UniCredit Bank Czech Republic and Slovakia, a.s. (UCBCZ) informs clients of the implementation of the CSDR Settlement Discipline Regime (SDR) that will go live on 1 February 2022 in the Czech market. The main SDR functionalities are the following:
• Instructions matching process and conditions for cancellation
PREA instruction - unmatched - instruction can be cancelled unilaterally
PREA instruction - matched, counter-instruction PREA - instruction cannot be unilaterally cancelled
PREA instruction - matched, counter-instruction NEWM - instruction cannot be unilaterally cancelled
NEWM instruction - unmatched - instruction can be unilaterally cancelled
NEWM instruction - matched, counter-instruction PREA - instruction cannot be unilaterally cancelled
NEWM instruction - matched, counter-instruction NEWM - instruction cannot be cancelled, the transfer is registered in the settlement system and can be cancelled only after agreement with the counterparty.
• Hold and Release
Hold and release mechanism will be available for all instruction types - (only MT530 can be used for this service).
• Partial release
The CDCP (the local CSD) will allow the partial release via MT530 (PARTQT) that is sent to local CSD even before the Intended Settlement Date (ISD). This functionality can therefore be used in the situation where there are sufficient securities on the omnibus account, but they do not belong to the client who has submitted the settlement order and is allowed by both parties. Partial Release can only be applied on the delivery side of the transfer.
• Partial settlement
The CSD participant determines whether partial settlement is allowed for the instruction by using PART (both counterparties consent required). If the PART is not filled in, the default value of the local CSD (NPAR) is used. The change of the PART/NPAR is possible until the beginning of the settlement by MT530. Instructions will be split only based on lack of securities. Thresholds for partial settlement will be published by the CSD on an annual basis during January, the ECB exchange rates as of Dec 31st, 2021 are used for conversion and the values are valid until the new values are published in January 2023 (EUR 10,000- for shares, EUR 100,000- for bonds).
• Penalties (types, reporting and booking)
The penalties regime will now be applicable also to OTC settlements.
LMFP (Late Matching Fail Penalty) - in case the matching happens after the ISD, the penalty will be charged retroactively, in one amount for the days between ISD and the date of matching. The party who sent the instruction late shall pay the penalty fee
SEFP (Settlement Fail Penalty) - shall be paid if the matching takes place on ISD until market cut-off time, but actual settlement does not happen on ISD or on the following business days. Penalized period will be the days between ISD and actual settlement date, the penalty will be calculated on a daily basis.
The penalties incurred or received, will be reported via MT537PENA distributed by the CSD to its participants. Such daily messages are expected around 12:00 CET on the Penalties Business Day + 1 (PBD+1) and will be forwarded to clients upon receipt. The monthly MT537 penalty pre-advice will be sent on the 14th business day of the following month. In case clients decide to appeal, they may file an appeal by email to the dedicated relationship manager at UniCredit. The appeal needs to include the Penalty Reference (PREF), the reason for the appeal and the proposed value with the calculation. The appeal deadline is by the 9th business day of the month, following the month during which the penalty incurred. UCBCZ will submit the appeal to the CSD for assessment. Should the appeal be successful the result will be confirmed by MT537/FWAM. In case the appeal was declined, the client will be informed via email by UCBCZ.
The penalty net amounts will be booked to the client cash accounts linked to the respective securities accounts on the 17th business day of the following month. To avoid the penalties for January 2022, the overdue transactions should be cancelled prior to February 1st, 2022.
• Buy-in regime
According to ECSDA this has been postponed, its implementation date is to be announced in due course.
Impact on Clients: Clients should note the above information on CSDR SDR implementation.