Bonds and Repos – Spanish government bonds: Update on target solution and launch

Since 17 December 2010, LCH.Clearnet SA offers clearing services for Spanish government bonds with settlement in Iberclear, the domestic CSD, and now accepting trades from ICAP/BrokerTec, MTS Repo Market and ETCMS.

LCH.Clearnet SA is implementing additional features to the Spanish debt service in a phased approach and is pleased to announce that the target solution is expected to go live on Friday 1 July, 2011.

Target solution features

The objective is to implement a service similar to the one offered today on the French debt market.

Products and Trade management

• Products to cover cash trades (Buy / Sell transactions) in addition to the Repo (Buy & Sell Back) ones;
• Connections to Trading and Matching platforms to be extended (Tullett Prebon Repo to join with a roadmap to be defined);
• A new cut off will be implemented at 4:00 pm CET to include trades with settlement on trade date+1 in the netting process before the start of Iberclear’s settlement cycle.

Settlement management

• Settlement instructions are generated and sent out by LCH.Clearnet SA upon Power of Attorney from clearing members or their settlement agent;
• Settlement in the domestic CSD ( Iberclear):
  • All transactions with the same Intended Settlement Date (ISD) are included in one single settlement instruction per Clearing Member code, clearing compartment and per ISIN code;
  • Net instructions are generated and sent to Iberclear at close of business the day before the ISD, hence reducing the number of settlement instructions;
  • Same Day repo front legs are settled on a gross basis as it is the case today;
  • Depending on the netting result, a cash only instruction might be generated for settlement in Target2 (and included in the morning margin call at ISD);
  • Automatic shaping will be implemented on the Spanish debt according to market demand. Today for the French debt clearing, shaping is applied by slices of € 50 million.

Membership

• Mandatory Power of Attorney (PoA) will be requested from all clearing members to enable settlement instructions to be sent to Iberclear on their behalf by LCH.Clearnet SA.

Testing principles and launch approach

Testing principles

• Test platform will be available from Monday 16 May, 2011;
• A mandatory and light monitored test cycle will be scheduled;
• Members will be able to carry out end-to-end testing from matching and trading platforms to the settlement platform Iberclear, through the clearing platform;
• Additional periods of free testing will also be arranged.

Launch approach

• For Members already active, all gross settlement instructions, for which the initial and/or return settlement date is expected on or later than Monday 4 July, 2011, will be cancelled by Iberclear;
• As a result, new netted settlement instructions will be generated and sent by LCH.Clearnet SA with a first settlement date on Monday 4 July, 2011.

Next steps

• LCH.Clearnet will collect PoAs that will be sent shortly to members;
• Updates of the Service Description and the Member Report will be released in April;
• Testing guide with detailed planning and description of the launch steps/actions will be provided in April;
• Service presentation will be organised in April.

For further information, please contact:

your LCH.Clearnet SA product implementation manager:
Mykael Lemosle: +33 (0) 1 70 37 65 27 – [email protected]
or your account manager:
Michel Bokobza: +33 (0) 1 70 37 65 55 – [email protected] 

Customer and Market Management LCH.Clearnet SA

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