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ACSDA 15 TH General Assembly

Explore the ECCSD settlement model for securities transactions, ensuring broker compliance and Central Bank funds availability, minimizing risks, and enhancing investor protection.

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ACSDA 15 TH General Assembly

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  1. ACSDA 15TH General Assembly CSD Settlement Liquidity Management ECCSD Settlement Model Trevor Blake ECCSD

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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!

  7. 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

  8. 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

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