Germany: Introduction of buyer protection standards for corporate actions
As announced by the German Market Practice Committee and German NUG (T2S National User Group) the German market introduced the manual buyer protection mechanism on
Monday 22 June 2015
Buyer protection (BP) 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.
The German market has decided not to introduce an automated buyer protection infrastructure. Instead buyer protection will be handled bilaterally in Germany. As a result, only market participants need to comply with T2S corporate actions standards on manual buyer protection (BP). The CSD does not need to make any system changes in relation to BP since the exchange of BP instructions takes place bilaterally between the counterparties, that is, outside the CSD environment.
In order to comply with the Corporate Actions Joint Working Group (CAJWG) and T2S Corporate Action Sub-Group (CASG) standards on manual buyer protection, German market 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
Definitions
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).
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