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I nuovi servizi per gli emittenti Palazzo Mezzanotte, Milano, 28 Maggio 2013
I nuovi servizi per gli emittenti
Palazzo Mezzanotte, Milano, 28 Maggio 2013
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XE Eurobonds – Raising the bar Andrea Tranquillini Head of Network Management & International Issuance Monte Titoli
I nuovi servizi per gli emittenti
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New Service Main Features
Key Service Differentiators Impact
1 “XE” ISIN Market neutral to accept new “XE” ISIN. Code is neither a key driver of liquidity nor quality.
2 STP offered by MT-X and UnaVista Great improvement on current processes and cost savings
3 No requirement for ICSD agent safekeeping and servicing Simpler process brings efficiencies. Further efficiencies with Dematerialisation option
4 Central Bank Money Provides an alternative to the current Commercial Bank Money service. Significant risk reduction option
5 Streamlining of the execution process General simplification of the execution process with benefits for Lead Managers, Sub Custodians and Investors
6 Corporate Actions Automation Proposed development using XBRL taxonomy offers benefit for Global Custodians, addressing a significant concern raised previously
7 Significantly Lower Safekeeping Fees Major benefit for Global Custodians and Investment Banks
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A new Numbering Agency Securities coding
SECURITY CODE • “XE” prefix – Unique for International Bonds & Debt Instruments
where MT is Issuer (I)CSD • Additional request for membership submitted to the ANNA
(Association of Numbering Agencies) • Membership not a showstopper to start allocating codes
X E 0 0 B 1 F 3 M 5 9 0
Code identifying place of deposit (for international bonds)
Seven digits alphanumeric code (using SEDOL format) Filler
Check digit
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CBL
Key Benefits AT ISSUANCE fewer parties reduced Operational risk. SAFEKEEPING As per the ECB Standard 3, Monte Titoli has a unique and direct relationship with the issuer. FORM Global Note safe kept by Monte Titoli. Dematerialization possible with servicing efficiencies. COMMUNICATION All communications from Issuer or Agent directly to MT. Prime record with MT.
ISSUER’s AGENT
ISSUER
LEAD MANAGER
PARTICIPANTS
INVESTORS
Monte Titoli
A new simpler structure All functions imbedded within Monte Titoli
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SETTLEMENT AGENT can be either: - Lead Manager (for Syndicated
Issues), or - Programme Agent (for direct
programme issuance). As agreed bilaterally between Issuer and Agent. Must be A/C holder
Issuer appoints, and notifies MT of 1. ISSUER AGENT responsible for
• Issue creation, and • Post-Issuance servicing
2. PAYMENT AGENT responsible for • interest & principle events
Issue closed
Issue created
Securities distributed
Issuer
Issue A/C (Debit)
Agent A/C (Credit)
Participant (Credit)
Investor (Credit)
Issuance structure Issuer responsible for creating issue, settlement, and post-issuance servicing
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Monte Titoli
Option 1 Lead
Manager
Underwr I
ter
Underwr I
ter
Underwr I
ter
Investors
Securities
Issuer
Cash
EUR via T2
Issuer
Primary settlement roles DVP Securities distribution and proceeds payment to issuer
Issuer
Option 2 Programme
Agent
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Securities Cash
ISSUER’s AGENT
ISSUER
Lead Manager/IPA*
PARTICIPANTS
INVESTORS
MT T2
Issuance process
Process flow
1. Security created in issuer account (DR)
2. Simultaneous automatic credit (FOP) according to “agent” account for «distribution»
3. Distribution occurs on a real-time DVP basis
4. Simultaneous DVP RTGS settlement for cash leg via T2
* Depending on the role performed and on the type of issuance
Key Benefits Settlement Real time Gross Settlement in Central Bank money (T2). Settlement Immediate finality in the early morning of issue date.
4 2
1
3
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Monte Titoli
CBL 1
CBL 2
EB 1
EB 2
EB Sett. system
CBL Sett. system
BRIDGE
Express Net & (RTGS)
CBL
EB
Direct Participants
Transaction input
Settlement & confirmation
Settlement with peers Transferability of XE Eurobonds
Key Benefits Settlement No limitation in transferability of XE assets with peer ICSDs. Currency Phase 1 EUR CeBM settlement in T2, Phase 2 Multicurrency in CoBM Deadline Currently available during T2 opening hours. Overnight window planned
T2 Realignment
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Income processing
Key Benefits Credit Risk Removal of overnight and intraday exposure for crediting proceeds Operational Risk Substantial reduction of reversal risk.
CURRENT PROCESS • Funds advanced to Participants (at cost), based on;
– Credit standing of Participant, and
– Credit standing of Issuer
– Poor credit – funds credited next day, or when receipt determined (Upon receipt of Funds)
NEW PROCESS • Immediate payment to the market as soon as issuer paying agent pays. Most
payment in T2 settled by mid morning CET. • Irrelevance of participant and issuer credit rating. • Immediate finality of payment and minimization of reversal risk.
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Assets servicing
CORPORATE ACTIONS • In December 2012, Monte Titoli has been recognized amongst the top CSDs for CA standards implementation in the T2S markets.
FISCAL SERVICES • Pre-issuance and post-issuance services outsourced to market leading
provider ″GlobeTax″. • Both relief at source and refund available if applicable. • Electronic reporting for issuer agents.
Key Benefits Corporate Actions Forerunner of European harmonization Fiscal Service Specific assistance in the pre-issuance phase provided
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Collateral eligibility criteria
TYPE of EUROBONDS • CGNs (Classic Global Note) eligible but not when held via common agents for EB or
CBL. • NGNs – July 2006 – Created to enable EB & CBL to meet the ECB requirements,
addressing concerns around “Undue custody risk” on use of Common Depositaries. (Standard 3 of ECB SSS Standards)
• Monte Titoli meets ECB requirements for both Global (CGN) and dematerialised.
EUROSYSTEM RULES • Laid down in Annex I to Guideline ECB/2011/14 of 20 September 2011 on monetary
policy instruments and procedures of the Eurosystem.
Key Benefits CGN Eligible if held with Monte Titoli as no Undue Custody Risk. Book entry Eligible as held and settled with Eurozone SSS fulfilling ECB standards
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An innovative language – XBRL eXtensible Business Reporting Language
• Point raised about SWIFT communication standards not ensuring exhaustive transfer of information and need for interpretation of information in documents
• Examine a possible solution to Important information, not covered in SWIFT messages, by using XBRL to tag the information and enable all parties to enjoy STP
• Standard taxonomy (dictionary) of terms mandated in law by US and other governments for financial reporting consistent with ISO 20022 messaging standard used to ‘tag’ data in text-heavy documents
• Makes documents (e.g. Market Announcements, Term Agreements) machine readable and reduces re-keying effort and associated error risks
• Establish a sub-Working Group to evaluate and take necessary steps towards addressing this quickly
• GlobeTax helped develop the XBRL withholding tax taxonomy for corporate actions
Key Benefit Communication Increase quality of communication at issuance on securities data Operations Reduce risk of reversal on payment date
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Cost reduction
• Significantly lower safekeeping fees (concentration of agency roles in Monte Titoli expected to bring at least of 30% savings)
• Reduced servicing efforts and administrative burden for intermediaries
• De-risked real-time DVP CeBM issuance process without credit exposure
• Streamlined real-time Corporate Actions processing in CeBM in Central Bank Money
• Reduction of operational risk thank to real time DVP settlement • Dismantling of the credit exposure principle thanks to full STP RTGS
DVP • Eligibility for ECB and CCP collateral
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Legal Structure Enrica Cremonini Legal Counsel Gruppo Borsa Italiana
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Legal Framework Main aspects
• Monte Titoli operates within the legal framework of the Italian Finance Act (Leg.D.58/1998), and the Monte Titoli rules on “Centralised Administration of Securities” are approved by the competent authorities as complying with the laws.
• This legal framework is fully compliant with the industry standards (ESCB Recommendations for Securities Settlement Systems and BIS Principles for Financial Markets Infrastructures, requiring a high degree of legal assurance for each aspect of the clearing and settlement process, including: • Legally valid and enforceable arrangements for netting and collateral • Valid and enforceable rules on the entitlement to securities and the legal effects arising from a credit
book entry on a security account only the relevant account holder is entitled to exercise rights arising from the securities
• No claims on securities can be exercised by MT • Clear definition of the nature of the proprietary rights on book entry securities • Full protection of Client’s assets in the event of the insolvency of a system participant or the CSD is
granted by strict asset segregation rules, both at CSD and Intermediary level and prohibition of actions or attachments by the creditors of the intermediary or of the CSD against the securities which are the property of the Intermediary’s client
• Settlement Finality rules implemented according to EU Legislation to protect the settlement system in case of insolvency
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Legal Framework Monte Titoli as Depositary and Safekeeper
In accordance with the legislation, and having a contractual relationship with the Issuer, MT as authorized CSD, manages the securities settled through its settlement system as follows: • A securities account is opened for the issue on Monte Titoli’s books
• The issue is deemed to be completed when securities are credited on the participants’ securities account
• Securities in certificated form: MT acts as a custodian of the physical document representing the security. Upon receipt of the security, MT registers the issue on the relevant securities accounts
• Securities in dematerialized form: MT provides for the registration on the relevant securities account upon completion of the placement process and upon instruction of the Issuer or of the Issuer Agent
• Reconciliation: at the end of each accounting day, MT verifies that the amount registered in the securities account held by intermediaries is equal to the amount registered in the issuer’s securities account
• Corporate actions management:
– Notices in relation to note holders meetings
– Income payments of principal and interests under the securities
– Tax services in relation to the relevant securities
Issue closed
Issue created
Securities distributed
Ongoing Servicing
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Legal Framework Options for form of securities
Securities cleared through MT may be either in certificated (global
or definitive) form or in uncertificated (“dematerialised”) form
According to private international law, the form of securities will be regulated by the law where securities are issued
– If the securities are issued in Italy, Italian law will apply to the form of
the securities
– If the securities are issued in another jurisdiction, the law of such jurisdiction will apply to the form of the securities (e.g. if the securities are issued in the UK, UK law will apply)
Securities in dematerialized form are deemed to be issued when
the issuer’s securities account is opened and the relevant securities are credited therein
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Legal Framework Dematerialization rules
To the extent Italian law applies to the form of securities, article 83-bis of Italian Finance Act and article 15 of the Joint Regulation set forth that the financial instruments to be issued in dematerialized form are the following:
• Financial instruments traded or intended to be traded on Italian regulated
markets;
• Shares, other equity instruments, bonds and other debt instruments, as well as any other financial instrument that gives the right to acquire other financial instruments issued by an entity having financial instruments listed on an Italian regulated market or is included in the list (held by CONSOB) of issuers having shares diffused to the public;
• Bonds and other debt instruments issued for an aggregate amount of at least Euro 150 millions (below this amount form is optional) ;
• Other financial instruments for which the issuer opts for the dematerialization regime.
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Legal Framework Guidelines on documentation amendments
The new structure will modify the operations and timing of both the issuance process and the ongoing servicing. As a consequence this will have to be appropriately reflected in all the relevant legal documents related to the issue such as: 1. Prospectus/Offering Circular 2. Subscription Agreement/Progamme Agreement 3. Global Note 4. Agency Agreement ( and Trust Deed) 5. Operative and Administrative Procedure Memorandum 6. Signing & Closing Memorandum
In amending these documents, considerations are: 1) For certificated issues in Monte Titoli, securities will be in CGN form. Normally
the wording used in programmes already includes both NGN or CGN 2) Monte Titoli will be indicated as the depository and safekeeper of the note 3) The Operative and Administrative Procedure Memorandum and the Agency
Agreement needs to reflect timing and procedure in line with Monte Titoli operations.
4) The Issuer will have an agreement with Monte Titoli with standard terms and conditions both for custody and safekeeping service.
• A&O drafting documentation templates
• ICMA Legal & Docs Committee to review
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Sales Team Details Alessandro Zignani Head of Post Trade Sales
[email protected] T +39 02 33635 212; M +39 366 6120430
Cristina Belloni Global Post Trade Sales
[email protected] T +39 02 72426504
Giovanni Costantini Global Post Trade Sales
[email protected] T +39 02 33635283
XE Eurobonds team Details Andrea Tranquillini Head of Network Management & International issuance
Enrica Cremonini Legal Counsel
Contacts
mailto:[email protected]:[email protected]:[email protected]:[email protected]
Grazie della Vostra attenzione
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• The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to be considered as a recommendation by Borsa Italiana S.p.A. as to the suitability of the investment, if any, herein described.
• This document has not to be considered complete and it is meant for information and discussion purposes only. Borsa Italiana S.p.A. accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this documents.
• AGREX, BEST VENUE INDICATOR, BORSA ITALIANA and BORSA ITALIANA’s logo, BORSA ITALIANA ITALIAN STOCK EXCHANGE, BORSA VIRTUALE, BORSAM@T, CITY FOR GOOD, DDM, ELITE, ETFplus, EUROMOT, EXPANDI, EXTRAMOT, IDEM-THE ITALIAN DERIVATIVES MARKET, IDEX, MARKET CONNECT, MIB, MIB 30, MIBTEL, MIDEX, MINIFIB, MINIFIB, MIV, MOT, MTA, MTF, NIS, SEDEX, STAR, STAR SEGMENTO TITOLI CON ALTI REQUISITI, TECHSTAR are registred trademarks owned by Borsa Italiana S.p.A.
• CC&G is a registred trademark owned by Cassa di Compensazione e Garanzia S.p.A.
• MONTE TITOLI, X-TRM AND MT-X are registred trademarks owned by Monte Titoli S.p.A.
• MTS, BOND VISION, EUROMTS are registred trademarks owned by MTS S.p.A.
• London Stock Exchange, the coat of arms device and AIM are registered trade marks of London Stock Exchange plc.
• FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence.
• The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership on the same.
• Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd – Italian branch.
• The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities
Diapositiva numero 1Diapositiva numero 2New Service�Main Features�A new Numbering Agency�Securities coding A new simpler structure�All functions imbedded within Monte TitoliIssuance structure�Issuer responsible for creating issue, settlement, and post-issuance servicing�Primary settlement roles�DVP Securities distribution and proceeds payment to issuerIssuance process �Settlement with peers�Transferability of XE EurobondsIncome processingAssets servicingCollateral eligibility criteriaAn innovative language – XBRL�eXtensible Business Reporting LanguageCost reductionDiapositiva numero 15Legal Framework�Main aspectsLegal Framework�Monte Titoli as Depositary and SafekeeperLegal Framework�Options for form of securities�Legal Framework�Dematerialization rules�Legal Framework�Guidelines on documentation amendments��ContactsDiapositiva numero 22Diapositiva numero 23
