Finland: Euroclear Finland introduces new system for bonds
Effective
Monday 3 November 2014
the Finnish CSD, Euroclear Finland (EFI), will implement the first phase of its adaptation to TARGET2-Securities (T2S).
In this first phase (Release 1), EFI will launch a new platform, called Infinity, that replaces the RM system for bonds.
In the second phase (Release 2), planned for Q4 2015, the OM system for equities and corporate bonds will be replaced by Infinity and the third phase (Release 3) in February 2017 the outsourcing of the settlement activity to T2S will take place.
Impacts on customers
In the context of the Release 1, Clearstream Banking1 customers are not required to make any changes to their settlement instructions with counterparties in Finland sent to CBL. CBL remains a direct participant in Infinity and Nordea Bank Finland continues to operate CBL’s account.
Customers should, however, be aware of some changes to current market practices for bonds and align with their counterparties accordingly, where relevant. These changes are detailed below.
Note: Release 2 is expected to have an impact on CBL customers’ settlement instructions and further details will be communicated early in 2015.
Matching rules
EFI will implement the T2S matching rules in Release 1. As a consequence, certain fields may, if present, be matching criteria, as indicated herebelow.
Opt-out indicator
The Opt-out indicator field specifying no market claim processing will not be mandatory but, when one of the counterparties provides it in its instruction, the other counterparty must provide it too:
| :22F::STCO//NOMC |
CBL will opt out from automatic market claim processing and the above field will be included in each settlement instruction sent for CBL's account in Infinity.
The customer must, therefore, ensure that their counterparty indicates the same opt-out at instruction level; otherwise, the instructions will not match.
Common Trade Reference
An optional reference value can be omitted by either counterparty but must match when provided by both counterparties:
| Via CreationDirect or SWIFT: | :20C::COMM// |
| Via CreationOnline: | Common Reference |
Customers can include this optional field to reduce the risk of cross-matching but, if both parties provide a value, this value must be identical in both instructions in order for them to match. If this is not the case, the instruction remains unmatched in Infinity and will be reported as such to the customer.
Hold and release
EFI will introduce the T2S hold/release service in Infinity. EFI customers can put their instruction on hold provided that the customer’s instruction is not yet provisioned and released to the market.
If the EFI counterparty has placed its instruction on hold, we will report status/reason :SETT//PENx :PENx//PRCY in SWIFT (PRCY – Counterparty Instruction on Hold in CreationOnline).
Recycling rules
EFI will adopt the standard T2S recycling rules in Infinity such that:
- Unmatched instructions will be recycled for 20 business days (starting from the initial settlement date), after which they will be cancelled.
- Unmatched cancellation requests will be recycled for 20 business days (starting from the date of receipt).
- Matched instructions will have no cancellation limit and will be recycled until a business rule is violated (for example, security reaches maturity); bilateral cancellation continues to be required for matched instructions.
We will advise customers of the cancellations performed by EFI upon execution.
New cash tolerance
Currently, EFI applies a unique cash tolerance (allowed countervalue difference) of EUR 25. With the implementation of Release 1, EFI will apply the cash tolerance that will be in effect in T2S, as follows:
- EUR 2 for transactions with an amount less than or equal to EUR 100,000; and
- EUR 25 for transactions with an amount greater than EUR 100,000.
If there is a discrepancy with the counterparty instructions, the customer will be advised accordingly.
Instruction types
CBL will not support the new T2S instruction types RWP (receipt with payment) and DWP (delivery with payment) in the context of Release 1.
Although EFI will accept already matched payment free of delivery (PFOD) instructions (that is, against payment instructions with a zero quantity), CBL will, as today, reject such instructions received from customers.
Counterparty identification and procedure for domestic counterparties
Counterparty identification in settlement instructions will continue to be mandatory but will not be part of the matching criteria in Infinity. Counterparty matching is performed only at the level of the CSD participant.
Customers are requested to inform their local counterparties of the following details to be used for instructions with CBL customers:
| DEAG / REAG: | BIC of CBL: CEDELULL |
| BUYR / SELL: | BIC of CBL customer |
Pending transactions
All transactions that have been entered into to the RM system on/before 31 October 2014 and that have not settled will be transferred in the new Infinity EFI platform by Nordea Bank Finland.
Transactions sent on/after 3 November will immediately be sent for matching and settlement in Infinity.
Further information
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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1. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).