BVI Securities Transaction Standards

Transcription

1 BVI Securities Transaction Standards Bundesverband Investment und Asset Management e.v.

2 External Business Communication of Investment Management Institutions 15. Mai 2007 Version 1.0

3 Content 1 Introduction Pre-Requisites Business Related Rules Risk and Responsibility for Settlement Settlement Fees Settlement Process "Lean" Settlement Instructions "Actual Settlement" "Lean" Settlement Confirmation Extended Settlement Instructions Extended Settlement Confirmation How to charge fees Summary Relation to the Cash Statements Relation to Securities Statements Examples Example 1: OTC Fixed Income trade Trade Confirmation MT "Lean" Settlement Instruction MT "Lean" Settlement Confirmation Extended Settlement Instruction Extended Settlement Confirmation Example 2: Equities Trade in UK Trade Confirmation MT "Lean" Settlement Instruction MT "Lean" Settlement Confirmation MT Extended Settlement Instruction MT Extended Settlement Confirmation MT Example 3: Equities Trade in Finland Trade Confirmation MT Example 4: Fixed Income Trade, settled via Euroclear Trade Confirmation MT Example 5: Fixed Income Trade in US Securities Trade Confirmation MT Appendix A: List of Countries with Documented SMPG-Standards for Settlement Contacts Version 1.0 Page 1

4 1 Introduction The purpose of this document is the specification of messages according to SWIFT/ ISO standards, for settlement of equities and fixed income trades, which are exchanged between a KAG 1 and a custodian. This document expands on the BVI Transaction Standards dated May The BVI- Standards specify in detail the Trade Confirmations broker/dealers (B/D) send to KAGs. This document specifies the settlement instructions and settlement confirmations, that are exchanged based on those trade confirmations. The terms used in here have been documented in the BVI Transaction Standards documents from May They can be looked up in the glossary section of the document "Trading & Settlement". 1.1 Pre-Requisites In the process of the introduction of ISO on the SWIFT network, settlement to sub-custodians 2 had been standardised on a global basis. These standards are known as "Securities Market Practice for Settlements" 3 (also known as "SMPG standards for S&R" 4 ). We shall refer to "SMPG Standards" only, because only settlement is in scope. SMPG Standards consist of two parts: "Common Elements" and "Country Specific Elements". Common Elements are ten globally uniform data elements necessary for securities settlement. They are complemented by Country Specific Elements. Country specific elements differ per country (to be more precise: per place of settlement = PSET, usually a Central Securities Depository). These data elements are either required by regulation, e.g. tax, or are necessary due to country specific functional or technical requirements. For example: the identification of parties is still not standardised globally. Specifications for these country specific data elements are available for more than 30 countries (see list appendix A). The BVI Transaction Standards and this document assume SMPG standards are applicable in their full scope and without change. This shall apply as well for the MT 515 trade confirmation (especially the "settlement details" data ("Settlement Chains") that shall be delivered according to SMPG) as well as the settlement instructions and settlement confirmations that are specified here KAGs are regulated German Investment Management Institutions (IMI) which do asset management, fund accounting and administration and reporting to institutional investors. So called "Master KAGs" are working with asset management out-courced to third parties (see document "BVI Transaction Standards" part "Trading with Advisors/Outsourcing"). "Sub-Custodians" are financial institutions, who are direct members of a Central Securities Depository and hold securities accounts there. Securities Market Practice are worked out by the Securities Market Practice Group (SMPG). It has sub-groups on a national level and a global group. SWIFT is working as secretariat for SMPG. For more info on SMPG, see S&R stands for Settlement & Reconciliation. Reconciliation using account statements is also standardised, but is out side the scope of this document. There are many more SMPG Standards, e.g. for Corporate Actions. Version 1.0 Page 2

5 The BVI Transaction Standards are hence not meant to supersede the SMPG standards, also not for Germany. Rather the BVI Transaction Standards specify the application of SMPG standards in the context of the German KAG business. Ultimately brokers, KAGs, global custodians, sub custodians and central securities depositories will use the same standards for securities settlement: SMPG based on ISO via SWIFT. This enables straight through processing (STP), also for complex cross border business. 2 Business Related Rules 2.1 Risk and Responsibility for Settlement General terms and conditions and the German legal framework are suggesting the following standard business scenario: The standard scenario 5 for securities settlement is "Actual Settlement", i.e. the value date is depending on the local market where settlement ultimately happens. This is true for the expected value date (e.g. T+3 as per local market practice) as well as for the actual point in time when settlement happens, depending on matching trade details and if and when the counter party delivers 6. The value date for the KAG is well defined. The settlement and delivery at a Central Securities Depository implies also change of ownership for the KAG at the same point in time, because settlement means change of ownership as per the definition of "collective safe custody" ("Verschaffung von Miteigentum an einem Sammelbestand"). 2.2 Settlement Fees The following market practice is recommended: Custodians charge the KAG for the settlement service and do so separately for own and third party services. Third party services shall be charged per trade. Custodians charge their service preferably per trade ("Ticket Fee"), or in fixed intervals (e.g. monthly). 3 Settlement Process Depending on how process steps are allocated between KAG and custodian there are two models: 5 6 Deviations from this procedure have to be agreed between KAG and custodians in writing. For example: the custodian can assume full responsibility for settlement ("obligo"). The standard term for this is "Contractual Settlement". Then the custodian guarantees the KAG a certain value date independent from the local market and possibly even independent from the local market practice value date. For obvious reasons contractual settlement is the standard practice in the retails securities business. This is known as "Settlement-Matching". Version 1.0 Page 3

6 3.1 "Lean" Settlement Instructions In this model fund accounting of the KAG is based primarily on the broker trade confirmation 7 MT 515 and matching of the trade details with the broker/dealer. Based on the broker trade confirmation the KAG generates a settlement instruction MT 541 (buy) or MT 543 (sell) to the custodian, containing only the information needed for settlement, hence the term "lean". The content of the settlement instruction are hence only the "Common Data Elements" and the "Country Specific Data Elements" as defined by SMPG. The latter are depending on the "Place of Settlement" (PSET) 8. The settlement instruction shall be generated on the trade day. This model fits best settlement in the currency of the security. This currency can be different from the fund currency "Actual Settlement" Broker/ Dealer IMI a) Settlement Instruction d) Settlement-Status f) Settlement Confirmation All via SWIFT: SWIFTNet FIN: a) MT 541, MT 543 b) MT 541, MT 543 c) MT 548 d) MT 548 e) MT 545, MT 547 f) MT 545, MT 547 Custodian b) Settlement Instruction c) Settlement-Status e) Settlement Confirmation CSD In the case of "Actual Settlement" the value date is governed by the market practice of the local market (PSET, usually a central securities depository), where final settlement takes place. From a customer (the KAG) point of view settlement has only happened when it did happen in the local market ("actual"). Process: 1. The custodian receives the settlement instruction from the KAG. 2. The custodian checks if the "foreign" settlement chain fits the "own" settlement chain (specifically if final settlement will happen at the same central securities depository, PSET). 7 8 The German term for trade confirmation - as agreed by BVI - is "Broker-Abrechnung". KAG and Broker have to agree on a PSET beforehand. In the best case the KAG is advising PSET to the broker after the KAG has queried the PSET for this trade (and this fund) from the custodian (electronically!). Version 1.0 Page 4

7 3. The custodian instructs the CSD or its intermediary (sub-custodian) where it has a custody account. 4. The custodian checks the matching of its own instructions with the instruction of the counter party until the settlement finally happens. Intermediate reports to the KAG are possible (per MT 548, on request by MT 549). 5. The custodian confirms settlement to the KAG by MT 545/ The custodian is charging the settlement service to the KAG The custodian is accounting securities an cash "Lean" Settlement Confirmation In the case of lean settlement instructions and "Actual Settlement" the custodian confirms settlement to the KAG at the same day when settlement happened using MT 545 (buy) or MT 547 (sell). The custodian shall specify the charges its settlement service using the same settlement confirmations 10. This settlement confirmation is "lean" because the custodian is reporting back the same content of the settlement instruction, adding just the fees for the settlement service 11, Extended Settlement Instructions In the second model the custodian is performing additional accounting and checking services. Extended settlement instructions should allow, for example, for the following: The custodian is checking trade prices. The custodian is checking accrued interest. The custodian is checking and accounting for brokerage fees. For this purpose the KAG shall supply the custodian additional data elements to the ones mandated by SMPG. The custodian can return these data elements in the settlement confirmation. Note: As the extended settlement instruction is an extention of the lean settlement instruction, the KAG shall be allowed to elect to send an extended settlement instruction all the time, even in the case where the custodian does not save and process the additional data elements. 9 Fees for the settlement service are reported separately (as separate data elements) and will be charged in addition to the settlement amount. 10 For this the German term "Depotbank-Abrechnung" had been agreed by the KAGs in den BVI-Transaction Standards from Mai Brokerage services of the Custodian (if the custodian has a brokerage arm) (aka Konto-Depot business) shall not be confirmed using MT545/547. Rather for this kind of business MT515 shall be used. Pure settlement services (without Brokerage) shall not be confirmed using MT515. Rather MT545/547 shall be used. 12 Special cases e.g. Partial Settlements are not documented here for the sake of clarity. Version 1.0 Page 5

8 The KAG shall be willing to accept that the custodian does not return these data elements in the case of a lean settlement service. This arrangement needs to be documented in the SLA between KAG and custodian as this deviates from the standard case in which the custodian returns all data elements it had received in the settlement instruction Extended Settlement Confirmation In that case the custodian returns additional data elements in the settlement confirmation it had received in the extended settlement instruction. These data elements are not to be changed. The purpose of this "data round trip" is to facilitate feeding KAG systems which are geared to be fed by information supplied by the custodian 13. The fees the custodian charges for this settlement service shall be reported in additional data elements just as in the case of lean settlement confirmations. 3.3 How to charge fees The model of lean settlement instructions assumes broker fees are accounted for by the KAG. If the KAG has elected to out-source accounting, e.g. to the custodian, then it shall report broker fees in the additional data elements of the extended settlement instruction. The data elements in the MT 541/543 fit one-to-one the data elements in the MT 515 trade confirmation. The custodian will report back these data elements unchanged in the MT 545/547 settlement confirmation adding another data element to charge its settlement fee. In both cases lean or extended settlement instruction the Settlement Amount as been provided by the broker and as agreed between broker and KAG must remain unchanged along the whole process chain. This is a pre-requisite for STP and the only way to achive a matching tolerance of zero Euro at the central securities depository (PSET). The broker will include its and third party fees (and taxes and accrued interest, if applicable) in the settlement amount. It will include a cost block to cover for its part of the settlement as the broker trade confirmation is the only means for the broker to charge the cost to its client (the KAG): In MT 515, 541/3, 545/7: DEAL = Price * Nominal (or Price * Units) In MT 515, 541/3: SETT = DEAL + ACRU + EXEC + LOCO + STAM + STEX + REGF The BVI Transaction Standards specify in detail the broker fees 14. Broker fees and fees charged by the custodian are to be kept separate. Hence the settlement fees shall be put in separate data elements and appear only in the settlement confirmations MT545/547: In MT 545/7: ESTT = SETT + CHAR + Matching Tolerance If the KAG is requesting the Settlement Confirmation for the trade day of the following day, then only the model "Contractual Settlement" is applicable as all markets have at least T+2. This is because the Settlement Confirmation shall be sent only once. 14 Specified Broker fees are: ACRU, EXEC, LOCO, STAM, STEX, REGF. CHAR shall not be used by the Broker, rather the other specified fields. Thus CHAR is available for the custodian's settlement fee. 15 Strangely there is no separate field for the Matching Tolerance. Hence it has to be implied by the difference between SETT+CHAR and ESTT. All parties shall strictly stick to the standards so that the matching tolerance gets zero. All parties shall assume the same settlement amount (SETT). Version 1.0 Page 6

9 The following graphics shows how the different amounts relate to each other in the different Message Types: MT 515 MT 541/543 MT 545/547 Custodian Fees (CHAR)... Possibly Matching Tolerance Broker Fees Broker Fees* Broker Fees*... Settlement Amount (SETT) Units*Price / Nominal*Price Settled Amount (ESTT) * Reporting broker fees in MT541/543 and MT545/547 is optional The "settled amount" (ESTT) reported back in MT 545/547 results from the "Settlement Amount (SETT) plus the fees the custodian charges the KAG. There could be a matching tolerance, if the trade has been matched at the central securities depository (CSD) within a tolerance. These tolerances are different from CSD to CSD. Examples: Euroclear France: Zero Euro, Clearstream Frankfurt: 25 Euro, Japan: Zero Euro. The settled amount is the amount to be booked on the KAG cash account. In the case of "Actual Settlement" own and third party fees can be exactly accounted for per trade because the MT 545/547 are only sent after the final settlement happened in the local market and the custodian has been charged by its service provider (possibly via a chain of service providers and MT 545/547). In the case of "Contractual Settlement" the custodian has to charge a flat fee because the fees of the custodian's service providers can not be known at this point in time Summary If the KAG has agreed a "Ticket Fee" with the custodian it shall be part of ESTT and reported using the CHAR field. For the same trade the amount in the fields DEAL SETT and ESTT are exactly the same for lean and extended settlement instructions and settlement confirmations. The only difference is whether DEAL and the individual broker fees do or do not appear Relation to the Cash Statements The present standard for cash statements via SWIFT is MT 940. The process and messages described above will result in one statement line for one securities trade. This includes the cash leg of the securities trade and all fees if as described and mandated above the settlement fees are included in the settlement amount in MT 545/547. Version 1.0 Page 7

10 4 Relation to Securities Statements Holding balances are reported by the custodian to the KAG using MT 535. The status of an individual trade can be requested using MT 549 from the custodian who is responding using MT 548. For a batch like processing the custodian can report all matched and settled trades using MT 537 and all pending unsettled and unmatched trades using MT 537. SMPG documents are also available for these messages. 5 Examples 16 The examples show in turn MT515 - conforming to the BVI Securities Transactions Standards - to be sent from broker/dealers to asset managers and the related MT541/543 to be generated by the Asset Manager from the MT515. The asset manager will send the MT541/543 to the custodian (and if applicable also a copy to a Master-KAG). The examples also show some important decisions by the German KAGs on content and codes: The ISIN shall be used as the sole and binding securities identifier The ISO MIC code shall be used to indentify the place of trade (exchange or trading platform), if not OTC The Settlement Parties/Accounts (Settlement Chain), for the Place of Settlement at hand shall be included exactly as specified by SMPG The examples cover standard equities and fixed income business in various markets Example 1: OTC Fixed Income trade The KAG "AKAGDEFF" effected an OTC fixed income trade with bank BANKDEFF. Customer: AKAGDEFF sold Fixed Income Place of Trade: Over the counter Place of Settlement: Clearstream Banking Frankfurt Counter Party (Broker): BANKDEFF BANKDEFF is Clearstream Banking Frankfurt participant Trade Confirmation MT 515 The left column shows the physical representation of the SWIFT/ISO message ("Text- Block" only, no FIN "Header"). The right column are comments. Empty lines are only included 16 The amounts shown are estimates and only serve illustration of the data format standards. They are not meant to reflect market conditions. 17 Exchange trades options and futures shall be included in a future version of this paper Version 1.0 Page 8

11 to increase readability. :16R:GENL :20C::SEME// :23G:NEWM :22F::TRTR//TRAD :16R:LINK :20C::RELA//NONREF :16S:LINK :16R:LINK :20C::TRRF//12345 :16S:LINK :16S:GENL Broker's message reference No reference to an allocation Broker's trade reference :16R:CONFDET :98C::TRAD// Trade date and time :98A::SETT// Settlement day :90A::DEAL//PRCT/101,79 Price :99A::DAAC//073 Interest days :94B::TRAD//OTCO/GMTS Trading system (GMTS) the KAG and B/D have used :22H::BUSE//SELL Sell (KAG view) :22H::PAYM//APMT Settlement against payment :95P::SELL//AKAGDEFF KAG is seller :97A::SAFE//FUND Account of fund with broker :95P::INVE//AKAGDEFF Ultimate seller (Fund remains anonymous) :97A::SAFE// Account of fund with custodian :95P::BUYR//BANKDEFF Buyer (Broker) :22F::TRCA//PRIN Broker trades against own book :36B::CONF//FAMT/ , Nominal :35B:ISIN DE Security 3,75 PRCT ALLGEM.HYP.BK.RHEINB.AG PF.S.3 Narrative ditto /F:2500 ditto :16S:CONFDET :16R:SETDET :22F::SETR//TRAD :95P::PSET//DAKVDEFF :95P::REAG//BANKDEFF Central securities depository: Clearstream B.F. Broker himself is CBF member Version 1.0 Page 9

12 :97A::SAFE// :19A::ACRU//EUR29918,03 :19A::DEAL//EUR , :19A::SETT//EUR ,03 :16S:SETDET Broker's account with CBF (= KV-Nummer) Accrued interest Nominal*Price Settlement amount "Lean" Settlement Instruction MT 543 From the MT 515 the KAG generates the following settlement instruction to the custodian: :16R:GENL :20C::SEME// :23G:NEWM :16S:GENL KAG's message reference :16R:TRADDET :98C::TRAD// Trade day :98A::SETT// Settlement day :35B:ISIN DE Security 3,75 PRCT ALLGEM.HYP.BK.RHEINB.AG PF.S.3 Narrative ditto /F:2500 ditto :16S:TRADDET :16R:FIAC :36B::SETT//FAMT/ , :97A::SAFE// :16S:FIAC :16R:SETDET :22F::SETR//TRAD :95P::PSET//DAKVDEFF :95P::REAG//BANKDEFF :97A::SAFE// :19A::SETT//EUR ,03 Nominal Fund's account with custodian CSD (= CBF) Broker himself is CBF member Broker's account with CBF (= KV-Nummer) Settlement amount Version 1.0 Page 10

13 :16S:SETDET SMPG standards mandate the trade day only, not day and time. Broker fees (usually irrelevant for fixed income trades) and accrued interest are not mentioned explicitly in the lean settlement instruction. They are just contained in the settlement amount. The Settlement Parties (the settlement chain) have been taken over as-is from MT 515. The responsibility for correctness of Settlement Parties rests with the Broker "Lean" Settlement Confirmation When settlement happened in the local market the custodian sends the following settlement confirmation to the KAG: :16R:GENL :20C::SEME// :23G:NEWM :16R:LINK :20C::RELA// :16S:LINK :16S:GENL Custodian's message reference Link to KAG's message-ref. :16R:TRADDET :98C::TRAD// Trade day :98A::ESET// "Real" settlement day :35B:ISIN DE Security 3,75 PRCT ALLGEM.HYP.BK.RHEINB.AG PF.S.3 Narrative ditto /F:2500 ditto :16S:TRADDET :16R:FIAC :36B::ESTT// FAMT/ , :97A::SAFE// :16S:FIAC :16R:SETDET :22F::SETR//TRAD :95P::PSET//DAKVDEFF :95P::REAG//BANKDEFF :97A::SAFE// :19A::ESTT//EUR ,03 Nominal Fund's account with custodian Central securities depository (= CBF) Broker himself is CBF member Broker's account with CBF (= KV-Nummer) Settled Amount 18 This is important if settlement is delayed due to non matching settlement parties. Version 1.0 Page 11

14 :19A::CHAR//EUR49, :16S:SETDET Custodian's settlement fee The custodian charges the KAG EUR 49 for the settlement service for this trade. The settled amount is EUR 49 higher than the settlement amount. The matching tolerance was EUR Extended Settlement Instruction Additions to the "lean" settlement instructions are in italics. They are trade time, price, interest days, accrued interest and (possibly) fees. All fee fields that are specified for MT 515 in the BVI Transaction Standards can be used one-to-one in the MT 541/543. The amount are oneto one these that have been charged by the broker. The settlement amount is the same as in the lean settlement instruction. :16R:GENL :20C::SEME// :23G:NEWM :16S:GENL KAG's message reference :16R:TRADDET :98C::TRAD// Trade day and time :98A::SETT// Settlement day :90A::DEAL//PRCT/101,79 Price :99A::DAAC//073 Interest days :35B:ISIN DE Security 3,75 PRCT ALLGEM.HYP.BK.RHEINB.AG PF.S.3 Narrative ditto /F:2500 ditto :16S:TRADDET :16R:FIAC :36B::SETT// FAMT/ , :97A::SAFE// :16S:FIAC :16R:SETDET :22F::SETR//TRAD :95P::PSET//DAKVDEFF :95P::REAG//BANKDEFF :97A::SAFE// :19A::ACRU//EUR29918,03 Nominal Fund's account with custodian Central securities depository (= CBF) Broker himself is CBF member Broker's account with CBF (= KV-Nummer) Accrued Interest Version 1.0 Page 12

15 :19A::DEAL//EUR , :19A::SETT//EUR ,03 :16S:SETDET Nominal * Price Settlement Amount Extended Settlement Confirmation Special conditions, e.g. Contractual settlement, can be signalled using field STCO: :16R:GENL :20C::SEME// :23G:NEWM :16R:LINK :20C::RELA// :16S:LINK :16S:GENL Custodian's message reference Link to KAG instruction :16R:TRADDET :98C::TRAD// Trade day and time :98A::ESET// "Real" Settlement day :90A::DEAL//PRCT/101,79 Price :99A::DAAC//073 Interest days :35B:ISIN DE Security 3,75 PRCT ALLGEM.HYP.BK.RHEINB.AG PF.S.3 Narrative ditto /F:2500 ditto :16S:TRADDET :16R:FIAC :36B::ESTT// FAMT/ , :97A::SAFE// :16S:FIAC :16R:SETDET :22F::SETR//TRAD :22F::STCO/BVIT/CONT :95P::PSET//DAKVDEFF Nominal Fund's account with custodian Signals special purpose of message 19 Central securities depository (= CBF) 19 Advises "Contractual Settlement"; then MT545/547 is sent at the trade day. If this field is missing "Actual Settlement" is the default. Version 1.0 Page 13

16 :95P::REAG//BANKDEFF :97A::SAFE// :19A::ACRU//EUR29918,03 :19A::DEAL//EUR , :19A::ESTT//EUR ,03 :19A::CHAR//EUR49, :16S:SETDET Broker himself is CBF member Broker's account with CBF (= KV-Nummer) Accrued Interest Nominal * Price Settled Amount Custodian's settlement fee 5.2 Example 2: Equities Trade in UK Business details: Customer: AKAGDEFF sold Counter Party (Broker) BROKGB2L Equities Place of Trade: London Stock Exchange Stamp duty Place of Settlement: Crest BROKGB2L has account serviced by a Crest participant with Crest participant ID AG Trade Confirmation MT 515 :16R:GENL :20C::SEME// :23G:NEWM :22F::TRTR//TRAD :16R:LINK :20C::RELA//NONREF :16S:LINK :16R:LINK :20C::TRRF//12345 :16S:LINK :16S:GENL Broker's Reference :16R:CONFDET :98C::TRAD// :98A::SETT// Version 1.0 Page 14

17 :90B::DEAL//ACTU/GBP12,93 :94B::TRAD//EXCH/XLON :22H::BUSE//SELL :22F::PRIC//AVER :22H::PAYM//APMT :95P::SELL//AKAGDEFF :97A::SAFE//FUND :95P::INVE//AKAGDEFF :97A::SAFE// :95P::BUYR//BROKGB2L :22F::TRCA//AGEN :36B::CONF//UNIT/3000, :35B:ISIN GB GLAXOSMITHKLINE PLC REG.SH.LS-,25 /F:1232 :16S:CONFDET :16R:SETDET :22F::SETR//TRAD :95P::PSET//CRSTGB22 :95R::REAG/CRST/AG999 :95P::BUYR//BROKGB2L :97A::SAFE// :19A::DEAL//GBP38790, :19A::EXEC//GBP70,58 :19A::STAM//GBP7, :19A::SETT//GBP38867,58 :16S:SETDET Price London Stock Exchange Average Price Broker does an agent trade Central securities depository is Crest Crest ID of Crest member B/D B/D's account with Crest member Nominal*Price Broker fee Stamp Duty Settlement Amount Version 1.0 Page 15

18 5.2.2 "Lean" Settlement Instruction MT 543 :16R:GENL :20C::SEME// :23G:NEWM :16S:GENL :16R:TRADDET :98C::TRAD// :98A::SETT// :35B:ISIN GB GLAXOSMITHKLINE PLC REG.SH.LS-,25 /F:1232 :16S:TRADDET :16R:FIAC :36B::SETT//UNIT/3000, :97A::SAFE// :16S:FIAC :16R:SETDET :22F::SETR//TRAD :95P::PSET//CRSTGB22 :95R::REAG/CRST/AG999 :95P::BUYR//BROKGB2L :97A::SAFE// :19A::SETT//GBP38867,58 :16S:SETDET KAG's message reference Trade day Settlement day Security Narrative ditto Nominal Fund's account with custodian Central securities depository is Crest Crest ID of Crest member B/D B/D's account with Crest member Settlement Amount "Lean" Settlement Confirmation MT 547 When settlement has happened in the local market (PSET) the custodian sends the settlement confirmation to the KAG: :16R:GENL :20C::SEME// :23G:NEWM :16R:LINK :20C::RELA// :16S:LINK :16S:GENL Custodian's message reference Link to KAG instruction Version 1.0 Page 16

19 :16R:TRADDET :98C::TRAD// :98A::ESET// :35B:ISIN GB GLAXOSMITHKLINE PLC REG.SH.LS-,25 /F:1232 :16S:TRADDET :16R:FIAC :36B::ESTT//UNIT/3000, :97A::SAFE// :16S:FIAC Trade day "Real" Settlement day Security Narrative ditto Nominal Fund's account with custodian :16R:SETDET :22F::SETR//TRAD :95P::PSET//CRSTGB22 :95R::REAG/CRST/AG999 :95P::BUYR//BROKGB2L :97A::SAFE// :19A::ESTT//GBP38916,58 :19A::CHAR//GBP49, :16S:SETDET Central securities depository is Crest Crest ID of Crest member B/D B/D's account with Crest member Settled Amount Custodian's settlement fee The custodian charges the KAG GBP 49 for the settlement service for this trade Extended Settlement Instruction MT 543 :16R:GENL :20C::SEME// :23G:NEWM :16S:GENL :16R:TRADDET :98C::TRAD// :98A::SETT// :90A::DEAL//ACTU/GBP12,93 :35B:ISIN GB GLAXOSMITHKLINE PLC REG.SH.LS-,25 /F:1232 :16S:TRADDET KAG's message reference Trade day and time Settlement day Price Security Narrative ditto Version 1.0 Page 17

20 :16R:FIAC :36B::SETT//UNIT/3000, :97A::SAFE// :16S:FIAC Nominal Fund's account with custodian :16R:SETDET :22F::SETR//TRAD :95P::PSET//CRSTGB22 :95R::REAG/CRST/AG999 :95P::BUYR//BROKGB2L :97A::SAFE// :19A::DEAL//GBP38790, :19A::EXEC//GBP70,58 :19A::STAM//GBP7, :19A::SETT//GBP38867,58 :16S:SETDET Central securities depository is Crest Crest ID of Crest member B/D B/D's account with Crest member Nominal*Price Broker fee Stamp Duty Settlement Amount Remark: The KAG reports to the custodian also all fees, charges and taxes amounts as had been charged by the B/D. The Settlement amount stays the same Extended Settlement Confirmation MT 547 :16R:GENL :20C::SEME// :23G:NEWM :16R:LINK :20C::RELA// :16S:LINK :16S:GENL :16R:TRADDET :98C::TRAD// :98A::ESET// :90A::DEAL//ACTU/GBP12,93 :35B:ISIN GB Custodian's message reference Link to KAG instruction Trade day and time "Real" Settlement day Price Security Version 1.0 Page 18

21 GLAXOSMITHKLINE PLC REG.SH.LS-,25 /F:1232 :16S:TRADDET :16R:FIAC :36B::ESTT//UNIT/3000, :97A::SAFE// :16S:FIAC Narrative ditto Nominal Fund's account with custodian :16R:SETDET :22F::SETR//TRAD :22F::STCO/BVIT/CONT Signals special conditions 20 :95P::PSET//CRSTGB22 Central securities depository is Crest :95R::REAG/CRST/AG999 Crest ID of Crest member :95P::BUYR//BROKGB2L B/D :97A::SAFE// B/D's account with Crest member :19A::DEAL//GBP38790, Nominal*Price :19A::EXEC//GBP70,58 Broker fee :19A::STAM//GBP7, Stamp Duty :19A::ESTT//GBP38916,58 Settled Amount :19A::CHAR//GBP49, Custodian's settlement fee :16S:SETDET The custodian reports back the additional fields if so agreed. The custodian does not touch the broker fees. Rather the custodian charges GBP 49 for his settlement service for this trade and reports this using an additional amount field (Qualifier "CHAR"). 5.3 Example 3: Equities Trade in Finland Business detail: 20 Advises "Contractual Settlement"; then MT 545/547 is sent at the trade day. If this field is missing "Actual Settlement" is the default. Version 1.0 Page 19

22 Customer: AKAGDEFF sold Equities Average price Place of Trade: Helsinki Stock Exchange Place of Settlement: APK APK participant: ABCDFIHH Counter Party (Broker): BANKDEFF holds account " " with ABCDFIHH The KAG effects a trade with broker "BANKDEFF". BANKDEFF is remote member of the Helsinki Stock Exchange and executes the trade there directly. To settle the securities at the Finish' Central Securities Depository BANKDEFF is using Bank ABCDFIHH as his clearing agent Trade Confirmation MT 515 :16R:GENL :20C::SEME// :23G:NEWM :22F::TRTR//TRAD :16R:LINK :20C::RELA//NONREF :16S:LINK :16R:LINK :20C::TRRF//12345 :16S:LINK :16S:GENL :16R:CONFDET :98C::TRAD// :98A::SETT// :90B::DEAL//ACTU/EUR14,755 :94B::TRAD//EXCH/XHEL :22H::BUSE//SELL :22H::PAYM//APMT :22H::PRIC//RDAV :95P::SELL//AKAGDEFF :97A::SAFE//FUND :95P::INVE//AKAGDEFF :97A::SAFE// :95P::BUYR//BANKDEFF :22F::TRCA//AGEN Version 1.0 Page 20

23 :36B::CONF//UNIT/10000, :35B:ISIN FI NOKIA CORP.REG.SHARES EO 0,06 /F:1222 :16S:CONFDET :16R:SETDET :22F::SETR//TRAD :95P::PSET//APKEFIHH :95P::REAG//ABCDFIHH :95P::BUYR//BANKDEFF :97A::SAFE// :19A::DEAL//EUR147550, :19A::EXEC//EUR147,55 :19A::SETT//EUR147697,55 :16S:SETDET Nominal*Price Broker fee Settlement Amount 5.4 Example 4: Fixed Income Trade, settled via Euroclear Business details: Customer: AKAGDEFF bought Fixed Income Place of Trade: Over the counter Place of Settlement: Euroclear Counter Party (Broker) = Euroclear participant: BANKDEFF Trade Confirmation MT 515 :16R:GENL :20C::SEME// :23G:NEWM :22F::TRTR//TRAD :16R:LINK :20C::RELA//NONREF :16S:LINK :16R:LINK Version 1.0 Page 21

24 :20C::TRRF//12345 :16S:LINK :16S:GENL :16R:CONFDET :98C::TRAD// :98A::SETT// :90A::DEAL//PRCT/99,481 :99A::DAAC//000 :94B::TRAD//OTCO/BLOOMBERG :22H::BUSE//BUYI :22H::PAYM//APMT :95P::BUYR//AKAGDEFF :97A::SAFE//FUND 961 :95P::INVE//AKAGDEFF :97A::SAFE// :95P::SELL//BANKDEFF :22F::TRCA//PRIN :36B::CONF//FAMT/600000, :35B:ISIN XS UNION FENOSA SA 5 PRCT 09/12/2010 :16S:CONFDET :16R:SETDET :22F::SETR//TRAD :95P::PSET//MGTCBEBE :95R::DEAG/ECLR/99999 :95P::SELL//BANKDEFF :19A::DEAL//EUR596886, :19A::SETT//EUR596886, :16S:SETDET System KAG and B/D are using Nominal Euroclear B/D account with Euroclear B/D Nominal*Price Settlement Amount Version 1.0 Page 22

25 5.5 Example 5: Fixed Income Trade in US Securities Business details: Customer: AKAGDEFF bought Fixed Income Place of Trade: Over the counter Place of Settlement: Federal Reserve US Federal Reserve participant identified by Fedwire No Counter Party (Broker): BANKDEFF Other Party: asset manager ADVSUS33 (insourcing from AKAGDEFF) who submitted the original order Trade Confirmation MT 515 :16R:GENL :20C::SEME// :23G:NEWM :22F::TRTR//TRAD :16R:LINK :20C::RELA//NONREF :16S:LINK :16R:LINK :20C::TRRF//12345 :16S:LINK :16S:GENL :16R:CONFDET :98C::TRAD// :98A::SETT// :90A::DEAL//PRCT/96, :99A::DAAC//094 :94B::TRAD//OTCO/CANTORS HYPERSPACE :22H::BUSE//BUYI :22H::PAYM//APMT :95P::BUYR//AKAGDEFF :97A::SAFE//FUND S1 :95P::INVE//AKAGDEFF :97A::SAFE// :95P::SELL//BANKDEFF :22F::TRCA//PRIN :36B::CONF//FAMT/700000, Price System ADVS and B/D are using KAG KAG Account with custodian B/D Nominal Version 1.0 Page 23

26 :35B:ISIN US912828AU42 3,875 PRCT USA TREASURY NOTES V F/A :16S:CONFDET :16R:SETDET :22F::SETR//TRAD :95P::PSET//FRNYUS33 :95R::DEAG/USFW/ :97A::SAFE//BK OF NYC/BAFRA :95P::SELL//BANKDEFF :97A::SAFE// :19A::ACRU//USD6928,67 :19A::DEAL//USD672546,88 :19A::SETT//USD679475,55 :16S:SETDET :16R:OTHRPRTY :95P::MEOR//ADVSUS33 :16S:OTHRPRTY "Fed" "Fed" user (Prop.-Code) B/D B/D's account with Fed user Accrued Interest Nominal*Price Settlement Amount Asset Manager 6 Appendix A: List of Countries with Documented SMPG- Standards for Settlement Source: as of Country Document Size Author Date AT AT_del1_v5.0_V1.1.pdf Alexandre AU & NZ S&R AU_NZ_del1_v5_1.pdf Alexandre BE S&R BE_del1_v5_3.pdf Alexandre BR S&R BR_del1_v4_1.pdf Alexandre CA (Canada) S&R CA_del1_v5_2.pdf Alexandre CH CH_del1_v5.0.pdf 40.8 Alexandre Version 1.0 Page 24

27 DE S&R DE_del1_v5.3.pdf DK S&R See Nordic S&R 16.9 ES S&R v5.5 ES_del1_v5_5.pdf FI S&R See Nordic S&R 16.9 FR FR_del1_v5.0.pdf 43.9 FR S&R MP Addendum FR S&R MP Addendum (Settlement 59.4 in Euroclear France for Euroclear).pdf GR S&R GR_del1_v4_1.pdf HK S&R 5.2 HK_del1_v5_2.pdf IC S&R See Nordic S&R 16.9 ICSD ICSD_del1_v5.0.pdf IL S&R IL_del1_v5_1.pdf IN S&R v3.1 IN_del1_v3.1.pdf IT (S&R) IT_del1_v5_1.pdf JP S&R JP_del1_v5_3.pdf LU LU_del1_v5.0.pdf 75.3 MY S&R MY_del1_v5.0.pdf NL S&R CSD participants 2005 NL_CSDparticipants2005.pdf NL S&R v5.1 NL_del1_v5.1.pdf NO S&R See Nordic S&R 16.9 Nordic (DK, FI, IC, NO, SE) S&R Nordic Market Practice SR Ver MP v5.1 5_1.pdf PL S&R v4.0 PL_del1_v4_0.pdf PT S&R PT_del1_v5_3.pdf 95.2 SE S&R See Nordic S&R 16.9 Settlement MP Summary sheet Settlement MP Summary sheet 23.8 v4_2.pdf TR S&R TR_del1_v5_3.pdf UK&IE S&R UK&IE_del1_v5_10.pdf US S&R Settlements Market ISITC-SWG-MP-54X-v24.pdf.zip Practice ZA S&R ZA_del1_v5_1.pdf Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Alexandre Tim Taylor Joshua Derrick Alexandre * * * Version 1.0 Page 25

28 Version 1.0 Page 26

29 7 Contacts BVI Bundesverband Investment und Asset Management e.v. Eschenheimer Anlage Frankfurt Tel.: Fax: S.W.I.F.T. Germany GmbH Dr. Thomas Redelberger Regional Manager Tel.: Fax: SMPG Alexandre Secretary General Version 1.0 Page 27