Settlement services - Bridge
Bridge Transactions
The Bridge is the electronic communications platform that facilitates the efficient settlement of securities transactions between counterparties in Clearstream Banking Luxembourg (CBL) and Euroclear Bank (EB). Transactions for Bridge settlement can be executed both free of payment or against payment.
Eligibility of securities
Bridge transactions can only be carried out if the security is eligible for admission in both systems.
Holidays
Bridge transactions settle every business days of the year with the exceptions of the 25 December and 1 January.
Matching process
Bridge instructions match through the inter-ICSD matching transmissions, known as "ACE" transmissions.
The exchange of “ACE” files is a rolling matching process with Euroclear, starting at 01:55 CET with a 2 minute frequency until 21:00.
First and second layer matching
The first layer matching information and the second layer matching information are included in the matching files.
The second layer matching information is optional and matching will only be performed on the second layer information if the information is provided by both parties.
If the information is missing from one counterparty, the instructions will match on the first layer information.
If the second layer matching information is present in both client instructions but does not match, the instructions will remain unmatched, will not be released for settlement and will be reported to clients accordingly.
First and second layer matching information can be found in Section 3.6 of the CBL Client Handbook.
Settlement file transmissions
CBL and EB exchange files to inform each other of the eligible delivery instructions and of the evolution of the lifecycle of existing transactions.
The delivering ICSD is the ICSD proposing the delivery instructions, via the proposed delivery files, to the receiving ICSD.
The delivery files contain the delivery instructions from the clients of the delivering ICSD to the counterparties of the receiving ICSD.
The feedback files provide the receiving ICSD with the settlement status of the delivery instructions.
Settlement of eligible transactions can occur during the overnight and the daytime processing.
Bridge settlement finality
Settlement finality refers from a legal perspective to the point in time when the settlement occurred and so the transfer of the property rights in the securities are fully and unconditionally transferred and for delivery against payment transaction the relevant debit/credits made on the relevant accounts.
Reporting of instructions
If an instruction settles following the receipt of a valid feedback file from Euroclear Bank, the instruction will be reported with the existing reason code to clients in MT537 and MT548 settlement reports and associated MT94x cash reports:
PEND NARR :70D:REAS//Settled
If an instruction cannot be settled immediately and is awaiting Euroclear Bank confirmation, the instruction will be reported with the existing reason code to clients in MT537 and MT548 settlement reports and associated MT94x cash reports:
PEND NARR :70D:REAS//Awaiting EOC feedback
If an instruction is deselected from the CBL or EOC Deliveries files due to the credit policy applied by the ICSDs, the instruction will be reported with the existing reason code to clients in MT537 and MT548 settlement reports:
PEND NARR :70D:REAS// Not settled by EOC
or
PEND NARR :70D:REAS// Not settled by CBL (Please refer to Risk management principles below)
Cancellation
Clients can request a cancellation for all Bridge securities instructions already sent to CBL.
A Bridge delivery or receipt instruction cannot be cancelled or amended in the following circumstances:
- If provision has been debited from the account during the settlement processing but confirmation or refusal of the transaction has not yet been received from the counterparty;
- If it has been reported as settled via Xact Web Portal, ClearstreamXact MT536 (Statement of Transactions), MT54x and additional MT950 (Money Statement) for against payment.
Unmatched instructions
- Any unmatched CBL delivery instruction that has not been settled or cancelled remains in suspense for a period of 15 business days following the Requested Settlement Date. If such an instruction is still unmatched after 15 business days following the requested settlement date, CBL sends a request to the client to either cancel or confirm the instruction. If the client does not confirm that the instruction is still valid within the next 5 business days, the instruction will automatically be cancelled. For CBL receipt instructions, the 20 business days period applies as well, but a CBL receipt instruction will only be cancelled upon confirmation from EB that the instruction has been cancelled on EB's side.
- Any change in the hold and release status of the instruction will reset the count of the days. Any change of the partial settlement indicator, priority code or settlement flag will not reset the count of days.
- If the unmatched instruction becomes “matched” within the 20-business-day period, the 60-business-day period for the matched instruction starts as from the day of matching.
Matched instructions
- For matched instructions, the suspense period is 45 plus 15 business days. If a matched Bridge instruction is still not settled after 45 business days following the requested settlement date or the matching date (depending on which one is the latest), CBL sends a request to the client to either cancel or confirm the instruction. If the client does not confirm within the next 15 business days that their instruction is still valid, the instruction will be cancelled. However, as bilateral cancellation applies on the Bridge, the cancellation of the transaction can only be applied if the cancellation has been received on both CBL and Euroclear Bank side.
- Any change in the hold and release status of the instruction will reset the count of the days. Any change of the partial settlement indicator, priority code or settlement flag will not reset the count of days.
- Any partial settlement will reset the count of days.
Risk management principles
The two ICSDs have agreed on a set of risk management principles designed to limit their exposure to one another and eliminate systemic risk. With the introduction of these risk management principles, the receiving ICSD may be obliged to deselect a proposed delivery at the end of a settlement period. Clients are recommended to limit the countervalue of their Bridge instructions to USD 500m, to avoid this from happening.
Should this happen, the transaction concerned will be given a new status with the narrative “Not Settled by CBL” or “Not Settled by EOC”, as appropriate. It is anticipated that there will be very few instances of this kind and that, if they should arise, settlement will take place later, upon re-presentation of the securities, in the same settlement processing period. Instructions that remain unsettled at the end of the mandatory settlement period may still be settled during the optional settlement period, if flagged accordingly by both counterparties.
This status can only be applied to against payment instructions.