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Dear Client
The Allocation & Confirmation requirements (A&C) and penalties for late matching and settlement failure (Penalties) are due to apply under the terms of the Central Securities Depositary Regulation (CSDR) from 1st February, 2022.
What is CSDR?
CSDR is a European regulation which regulates the authorisation and provision of settlement services across Europe and introduces a variety of measures to reduce the frequency of settlement fails in transactions involving securities settled over European central securities depositaries, or CSD. Securities include shares/bonds, money market instruments, UCITS and emission allowances. Transactions for these purposes include at least cash bond purchase and sales, collateral management operations, securities lending and repo. These measures are known as the Settlement Discipline Regime and include requirements to provide allocation and confirmation of settlement information within specified timeframes, fines for late matching of settlement instructions and failure to settle, and a mandatory buy-in regime. For more information about CSDR see https://www.afme.eu/Key-issues/CSDR This communication does not address the mandatory buy-in regime (“MBI”) under CSDR which has been delayed and will not come into force on 1st February.
Who do the Allocation & Confirmation requirements and Penalties apply to?
The A&C requirements apply to NatWest Markets N.V. when dealing with professional clients (which include eligible counterparties) or retail clients in relation to any transaction described above, where securities are ultimately settled over a CSD.
Penalties apply to clients of any NatWest Markets entities regardless of location when a settlement instruction in a CSD is entered or has been matched after the intended settlement date of the transaction or fails to settle either due to lack of securities or cash. Penalties are calculated by the CSD and are credited/debited to its participants (such as custodians, settlement agents), they can then be passed back through the custody chain to the ultimate trading party. Due to the importance of timely matching of accurate settlement instructions in order to avoid Penalties, we shall be enhancing our operational settlement processes across all in-scope transactions you have with our NatWest Markets entities in addition to NatWest Markets N.V. NatWest Markets will follow the AFME Guidelines on the recovery of any bilateral claims with its clients (AFME bilateral claim)
I trade with NatWest Markets N.V., what do the Allocation & Confirmation requirements mean for me?
For professional and eligible counterparty clients of NatWest Markets N.V., we need to incorporate the A&C requirements into our contractual arrangements (the “Allocation & Confirmation agreement”) with you. The Allocation & Confirmation agreement, set out below, is substantially based upon an agreement developed by AFME, a leading trade association of which we are a member. The AFME agreement and explanatory note can be downloaded at https://www.afme.eu/Key-issues/CSDR/CSDR-Model-Contractual-Provisions and sets out the prescribed information and the timelines by which it needs to be sent. This is trade level information and the location, identity and numbers of cash and securities accounts where cash and securities are to be credited and settled respectively, known as static data or SSIs, which we would usually hold as part of our trading relationship with you. Where you provide us with ongoing access to this information, CSDR provides that the A&C requirements shall not apply, this is reflected in the Allocation & Confirmation agreement.
How do I enter into the Allocation & Confirmation agreement with NatWest Markets N.V.?
The terms of the Allocation & Confirmation agreement are set out below. They are governed by English law and shall apply automatically between you and NatWest Markets N.V. from the Effective Date when you enter into a transaction with us. Where you are an agent acting on behalf of a third party (for example a fund manager) the agreement will also apply to such third party. In addition, where we have terms of business for retail and professional clients or contractual terms for eligible counterparties in place with you, this communication shall constitute written notice of amendment of such terms to incorporate the Allocation & Confirmation agreement therein.
Allocation & Confirmation agreement
1 Messaging protocols
1.1 This Clause 1 sets out terms that are intended to ensure compliance with CSDR and apply from the Effective Date and amends any Agreement from the Effective Date (unless we notify you otherwise prior to such date).
1.2 Following Us notifying You of the execution of a Transaction, You agree to provide Us a written allocation with all the information referred to in Article 2 of the Settlement Discipline RTS, each within the timeframes stipulated in that Article. You agree that where You send Us written allocations under this Clause 1, this also constitutes written confirmation of Your acceptance of the terms of the Transaction.
1.3 You may provide the written allocation and written confirmation referred to in Clause 1.2 by any communication procedure agreed between You and Us.
1.4 We shall confirm receipt of the written allocation and written confirmation referred to in Clause 1.2 within the timeframe required under Article 2 of the Settlement Discipline RTS.
1.5 You shall not be required to provide the written allocation and written confirmation referred to in Clause 1.2 upon execution of a Transaction where You grant Us access to, or otherwise make available to Us, on an ongoing basis, the information referred to in Article 2 of the Settlement Discipline RTS.
In this Clause 1:
“Agreement” means any terms of business for retail and professional clients or contractual terms for eligible counterparties that We have in place with You;
“CSDR” means Regulation (EU) No 909/2014 and the Settlement Discipline RTS as they may be modified from time to time;
“Effective Date” shall mean the date given in Article 42 of the Settlement Discipline RTS, as modified from time to time, or such other date notified by Us to You in writing (which may be by email);
“Settlement Discipline RTS” means Commission Delegated Regulation (EU) 2018/1229 as it may be modified from time to time; and
“Transaction” means any transaction which You undertake with or through Us which is within the scope of Article 5(1) CSDR, except where an exemption under Article 2 of the Settlement Discipline RTS applies;
“You” means you or any principal on whose behalf you act being our counterparty to any Transaction with Us; and
“Us” or “We” means NatWest Markets N.V., and “our” shall be construed accordingly.
What if I don’t agree to enter into the Allocation & Confirmation agreement with you?
We are required to have arrangements in place with you under which you provide the specified information to us. If you do not agree, this may impact our ability to continue trading with you.
Operationally what will change?
Each time you trade with any of our NatWest Markets entities, except where we already use electronic matching of settlement instruction information or you provide us with ongoing access to such information, our Settlements/Operations teams will contact you to obtain the written allocation information and confirmation from you which will include SSI (Standard Settlement Instructions) and PSET (Place of Expected Settlement). This may be sent by you electronically and by the later of:
- close of business on the day of the transaction where we are both located in the same time zone; or
- 12:00 CET on the following business day where either the time zone difference between us is more than two hours, or where the transaction was executed after 16:00 CET and we are both in the same time zone.
We shall confirm receipt of this information from you within two hours using existing messaging channels we have in place with you. Please contact us if you wish to provide this information through an electronic platform.
Who can I contact if I have more questions?
Please contact your usual NatWest Markets contact at first instance or alternatively email NWM.CSDR@natwestmarkets.com. You can also visit our dedicated website for further information on how CSDR changes may affect you.
Kind regards,
NWM CSDR Team |
