The Hungarian National Stakeholders Group discussed the latest market developments. A summary by Irén Deli, Senior Relationship Manager, GSS Hungary
At the second Hungarian National Stakeholders Group (HU-NSG) held in March, it was announced that AMI-SeCO has officially acknowledged the appointed representatives of the Hungarian National Stakeholders Group, so now the CEO of the Hungarian CSD, KELER, acts as the chairman of the HU-NSG, while the secretary position is filled by a representative of the Central Bank.
At the previous HU-NSG meeting in December 2017 participants agreed to the proposal that the Hungarian market will not open the T2S system on Good Friday, Easter Monday and 1 May, as the low T2S volumes in Hungary do not justify the operation on these days. AMI-SeCO decided however to open the T2S markets on the mentioned days in 2018 according to the previously announced schedule but will make it optional for the national CSDs. From 2019 onwards, 1 May will be a mandatory T2S working day for all markets.
Harmonisation of corporate actions
The implementation of CAJWG and CASG standards will transferred from the Hungarian Market Implementation Group (MIG) to the HU-NSG, which simplifies the structure as the members of the MIG and the NSG are basically the same.
Although the earlier CAJWG and CASG recommendations have become mandatory, they are not yet applied in the Hungarian securities market. Taking this into consideration, KELER, the Budapest Stock Exchange and the Central Bank of Hungary will prepare comprehensive conceptual material which will summarise the Hungarian corporate action reform from the point of view of its importance to the national economy, its advantages and main elements as well as its impact on stakeholders (investors, financial intermediaries, infrastructures and issuers). Moreover, it will determine the necessary steps for its accomplishment (amendment of legal regulations, change of market practices, evolving / developing the IT systems).
KELER’s aims, based on CASG standards and CAJWG recommendations to create a transparent and institutionalised solution by involving issuers, are as follows:
- improved and automated communication between issuers and the CSD so that KELER may act as the central source of corporate action information;
- easier and more efficient ownership identification process and tax determination: according to KELER’s plans, in the future, the ownership identification process before income payments would be abolished in its current form. The applicable tax rate would be defined on the basis of securities balances held in KELER, aggregated tax categories and reports with reduced data content;
- expanding the nominee concept for all types of securities;
- more complete and faster income payment: unifying the income payment made by issuers for all types of securities (net income versus gross income) and executing payment for the end investor within 1-2 days of announced pay date, controlled by the CSD (or made/paid by the CSD);
- automatic protection of ownership rights: unified handling of market claims, transformations and buyer protection, handling possible tax issues in case of market claims.
- setting up a new standard process of tax reclaim: in case relief at source would not be successful the process of “quick refund” will be introduced. If the applicable tax rate has not been applied at the time of the income payment, and the corrected data of the investor is provided to the issuer, then the issuer would correct the amount of the withheld tax before it is reported to the tax authorities.
- applying the same unified practice for equities and bonds.
Once issued, the conceptual material about the Hungarian corporate action reform will be discussed by the participants of the HU-NSG or its workgroup and KELER will prepare a complete action plan by the end of Q2, which will then be submitted to the European Central Bank.
Members of the HU-NSG will lobby for the necessary legal regulation amendments at the Ministry for National Economy. UniCredit Bank Hungary will follow the developments and participate in discussions and working group meetings, so that clients can be informed on a continuous basis.
Senior Relationship Manager
Global Securities Services Hungary