Amendment of the CDCP Operating Rules

Czech Republic
UniCredit Bank Czech Republic and Slovakia,a.s.
Fri, 02/06/2017

The Czech CSD has disclosed the implications of its CSDR and CCP.A projects                                                                                                                                                       

The CDCP will seek relicensing from the Czech National Bank (local regulator), which is expected to be obtained in the first quarter of 2018. Under the new license CDCP will continue to provide issue registration services, a central registry of securities, and settlement and clearing services. But it will not apply for a banking license.

These changes, effective the date the license is granted, will lead to the amendment of the CDCP Operating Rules and newly defined membership criteria. This will mean:

  • Change of settlement rules
  • Change of communication channels (SWIFT implementation in addition to CDCP proprietary interface)
  • Amendment of the Participant Agreement

Main impacts on CDCP participants:

  • T+2 (already in place since 6.10.2014)
  • Daily reconciliations of participants against the records of the CDCP (already in place at UniCredit)
  • Protection of assets
  • LEI assignment (already in place)
  • Operational risk of the main participants
  • Account segregation
  • Trade internalisation (from 10.3.2019)
  • Obligatory book entry or immobilised form for securities traded on a regulated market (2023-2025).

SWIFT communication:

  • SWIFT will be implemented besides the existing communication interface, which will be kept parallel to SWIFT
  • Necessary amendments to both SWIFT communication and the existing communication interface will be implemented along with settlement discipline (2019-2020).

Account structure:

Participants will have to offer both owner as well as customer accounts to their clients and have a duty to inform them of the associated costs and risks. The participants will need to have a license for the safekeeping and administration of securities and software for communication with the CDCP via the communication interface for the second layer securities registers.

These obligations will need to be fulfilled by the date when the new license will be granted to the CDCP under the CSDR, i.e. February/March 2018.

Participants will mainly be obliged to:

  • Manage their operational risks adequately, including having in place BCP and disaster recovery
  • Regularly test their BCP

Settlement discipline:

Technical standards have not yet been approved. The main goals are:

  • Support of timely settlement
  • Monitoring of timely settlement
  • Prevention and definition of settlement fail reason

The main tools will be:

  • Partial Settlement
  • Pre-matching
  • Mandatory matching
  • Bilateral trade cancellation

In addition, sanctions and their application will be defined and buy-in rules will come into place.

CCP.A implications:

  • CSDR also brings the implementation of CCP.A as the central counterparty for on-exchange
  • Implementation of settlement discipline and CCP.A are two linked projects, which will start simultaneously
  • CCP.A will allow for partial settlement

Fees for suspended trades will be aligned with those in the rest of Europe

Contact Details
Tomáš Vácha
Senior Relationship Manager
GSS Czech Republic
tomas.vacha@unicreditgroup.cz