on xxxxxxx
S+3 morning    The Net Fails remain (instructions unsettled) for CM A and CM       +/+ 100           -/- 100
               B.                                                                  (3rd day of Net   (3rd day of Net
                                                                                   Fail)             Fail)
                                                                                                                         +/+ 100              -/- 100
               CM B and CM C Open Position remains.
    evening    Continuous net settlement between the buying Open Position
               which becomes due and the selling Net Fail, both belonging to
               CM B.                                                                                       -/- 100 netted with +/+ 100
                   no Open Position remains for CM B.                                                            ZERO to settle
               Instructions sent for settlement regarding CM A buyer and CM C      +/+ 100                                                    -/- 100
               seller against LCH.Clearnet SA.
S+4 morning    CM A Net Fail remains.                                              +/+ 100                                                    -/- 100
               CM C did not deliver for the intended Settlement Date and thus      (4th day of Net                                            (1st day of Net Fail)
               its Open Position becomes a Net Fail.                               Fail)
S+5 morning    Both Net Fails remain (instructions unsettled).                     +/+ 100                                                    -/- 100
                                                                                   (5th day of Net                                            (2nd day of Net
                                                                                   Fail)                                                      Fail)
S+6 morning    Both Net Fails remain (instructions unsettled).                     +/+ 100                                                    -/- 100
                                                                                   (6th day of Net                                            (3rd day of Net Fail)
                                                                                   Fail)
S+7 morning    Both Net Fails remain (instructions unsettled).                     +/+ 100                                                    -/- 100
                                                                                   (7th day of Net                                            (4th day of Net Fail)
                                                                                   Fail)
    evening    Net Fail belonging to CM A has reached S+7, CM A Net Fail           +/+ 100                                                    -/- 100
               matches CM C Net Fail and buy-in is triggered for the latter.
S+8 morning    Tendering price communicated by LCH.Clearnet SA pursuant to
               article 7
               CM C can still contacts LCH.Clearnet SA to deliver in priority
               against other Securities providers, if it has provision
               corresponding to its selling Net Fail. If not the buy-in process
               carries on.
S+9 morning    End of regularisation of the buy-in procedure




     Instruction III.4-2                                                     7/7                                                     Published on xxxxxxx

				
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