SPANISH
MARKET REFORM
April 2016
TABLE OF CONTENTS
Spanish Market Reform Explained.................................................................. 3
Impact to Goldman Sachs and Our Clients ..................................................... 4
Spanish Market Matching Standards .............................................................. 6
Goldman Sachs Standard Settlement Instructions ......................................... 7
Frequently Asked Questions ........................................................................... 8
Spanish Market Reform
April 2016
2
SPANISH MARKET REFORM EXPLAINED
INTRODUCTION
The purpose of this document is to provide our clients and counterparties with information
regarding the Clearing and Settlement Reform in Spain (commonly known as Spanish Market
Reform or SMR), and the transition to a trade date plus two business days (T+2) settlement cycle
for Spanish cash equities.
The migration to ARCO, Iberclear’s new clearing and settlement system, will take place on
April 27, 2016 and the settlement cycle for Spanish cash equities will change to T+2 on trade date
June 23, 2016. The T+2 settlement cycle is mandated under the Central Securities Depository
Regulation (CSDR) and is dependent on the go-live of ARCO.
The reform is intended to prepare the Spanish equity market post-trade infrastructure for migration
to the European Central Bank’s TARGET2-Securities (T2S) settlement platform, which is scheduled
for September 2017.
The reform will result in changes to post-trade procedures including settlement processing,
settlement cycle and registration processing.
This document will cover the approach that Goldman Sachs (GS) is taking and the potential impact
on the settlement of securities transactions in the Spanish equity market.
TIMELINE
The key dates in 2016 for SMR and the migration to a T+2 settlement cycle are illustrated below.
This timeline is subject to Iberclear, BME Clearing and Bolsa de Madrid readiness.
SMR go-live,
first trade date
SMR first
settlement
date (T+3)
Last trading day
on T+3 cycle
First trading day
on T+2 cycle
First settlement
date for T+2
executed trades
Apr 27 May 2 Jun 22 Jun 23 Jun 27
Please note: Settlement for two trading days, June 22 (T+3) and June 23 (T+2), will occur on intended
settlement date (ISD) June 27, hence settlement volume is expected to increase on this day.
Spanish Market Reform
April 2016
3
IMPACT TO GOLDMAN SACHS AND OUR CLIENTS
SUMMARY OF THE KEY CHANGES
The table below provides an overview of the key changes to be introduced by SMR and a brief
description of Goldman Sachs’ approach:
Change
Description
GS Approach
Additional
Comments
Introduction
of a Central
Counterparty
(CCP)
• Bolsas y Mercados Españoles (BME) Clearing will be the
appointed CCP for Bolsa de Madrid executed trades, either directly
or via a local broker.
Citibank Madrid has been
appointed as the General
Clearing Member (GCM)
for GS.
Clients trading offexchange with GS will
not be impacted.
GS will be adopting
the General Third-Party
account model.
The full Spanish
standard settlement
instruction (SSI)
details are provided
on page 7. Clients will
need to instruct with
these new SSIs when
settling with GS.
• Clearing will become mandatory for on-exchange activity.
• BME Clearing’s function is to perform clearing and netting,
while Iberclear will continue to perform the settlement
processing function.
Iberclear
Account
Structures
Four types of account structure will be offered:
• Proprietary account
• General T
hird-Party account
• Individual T
hird-Party account
• Special Individual account of Financial Intermediary
Elimination of
References of
Registry
• References of Registry will be eliminated and communication of
ownership will take place in the Post Trade Interface (PTI).
• Registration names which represent the named beneficial owner
of the shares will remain.
• Registrars are still recognized as the beneficial owners in the
market to enforce traceability.
Settlement
Day Schedule
Two settlement processes will be introduced (times in CET):
• Settlement in cycles:
08:30 to 15:00 (two hour cycles with optimization)
• Real-time Gross Settlement (RTGS):
07:30 to 15:00 (DVP on-exchange) / 16:00 (DVP off-exchange) /
18:00 (FOP)
GS will have its own
securities account at
Iberclear, hence a new
Iberclear account number
has been appointed.
GS will continue to
use registration name
"Goldman Sachs
Securities Nominees
Ltd" and code
"COD00000062".
The full Spanish
standard settlement
instructions (SSI)
details are provided on
page 7.
GS will settle in the
predefined settlement
cycles and will not
instruct RTGS.
Clients must instruct
in advance of the
revised settlement
cut-offs, preferably
by T+1.
CET: Central
European Time
DVP: Deliveryversus-Payment
FOP: Free-of-Payment
Market Buy-in
Change
• The market buy-in deadline for equities will move from ISD+1 to
ISD+4 in-line with the rest of the European Union.
• Market penalties for late settlement of on-exchange deliveries will
continue to apply.
• An asset servicing adjustment, generated by a settlement
instruction with trading date T-4 that has failed, will be settled
directly in cash.
• An asset servicing adjustment, generated by a settlement
instruction on trading date T-3, will go directly to buy-in on the
day following its generation.
Spanish Market Reform
GS will adopt this
new standard.
Clients and
counterparties are
expected to provide at
least one full trading
cycle notice for any
onward bilateral
settlement risk.
ISD: Intended
Settlement Date
April 2016
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IMPACT TO GOLDMAN SACHS AND OUR CLIENTS
Change
Description
GS Approach
Additional
Comments
Auto-partial
settlement
• All on-exchange instructions will be automatically partialled by
default.
GS will opt-in for autopartial settlement,
except for Securities
Lending activity.
Iberclear applies a
default partial cash
threshold of €10,000.
GS will not use Hold
and Release directly,
however our agent bank
(Citibank Madrid) will
manage this process on
our behalf. GS will send
all instructions in ‘release’
status to the agent bank.
GS will not offer Hold
& Release capabilities
to clients.
• All other instructions will only be in scope if both parties have
opted-in to auto-partial settlement.
Hold & Release
• Iberclear will introduce Hold & Release capabilities, similar to T2S.
• Hold: A function to send a settlement instruction to Iberclear
for matching but preventing settlement.
• Release: A function to send a settlement instruction to T2S
for matching and settlement.
Recycling
• Matched and un-matched instructions will be auto-recycled.
GS will adopt this
new standard.
Timely matching
is required.
Bilateral
Cancelation
• To cancel matched instructions, bilateral cancelation requests from
both parties will be required.
GS will adopt this
new standard.
None
Cash Tolerance
Two-tiered cash matching tolerance:
GS will adopt this
new standard.
Increased accuracy
of settlement
instructions required
for matching.
• €25 for transactions > €100,000
• €2 for transactions ≤ €100,000
Implementation
of Ex-Date
• The ex-date will be one settlement cycle less one working day
prior to record date.
GS will adopt this
new standard.
None
AutoCompensation
on Claims
• Auto-compensation is applied on asset servicing claims for up to
20 business days (pre-SMR only three business days).
GS will adopt this
new standard.
This change will be
managed by GS on
our clients’ behalf
and will be reported
accordingly.
AutoTransformations
• Auto-transformations will be supported for all asset servicing
event types (pre-SMR only stock splits supported).
GS will adopt this
new standard.
This change will be
managed by GS on
our clients’ behalf
and will be reported
accordingly.
Formal Buyer
Protection
• Formal Buyer Protection is offered for failing CCP transactions over
key asset servicing dates (pre-SMR no protection offered).
GS will adopt this new
standard.
This change will be
managed by GS on
our clients’ behalf
and will be reported
accordingly.
Spanish Market Reform
April 2016
5
SPANISH MARKET MATCHING STANDARDS
NEW MATCHING FIELDS
Further to the existing mandatory matching fields, Iberclear will be introducing two new types
of matching fields, additional and optional. Additional matching fields will be used to indicate
corporate action attributes, whilst the optional matching fields provide new matching criteria.
Neither types of fields are mandatory but have different behaviors. The approach taken by
Goldman Sachs for these matching fields is outlined below.
ADDITIONAL MATCHING FIELDS
The use and matching of the Opt-out ISO transaction condition indicator results in the exclusion
of an instruction from automatic market claims. The CUM/EX indicator specifies the income
entitlement due on a transaction. In order to maintain matching consistency, Goldman Sachs will
not be instructing any of the additional matching fields. These fields will remain blank in
Goldman Sachs' settlement instructions.
Field
Matching Criteria
GS Approach
Opt-out ISO transaction
condition indicator
The additional matching
fields only become a matching
criterial if at least one party
instructs a value:
GS will not be instructing
these additional matching
fields in line with expected
market practice
CUM/EX indicator
Value 1 + Value 1 = Match
Blank + Blank = Match
Value 1 + Blank = No Match
Value 1 + Value 2 = No Match
OPTIONAL MATCHING FIELDS
The optional matching fields provide new criteria for market participants to use in the matching
process if required. Goldman Sachs will instruct the 'securities account of the delivering/receiving
party' for matching accuracy. All other optional matching fields will remain blank by default,
unless specifically provided by the client.
Field
Matching Criteria
GS Approach
Common trade reference
The optional matching fields
only become a matching criteria
if both parties instruct a value:
GS will instruct the 'securities
account of the delivering/receiving
party', all other optional matching fields
will remain blank by default
Client of delivering CSD participant
Client of receiving CSD participant
Securities account of delivering party
Securities account of receiving party
Spanish Market Reform
Value 1 + Value 1 = Match
Blank + Blank = Match
Value 1 + Blank = Match
Value 1 + Value 2 = No Match
April 2016
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GOLDMAN SACHS STANDARD SETTLEMENT INSTRUCTIONS
REVISED STANDARD SETTLEMENT INSTRUCTIONS FOR SPANISH EQUITIES
To comply with the new BIC11 format, as well as the changes to the account structure,
Goldman Sachs has provided revised SSIs for the Spanish equity market below.
Market/Effective
Trade Date
Goldman Sachs International
Goldman Sachs & Co
Spain
Equity
AG: CITIESMXXXX
CL: GSILGB2XXXX
PS: IBRCESMMXXX
AG: CITIESMXXXX
CL: GOLDUS33XXX
PS: IBRCESMMXXX
Iberclear Account:
IBRCCITIESMXXXX000000006T0EX0000005
Iberclear Account:
IBRCCITIESMXXXX000000007T0EX0000006
Registration Name:
Goldman Sachs Securities Nominees Ltd
Registration Name:
Goldman Sachs Securities Nominees Ltd
Registration Code:
COD00000062
Registration Code:
COD00000062
April 27, 2016
Spanish Market Reform
April 2016
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FREQUENTLY ASKED QUESTIONS
1. Is auto-partialling compulsory for offexchange activity?
No, auto-partialling is optional for offexchange related instructions. GS will
be implementing auto-partialling for both
receipts and deliveries, however both
parties need to opt-in for auto-partial for
the process to work. If one party does not
opt-in, the instruction will not be eligible
for auto-partial.
2. Will registration names be eliminated?
No, registrars are still recognized as the
beneficial owners in the market to enforce
traceability. Registration name details should
be provided amongst your SSIs on trade date.
3. Are off-exchange related settlements
moving to a T+2 settlement cycle?
Yes, the T+2 settlement cycle will be adopted
for both off-exchange and on-exchange
activity. T+2 will be the default settlement
cycle for all Spanish equites from trade
date June 23, 2016.
Spanish Market Reform
4. When does our organization have to make
any changes with respect to Spanish equity
SSIs for GS?
The Spanish equity SSIs provided by GS will
be effective from trade date April 27, 2016,
which is the date of Iberclear’s go-live for
ARCO. Prior to this date, GS will continue
to use its existing SSIs.
5. What methodology is GS using to convert
BIC8 to BIC11?
Unless a client or counterparty notifies us
otherwise, we will take the default approach
by appending “XXX” at the end of the BIC8
to make it BIC11 compliant.
6. Why is settlement volume expected to
increase on June 27, 2016?
Due to the change of settlement cycle from
T+3 (traded on June 22) to T+2 (traded on
June 23), the intended settlement date for
both trade dates will fall on June 27,
hence settlement volume is expected
to increase on this day.
April 2016
8
Contact Details
For any questions or queries please contact
the Goldman Sachs Spanish Market Reform Project Team at [email protected].
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