Buyer protection standards for corporate actions
As announced in Announcement L16134, LuxCSD1 has introduced a manual buyer protection mechanism in line with the T2S corporate action standards.
Buyer protection is a process whereby a buyer who has yet to receive the underlying securities from an elective corporate action, instructs the seller in order to receive the outturn of his choice.
LuxCSD has decided not to introduce an automated buyer protection infrastructure. Instead buyer protection should be handled bilaterally. As a result, only market participants need to comply with T2S corporate actions standards on manual buyer protection. The CSD does not need to make any system changes in relation to buyer protection as the exchange of buyer protection instructions takes place bilaterally between the counterparties, that is, outside the CSD environment.
To facilitate the buyer protection process, LuxCSD sends MT564/568 Corporate Action notification messages to buyers in relation to their pending receipt positions and includes the buyer protection deadlines whenever it is communicated by the market. This information is reported in the structured fields:
- :98a::ECPD (sequence D) - Election to Counterparty Market deadline and
- :98a::GUPA (sequence D) - Guaranteed Participation Date.
This is applied to all channels and all available formats (ISO, PDF, XML, XLS). The buyer protection deadline is also visible in Xact Web Portal.
The availability of buyer protection key dates for the Investor CSD links is described in the relevant Market Link Guide.
The availability of buyer protection key dates for LuxCSD issued securities is still under discussion with the market.
In order to comply with the Corporate Actions Joint Working Group (CAJWG) and T2S Corporate Action Sub-Group (CASG) standards on manual buyer protection, LuxCSD participants must use the attached BPI template for corporate actions if the requested option is not the default option, referencing the Corporate Action, the chosen option(s), the quantity of securities and the Underlying Transaction in the template. The template must be sent electronically (via fax or email) to the seller.
Even though not offered by the market (no deadlines provided), the buyer can invoke the buyer protection mechanism. In this case, LuxCSD will process the buyer protection manually and on a “best efforts” basis for the customer.
Automated buyer protection mechanism: an institutionalised and automated service provided by market infrastructure organisations (that is, where the election instruction is routed through the CSD/CCP, and where the CSD/CCP uses the BP instruction to process the transformation).
Manual buyer protection mechanism: a bi-lateral agreement between the respective trading parties by means of a manual process (no intervention from the market infrastructure regarding the exchange of BP instructions).
For further information about our products and services contact LuxCSD Client Services or your Relationship Officer.
1. LuxCSD refers to LuxCSD, société anonyme registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, Luxembourg, registered with the Trade and Company Register of Luxembourg, under number B. 154 449.