ACSDA 15TH General Assembly

CSD Settlement Liquidity Management

ECCSD Settlement Model

Trevor BlakeECCSD

ECCSD Settlement Model ECCSD settles on a T+1 cycle Market rules require

buying broker to receive cleared funds prior to placing buy order

selling broker to take possession of securities and move them to segregated account at ECCSD before placing sell order

ECCSD Settlement Model Settlement – DVP Model 2

Securities settled gross Cash settled Net in Central Bank money

All brokers-dealers linked to a clearing bank, which must be a Participant in Central Bank

payment system sign tripartite Agreement with ECCSD &

Central Bank

ECCSD Settlement Model Tripartite agreement provides mandate

to ECCSD to issue instructions to debit Clearing bank account at Central Bank Binding on Clearing bank

On T, Clearing bank must confirm sufficient funds available for settlement on T+1

Once confirmation received, ECCSD debit instructions cannot be countermanded

ECCSD Settlement Model

On T+1, ECCSD simultaneously moves securities from Selling Broker

segregated account to Buying Broker segregated account

debits and credits Brokers’ Clearing Banks accounts at Central Bank with net funds

ECCSD Settlement Model Pros

virtually eliminates risk of broker default no need for CSD liquidity support no need for collateral

Cons pre-funding ties up investor funds securities immobilized could impact on activity

risk of Clearing Bank default remains!

ECCSD Asset Servicing

Corporate actions separate and distinct from settlement

activities; no co-mingling payments made in commercial bank

money ECCSD holds accounts at beneficial

owner level payment made direct to investor, not

to broker

ECCSD Asset Servicing

Exceptions: payment made to broker on

instructions from investor typically for reinvestment of debt

redemption proceeds in new debt auctions

provides liquidity to primary market by eliminating need for investor to put up new monies for auction