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?	Clearstream Luxembourg operate a Model 1 DVP system, ensuring simultaneous final settlement of securities and funds transfers on a gross (trade by trade) basis.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The normal settlement period is of 3 rolling working days for all products dealt on the exchange. Shorter settlement periods may be arranged case by case between the counterparts.
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?	Clearstream Securities Settlement System has the capacity to handle T+2 settlement cycle or below. However, settlement cycle time reduction is a market decision.
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?	On receipt of settlement instructions from customers, mandatory trade fields are compared against those entered by the counterparty. If they do not match then the transaction will not be considered for settlement and will be reported as unmatched. The matching service is automatic for security transactions that are due to settle between two accounts at Clearstream Luxembourg or between an account at Clearstream Luxembourg and an account in Euroclear Bank. For external transactions, i.e. transactions between a Clearstream Luxembourg customer and a participant of another securities settlement system (SSS), as a general rule, matching occurs in such SSS and Clearstream Luxembourg adjusts to the matching rules of such SSS.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Clearstream ensure immobilisation of securities using depository banks, the internal settlement is completed on a scrip-less basis.
6.	Does the market allow partial settlements?	Partial deliveries for local trades may be arranged between the counterparts by splitting the transaction. The settlement instructions have to be transmitted accordingly.
7.	Can the depository accommodate same day turnarounds?	Yes, Clearstream can accommodate same day turnarounds. However, the timing of settlement of receipts from and deliveries to domestic market counterparties depends on the timing of the instruction flows and settlements in those markets.

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.