Note: This announcement originally published on 18 December 2015 and updated on 28 January 2016 and 2 February 2016, has been updated to correct one of the settlement timings referred to under "Settlement day and timings". The change has been highlighted.

Clearstream Banking¹ would like to inform customers of adaptation to its settlement system for equities on the Spanish market, effective requested settlement date

2 May 2016

The system changes are a result of the Spanish Central Securities Depository, (CSD), Iberclear’s implementation of the Spanish Reforma and preparation for future migration to TARGET2-Securities.

Spanish Reforma implementation timelines

Date	Implementation
Trade date 27 April 2016 (first settlement date  2 May 2016)	Reforma – phase 1: implementation of the ARCO platform for equities, warrants and ETFs and decommissioning of the Iberclear-SCLV platform.
to be confirmed	Introduction of T+2 settlement cycle for equities.
18 September 2017 (currently planned as final wave)	Reforma – phase 2: implementation of the ARCO platform for fixed income and decommissioning of the Iberclear-CADE platform.

Settlement system changes

Key changes introduced by the Spanish Reforma - phase 1 are as follows.

• Introduction of a central clearing counterparty (CCP) for equities;
• Integration of equities, warrants and ETFs  to a new platform called ARCO;
• Decommissioning of Iberclear-SCLV platform
• Settlement finality of equity trades moves from trade date to settlement date;
• New settlement day and timings;
• Instruction types;
• Place of settlement;
• Identification of parties to settlement instruction;
• Matching rules;
• Countervalue difference;
• Partial settlement;
• Recycling rules;
• Bilateral cancellation.

Market claims and transformation changes

• Mandatory distribution dates;
• Change in Transformation Management processes.

Impact on customers

Customers are required to make the following changes to their settlement instructions to Clearstream as a result of the market adaptations to the Spanish Reforma phase 1.

Customers should also be aware of some changes to current market practices and align with their counterparties accordingly, when relevant. align these changes with their respective counterparties.

Settlement day and timings

ARCO offers both settlement in cycles and in real-time.

Settlement in cycles runs on settlement days, five times a day from 08:30 to 15:00 CET (08:30, 10:00, 12:00, 13:00 and 15:00), an additional sixth cycle will be run at 15:45 if there are existing last resort loans in the market.

Settlement in real-time runs every settlement day, between 07:30 and 16:00 CET (for against payment transactions) and between 07:00 and 18:00 CET (for free of payment transactions).

Customers that do not wish their against payments transactions to settle real-time must provide field .:22F::RTGS//NRTG in their instruction.

If no indicator is received, Clearstream’s customer instructions will automatically be presented for real-time settlement. Instructions will only be settled in real-time if the counterparty’s instructions are also presented for real-time settlement.

New settlement deadlines for STP transactions are  as follows:

Instruction		Provisioning		Deadline for receipt of valid instructiona	Expected settlement results
start	end	from	to		from	to	value
AP=Against payment FOP=Free of payment SD=Settlement date
Iberclear-ARCO: Equities, warrants and ETFs
Receipts	FOP	21:30 SD-3	17:25 SD	17:25 SD	07:15 SD	19:30 SD
	AP	21:30 SD-3	15:10 SD	15:10 SD	07:15 SD	19:30 SD	SD
Deliveries	FOP	21:30 SD-3	17:25 SD	17:25 SD	07:15 SD	19:30 SD
	AP	21:30 SD-3	15:10 SD	15:10 SD	07:15 SD	19:30 SD	SD

a. Instruction deadlines are valid for instructions eligible for real-time settlement. Valid deadlines for instructions for which settlement is limited to settlement in cycles (up until the fifth cycle) should be read 14:25 SD for delivery and receipt free of payment and 14:10 SD for delivery and receipt against payment. Instructions eligible for the sixth cycle (in case of loan of last resort) are subject to the following deadlines: 15:10 SD for free of payment instructions and 14:55 SD for against payment instructions. Details about the real time settlement indicator and appropriate usage are provided in the Partial settlement section below.

Instruction types

In addition to allowing settlement free of payment and against payment in EUR, Reforma will introduce the following new instruction types: PFOD (Payment Free Of Delivery), DWP (Delivery With Payment) and RWP (Receipt With Payment).
Customers can settle free of and against payment in EUR via Clearstream Banking in line with the requirements provided in this announcement. However, PFOD, DWP and RWP instructions will not be supported by Clearstream Banking and Clearstream Banking will reject such instructions if received from customers.

Place of settlement

The place of settlement will be identified by the CSD’s BIC11. Customers are required to use the following BIC11 as Place of Settlement in their domestic settlement instructions for Spanish equities:

IBRCESMMXXX

If a customer does not comply with this requirement and uses the BIC8 to identify the Place of Settlement, Clearstream Banking will supplement the BIC8 provided with a default XXX suffix. The settlement instructions will then be processed with the derived BIC11 to comply with market settlement rules. Clearstream will pass on any incurred costs as a result of this (for example, liabilities, damages, penalties, expenses) onto the customer.

Identification of settlement parties

Customers must identify their counterparties in their instructions with BIC11, and via the following fields:

	Creation via SWIFT and CreationDirect	CreationOnline
Delivering party	:95P::DEAG	Delivering Agent
Receiving party	:95P::REAG	Receiving Agent

If a customer does not comply with this requirement and uses a BIC8 to identify their counterparty, Clearstream Banking will supplement the BIC8 provided with a default XXX suffix. The settlement instructions will then be processed with the derived BIC11 to comply with market settlement rules. Clearstream will pass on any incurred costs as a result of this (for example, liabilities, damages, penalties, expenses) onto the customer.

The format :95R::DEAG or REAG/SCLV/XXX or Delivering / Receiving agent - Party Format - SCLV –ES, will no longer be accepted and will result in the instruction being rejected with the error message “invalid option for DEAG/REAG”.

Procedures for customers’ counterparties

Customers are requested to inform their local counterparties to include the following information in instructions sent via Iberclear that settle against Clearstream Banking:

• Deliver to/receive from: BBVA's BIC (BBVAESMMXXX)
• For the account of/by order of: BIC11 of Clearstream Banking (CEDELULLXXX)
• In favour of/By order of: Customer BIC11 and account number of the Clearstream customer

On-exchange settlement models

On-exchange transactions can be settled either via bilateral Ancillary instruction method or via normal Traspaso method. The transaction method is a matching criteria and Clearstream Banking recommends its customers to agree with their broker on the choice of the method and to instruct accordingly.

Bilateral Ancillary transactions

On-exchange transactions settling via bilateral Ancillary method will take place against the account of the Financial Intermediary (broker) settling the transaction.
Customers wanting to settle their trade via the Ancillary method must indicate this by using one of the options below:

	Creation via SWIFT and CreationDirect	CreationOnline
Option 1	:95P::DEAG or REAG //Counterparty’s BIC11 :97A::SAFE//Account of the Financial Intermediary (broker) (20-digit)	Delivering/Receiving Agent BIC Party Counterparty's BIC11 Account Account of the Financial Intermediary (broker) (20-digit)
Option 2	:70E::SPRO//OAUX	Settlement Processing Narrative OAUX

Customers must ensure that both counterparties format their instructions accordingly, with identical formats, otherwise the instruction will not settle.

If none of the above indicators are received, the trade will be considered as a bilateral Traspaso trade.

Bilateral Traspaso transactions

There are no additional specific requirements for the counterparties of a Traspaso transaction.

Removal of Rapport trades

With the introduction of mandatory clearing through the CCP, Rapport trades no longer exist.

Matching rules

As a general rule, the following matching criteria will be mandatory for free of and against payment instructions:

Note: These fields must be present in the instructions and values must be identical in both settlement instructions.

• Payment type;
• Securities movement type (values match opposite);
• ISIN code;
• Delivering/receiving party BIC
• Trade date;
• Intended settlement date;
• Settlement quantity.

For against payment transactions, the following matching criteria will be mandatory:

• ISO currency code;
• Settlement cash amount (according to tolerance level).

For on-exchange transactions, customers must indicate the method that the broker has chosen to settle the trade (see on-exchange settlement model section above).

Optional matching fields

The following optional matching fields are available:

• Common reference;
• Client of delivering/receiving CSD participant;
• Securities account of the delivering/receiving CSD’s participant.

Optional matching fields are initially not mandatory and when one counterparty includes a value and the other does not, the instructions will match.

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.

Customers are requested to use the following fields in their instructions to Clearstream Banking:

Type and purpose of the optional matching field	Creation via SWIFT and CreationDirect	CreationOnline
Common Trade Reference Customer wishes to indicate a reference agreed with the counterparty	:20C::COMM//	Common Reference
Client of delivering CSD participant Customer wishes to specify the BIC11 or local code of the counterparty's underlying client	:95a::SELL	Client of delivering CSD participant
Client of receiving CSD participant Customer wishes to specify the BIC11 or local code of the counterparty’s underlying client	:95a::BUYR	Client of receiving CSD participant
Securities account for delivering party Customer wishes to specify the counterparty’s account	:97A::SAFE with :95a::DEAG	Securities account of the delivering party
Securities account for receiving party Customer wishes to specify the counterparty’s account	:97A::SAFE with :95a::REAG	Securities account of the receiving party

Reporting related to and optional matching fields

Clearstream Banking has adapted its best matching algorithm to take into account the additional matching criteria and report any mismatch accordingly. In the case of optional matching fields, a mismatch will only be reported if present in both the allegement and the customer instruction.
Any mismatch concerning the new matching criteria will be reported as follows:

Matching field	Reason codes in Creation via SWIFT and CreationDirect	Free text provided in narrative field
Common Reference	:25D::INMH NMAT :24B::NMAT IIND	//COMM/common ref on MT578 received by Clearstream Banking
Place of Settlement	:25D::INMH NMAT :24B::NMAT DEPT	/PSET/PSET on MT578 received by Clearstream Banking

Partial settlement

Partial settlement is available for receipt instructions that settle in cycles.
Customers wanting to make their receipt instructions eligible for partial settlement must ensure that the following conditions are fulfilled:

• field :22F::STCO//PART or Partial Settlement set to “Partial allowed” is provided
• no real-time indicator is provided (:22F::RTGS//YRTG)
• counterparty has also indicated its participation in partial settlement

Delivery instructions received with the SWIFT or CreationOnline partial indicator (:22F::STCO//PART or ‘Partial allowed’) will be rejected.

Recycling rules

• Unmatched instructions will be recycled for 20 business days starting from the first Intended Settlement Date or the date of the last status change of the instruction depending on which date is the latest;
• Unmatched cancellations will be recycled for 20 business days starting from the date of receipt;
• Recycling of matched instructions has no time limit and will be recycled until a business rule is violated (for example, security reaches maturity);
• There is no cancellation limit for matched instructions.

Cancellation

• Unmatched instructions can be cancelled unilaterally
• Matched instructions must be bilaterally cancelled. Unilateral cancellation of matched instructions will no longer be possible.

Loan register

Customers are no longer required to send the reference of the original loan in field TRRF when returning a loan. This field will be ignored. The FIFO method will always be applied when returning a loan.

Registration details

In order to change registration details, the put-through process is still needed and the same registration details are still mandatory.

Countervalue difference

The following cash tolerances will apply to instructions (against payment instructions in EUR only):

• EUR 2 for transactions with an amount equal to or less than EUR 100,000;
• EUR 25 for transactions with an amount greater than EUR 100,000.

Mandatory distributions in cash and stock

The ex-date for equities on the Spanish market will be changed from Payment Date to Payment date –three (3) business days and entitled positions will be calculated based on following dates:

• Ex-date: PD - 3 business days;
• Record date: PD - 1 business day;
• Payment date: Record date + 1 business day.

Transaction management

Transaction management details will be available in due course.

Further information

A cutover announcement will be published in due course and the Creation Link Guide – Spain will be updated on the effective date.

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.