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?	The depository operates both BIS model 3 and BIS model 1. BIS model 3 is executed through five batch-processing cycles during a business day. BIS model 1 is executed real time during the business hours of the Danish Central Bank 8:00 am. - 3:00pm. (but is only available to participants maintaining accounts with the Danish central bank).
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The depository supports all from T+0 to T+ one year. Market practice is T+3 except for some money market issues, for which practice is T+2.
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?	The customers are free to decide the trade settlement cycle. T+2 is commonly used in the market for some money market issues. Contrary, longer settlement periods of 3 to 6 months are common use in the market when mortgage bonds are sold to finance a real estate trade. The depository runs a netting system and a system for automatic collateralization, which significantly reduces market participants requirements for securities and liquidity. There have not yet been requirements from the customers to change market practice to T+2, although we are aware, that T+2 would bring the securities market in line with the forex market. Reducing the settlement period would be a challenge for investors from different time zones, who would probably have to reduce their settlement through intermediaries.
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?	Yes, the settlement-system performs on-line matching of trades, and direct participants receive match results immediately. All market participants that are indirect participants in the VP-system - such as institutional investors - are part of the real-time matching and have on-line access to match results.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	The depository exclusively keeps securities in dematerialised form.
6.	Does the market allow partial settlements?	No.
7.	Can the depository accommodate same day turnarounds?	Yes, one of the reasons of the netting system being established is the large number of same day turnarounds.

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.