Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 5

The major risks in Securities Systems should be mitigated by five key measures:

• the implementation of real delivery versus payment
• the adoption of a trade date plus one settlement cycle in a form that does not increase operational risk.
• the minimisation of funding and liquidity constraints by enabling stock lending and borrowing, broad based cross collateralisation, the use of repos and netting as appropriate
• the enforcement of scrip-less settlement
• the establishment of mandatory trade matching and settlement performance measures.

1.	Does the market use DvP settlement procedures in accordance with one of the recognised BIS models? If so, which one? If the model is not BIS model 1, are there plans to move to this model?	SIS uses BIS "Model 1" - realtime gross settlement with simultaneous, final, irrevocable DvP in central bank funds.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	Yes, Switzerland operates on T+3. Technically the SECOM system is designed to enable T+0 settlement.
3.	Could the market reduce the current settlement period to T+2 or below, without increasing fails rates? If so, how would this be achieved, and what plans are there to shorten the existing settlement cycle?	Same day settlements are possible and already used for some OTC transactions (free deliveries, repaired instructions, etc.). Due to the high rate of STP in Switzerland, there would only be only little impact on fail rates with a move to T+2 or below. However, cross-border business would suffer, unless industry utilities, like the GSTPA TFM or equivalent are used by the counterparties to a transaction. An additional dependency in the cross border business is the settlement period of foreign exchange transactions.
4.	Is matching of trade details achieved on trade date, at least for direct market participants; and by trade date plus one for indirect participants?	For exchange transactions, no separate trade matching is required, because the Swiss Exchange (SWX) sends the market executions as pre-matched trades directly into the SECOM system (locked-in). All exchange trades are therefore matched on trade date (within seconds of the execution) and market participants do not need to instruct SIS separately. OTC transactions (off exchange) are usually matched on T+1. Due to the online realtime system, a match can be achieved seconds before settlement occurs on SD.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Swiss securities are mainly immobilised and deposited in the SIS vault. Bonds, warrants, notes or investment trust units are usually represented by global certificates. Swiss registered shares are recorded in the shareholders register, but generally not issued in certificated form unless the shareholder expressly asks for delivery of a certificate ("Certificate with Deferred Printing"). This uncertificated form permits fungibility and eligibility of Swiss registered shares in SIS. Consequently, book entry transfers can be made between SIS members without the printing and movement of physical certificates. Only very few physical certificates are still in circulation or deposited in bank vaults. The SIS tariff structure encourages physical deposits into the system and discourages physical withdrawals.
6.	Does the market allow partial settlements?	SIS does not support partial settlements. The counterparties to a trade have to agree bilaterally on a partial settlement and instruct (or change instructions) in SECOM accordingly. It is not possible to amend instructions received "locked-in" from SWX.
7.	Can the depository accommodate same day turnarounds?	Yes. Because of the realtime RTGS settlement system, same day turnarounds are possible and very common.

Bank of International Settlements (BIS) Settlement Models

Model 1:	Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment).
Model 2:	Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.
Model 3:	Systems that settle transfer instructions for both securities and funds on a net basis, with final transfers of both securities and funds occurring at the end of the processing cycle.