Consultation Paper High level description, Nordic CSD Corporate ...

NCSD
Title
Corporate Action Consultation Paper
Date
22/05/2006
Author
NCSD
Consultation Paper
Reference
Nordic Single Consultation Paper
Consultation Paper – Draft 4.5.2006 for internal review
High level description,
Nordic CSD Corporate Action model
Nordic Corporate Action model
Version: 1.0
Author: Nordic Single Project
Date: 2006-05-22
page 1(62)

Contents
1 INTRODUCTION ........................................................................................................................4
1.1 BACKGROUND.........................................................................................................................4
1.2 OBJECTIVE, SCOPE AND METHODOLOGY .................................................................................5
1.3 THE CONSULTATION PROCESS AND THE ROADMAP TO A WHITE PAPER...................................7
1.4 GUIDELINES FOR READING AND RESPONSES............................................................................9
2 EXECUTIVE SUMMARY ........................................................................................................11
3 INTERNATIONAL INITIATIVES AND STANDARDS .......................................................13
3.1 EUROPEAN COMMISSION’S INITIATIVES................................................................................13
3.2 EUROPEAN CENTRAL SECURITIES DEPOSITORIES ASSOCIATION, ECSDA............................14
4 STRUCTURAL ISSUES............................................................................................................16
4.1 ACCOUNT STRUCTURE ..........................................................................................................16
4.1.1 Securities account structure.........................................................................................17
4.1.2 Securities account structure and Corporate Actions ...................................................19
4.2 PARTICIPANTS, ISSUERS AND ACCESS...................................................................................21
4.2.1 Participant roles ..........................................................................................................21
4.2.2 Membership and access...............................................................................................22
4.2.3 Issuing Agent ...............................................................................................................23
4.2.4 Issuer Access................................................................................................................27
4.3 SECURITIES DATABASE.........................................................................................................29
5 CORPORATE ACTIONS .........................................................................................................30
5.1 GENERAL OBJECTIVES...........................................................................................................30
5.2 CORE CSD CORPORATE ACTION SERVICES...........................................................................32
5.3 DEFINITION OF KEY DATES AND ENTITLEMENTS ...................................................................33
5.3.1 Key dates......................................................................................................................33
5.3.2 Determination of entitlement .......................................................................................35
5.4 FLOW OF CORPORATE ACTION DATA ....................................................................................36
5.4.1 Corporate Action notifications ....................................................................................37
5.4.2 Corporate Action instructions......................................................................................39
5.5 PROCESSING OF CORPORATE ACTIONS .................................................................................40
5.5.1 Issuance of securities...................................................................................................40
5.5.2 Mandatory distributions without options.....................................................................43
5.5.3 Mandatory reorganisation without options .................................................................43
5.5.4 Mandatory distributions with options..........................................................................44
5.5.5 Mandatory reorganisations with options.....................................................................44
5.5.6 Voluntary reorganisations with options.......................................................................45
5.5.7 Automated market claims related to Corporate Actions..............................................48
5.5.8 General meeting and proxy voting...............................................................................49
5.6 CORPORATE ACTION PAYMENTS ..........................................................................................51
5.6.1 Trade settlement and Corporate Action settlement......................................................51
5.6.2 Linking and prioritisation functionality.......................................................................53
5.6.3 Corporate Action related addition to the payment model............................................55
6 APPENDIX .................................................................................................................................58
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6.1 DEFINITIONS AND ABBREVIATIONS .......................................................................................58
6.2 APPENDIX II – WORKING GROUP PARTICIPANTS ..................................................................61
6.3 REFERENCES .........................................................................................................................62
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1 Introduction
1.1 Background
This Consultation Paper sets out requirements and proposals for a Nordic
Corporate Actions model. It also covers some high level requirements related
to payments, account structure and participant roles.
The Nordic Single (NS) project aims to supply a system and service structure
well-suited as a Single Service Platform for depository, settlement and
Corporate Action systems within the Nordic markets. Requirements have
been developed together with market participants.
The NS work was initially carried out with a group of NCSD participants
(Clearing & Settlement participants and Account Operators) which form a
Strategic Advisory Board (SAB) for the project and the Securities Dealers
Associations in Sweden and Finland. Based on bilateral meetings and
discussions in SAB, basic principles for a Nordic CSD have been stated in the
White Paper “Nordic CSD Structure, Basic Principles” 2005-06-17, updated
2005-11-24.
The overall characteristics of the Nordic CSD Model stated in the White
Paper “Nordic CSD Structure, Basic Principles” are
• Transparency and Open Access
• Nordic Harmonisation and Connectivity
• Single Service Platform
• Flexible Structure
• Based on International Industry Standards
Cornerstones of the Nordic CSD Model are close relation with the Issuers,
flexible account structure, single settlement engine and single interface.
After the publication of the White Paper two working groups were initiated to
continue the high level requirement work in the areas of Corporate Actions
and Clearing & Settlement. Also another Strategic Advisory Board was
formed of Issuer representatives from Sweden and Finland.
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Nordic Corporate Action model and the high-level requirement work has
been carried out in a Working Group consisting of specialists from the SAB
participant organisations and NCSD. The Working Group has analysed
current Corporate Action processes in the Nordic region and based on the
White Paper “Nordic CSD Structure, Basic Principles” outlined high-level
requirements and proposals for the Nordic Corporate Action model. The
Working Group prepared a High Level Requirements Report on some of the
most common Corporate Action processes for equities. The processes and the
requirements related to them were discussed in workshop sessions. Fixed
income area and some other securities (currently issued in the Nordic CSDs)
were mainly analysed by NCSD specialists who, during the work,
interviewed several specialists in the participant organisations. The common
and structural issues presented in this Consultation Paper have been prepared
in NCSD internal work. Also these proposals and requirements have been
discussed in the workshops.
1.2 Objective, scope and methodology
The objectives of this Consultation Paper are to outline the basic
requirements of the NCSD business model in the Corporate Actions area, to
increase awareness among the market participants and clients of the likely
forthcoming changes and to receive information on the views and preferences
of interested parties on the high-level requirements. The business model will
be based on the requirements. The key components are the services which
will be the NCSD core services, possible addititional services for the
participants and what would not be part of the NCSD services.
Corporate Actions cover a wide variety of processes in a number of markets.
It has been agreed to use the ECSDA Corporate Action definition which
reads as follows:
Corporate Actions cover all the processes which arise from the
announcement by an Issuer or his agent that an event affecting holders
of the relevant security is to take place up until the moment when all
effects of that event are complete.
Corporate Actions cover the following process areas:
• Incorporation of securities
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• Issuance of securities
• Transactions in securities
• Income or yield payments including taxation
• Changes in the basic information of the Issuers and the securities
• General meetings and re-registration process
• Lists of holdings
The Nordic CSDs offer a wide range of services covering all of the Corporate
Action areas.
Securities can, according to their nature or legal status, be divided into Equity
Market, Fixed Income Market and Derivatives Market. In this consultation all
security types currently being registered in the Nordic CSDs have been taken
into account. Equity and fixed income are the biggest markets. In addition,
Nordic CSDs have registered several other security types which are typically
traded on the stock exchange. Many of these securities have a listed equity as
an underlying asset, such as covered warrants.
Mutual funds have been excluded from this Consultation Paper. They are
covered instead in a separate study within the Nordic Single project. It is
noted that the mutual funds is one of the fastest growing areas with regard to
financial instruments. Currently the Nordic CSDs have very different service
offerings for mutual funds. Due to the importance of this market segment
NCSD has separated the requirements and business model studies of this area
from other Corporate Actions areas.
Corporate Actions in securities from outside the Nordic countries have not
been studied in this work and they are excluded from this Consultation Paper.
Tax issues and practises are typically very different between the countries and
there are small possibilities of any harmonisation. We have not studied
taxation-related matters or processes within this work. Most probably the
taxation processes will anyway remain local and will be attached to the
harmonised Nordic Corporate Action model on the country level.
Of the Corporate Action processes, the incorporation of new companies
typically follows national legislation and has not been included in this
Consultation Paper. Some other issues of an administrative nature, such as
change of the name of the Issuer, will be included in the future work.
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Participant roles have been covered in this Consultation Paper to the extent
needed for Corporate Actions. In the role of the Issuer and its responsibilities
there are no major changes planned although there may be some amended
requirements relating especially to the providing of information to the CSDs.
These and some other things that may have an effect the Issuers appear in the
relevant chapters of this paper. The role of Issuing Agent has been described
because it acts as a major participant in the Corporate Action processes. The
responsibilities will be analysed further in the future work. The roles of other
CSD participants, which based on an agreement with a CSD, conduct
business as a participant of a CSD, have not been included in this paper.
The proposals in this Consultation Paper have been identified and formulated
when analysing the Corporate Action processes. There may be restrictions on
which solutions can be achieved both relating to system alternatives, legal
restrictions and specific local requirements. Possible restrictions and
obstacles to harmonisation have to some extent been analysed during the
work. Further analyses will be made in the next phases of the project:
analysing the responses to this Consultation Paper and formulating the White
Paper, preparing the service descriptions and detailed requirements for the
Corporate Action processes and system assessments.
The areas dealt with in this consultation are not exhaustive. There may be
other high-level requirements related to Corporate Actions in the Nordic
region that have not been addressed in this Consultation Paper.
1.3 The consultation process and the roadmap to a White Paper
The target group for this Consultation Paper is mainly participants who are
active in any of the Nordic financial markets. However, anyone is welcome to
forward their views hereupon.
The input from this consultation, together with input from other working
groups, possibly different system assessments, central banks and other
institutions with an interest in the market structure, is planned to be used in
the formulation of an NCSD White Paper describing a model for efficient
Corporate Actions in the Nordic region. The responses to the consultation and
forthcoming White Paper can be used by both participants in their business
and system development planning and by NCSD in evaluations of system
alternatives for a Nordic platform.
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Customer
requirements
Clearing & Settlement
WG
Legal experts
International practice
and recommendations
White Paper
‘Nordic CSD Structure
Basic Principles’
CA Workshops
Consultation
‘High-level description, Nordic
Corporate Action model’
White Paper
‘High-level description, Nordic
Corporate Action model’
Figure 1: The consultation process
CSD
requirements
High level requirements
report on equity
processes
High level requirements
documents on fixed
income and derivatives
processes
Mutual
Funds
prestudy
Common issues in
account structure,
participant roles and
payments
Other input:
White papers from other
- international trends
working groups
- system assessments
White Papers from
White papers from
other working groups
other working groups
NCSD will prepare additional White Papers on the common issues: Account
Structure, Participant Roles and Payment Model. Some of the feedback from
this consultation will be used in these forthcoming White Papers which are to
be published after the Clearing & Settlement and Corporate Action White
Papers.
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1.4 Guidelines for reading and responses
This Consultation Paper outlines proposals, requirements, dependencies and
some other general background information. Readers are encouraged to
comment on the proposals and any parts of the Consultation Paper.
NCSD invites market participants and other interested parties to communicate
their feedback on this Consultation Paper to nordicsingle@ncsdgroup.com.
Please reply by Thursday 22nd June, 2006 at the latest.
This Consultation Paper has been structured in introduction (chapters 1-3),
infrastructural areas (chapter 4) and in Corporate Action specific areas
(chapter 5). Each area is described with some background information
leading up to one or more requirements and the drivers of these. This is
followed by a proposal, meeting the previously specified requirements. The
proposals have been labelled with ID CA for Corporate Actions followed by
a unique number (e.g. CA 14).
We kindly ask you to respond to each proposal as follows
- For each proposal we ask you to answer whether you agree with the
proposal or not.
- If you do not agree, please state reasons.
- Also we ask you to give feedback on other possible impacts or
dependencies relating to the proposal that need to be addressed
Responses to the Consultation Paper should be given by stating the label of
the proposal. If there are questions or comments to proposals, NCSD
recommends that the respective labels of the proposals are to be used when
referring to specific proposals. Readers are also encouraged to express their
overall views on the paper and, when needed, suggest further requirements
and proposals that should be specified in the forthcoming White Papers.
Regarding the structural issues and common issues with Clearing &
Settlement there are several proposals that have been already proposed in
Consultation Paper, High level description, Nordic CSD clearing and
settlement model, 2006-01-26 (the Clearing & Settlement Consultation Paper
ID number has been marked below such proposal). It is important to note that
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posing the same proposals again does not mean that they would not have been
accepted by the participants or that there would be any discrepancy or
misunderstanding. Instead, we ask also those interested parties who have not
read or answered the Clearing & Settlement consultation to comment on these
common issues, especially from the Corporate Actions process point of view.
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2 Executive summary
The Nordic Single (NS) project aims to supply a service structure well suited
as a Single Service Platform for depository & settlement systems within the
Nordic countries. Background factors and drivers for the Nordic
consolidation include synergy effects, cost-savings for clients, maintaining
and strengthening the Nordic competitiveness, and the fact that foreign
investors view the Nordic area as one market.
This NCSD Consultation Paper on Corporate Actions lists a number of high
level proposals relating to structure and functionality of Corporate Actions.
The responses to the consultation, together with the input from other working
groups within NCSD and possibly from some system assessments, will be
used to formulate a White Paper describing a high level model for Corporate
Actions in the Nordic region. The White Paper is to be followed by more
detailed service descriptions and requirement specifications.
At a general level, the Corporate Action Working Group has been unanimous
in taking the ECSDA Corporate Action standards as the bottom-line for
Nordic harmonisation, and implementing ISO standard messages in
communication. The model should include Issuing Agent as a key role in
Corporate Action processing. The Issuing Agent role should be supported and
sufficient preconditions for its operations ensured. In order to promote STP
the requirement is that NCSD should furnish the market with a central
securities database where information on Issuers, securities and Corporate
Actions is available. The Issuers should have an interface to the database and
input Corporate Action data in due course. Processing the Corporate Action
transactions in the settlement system and including at least all Nordic
currencies into harmonised processes are general requirements.
Many of the high-level requirements relate to STP and lowering the
operational risk in the processes. Information should be exchanged
electronically throughout the processes between the parties, and members
should be able to efficiently handle the information in their services. Clear
statements have been made in relation to harmonising Corporate Action
schedules, striving towards DvP and enhancing the tradability of securities.
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The major challenges discovered during the work comprise of the task of
agreeing, and in practise harmonising the four different countries into one
common market practise, different fiscal regulation and practises, and
harmonising four currencies into one Corporate Actions payment model.
The scope of this Consultation Paper includes such securities that currently
have been registered in the Nordic CSDs. This however, does not imply any
limitation in the future scope of the NCSD services. Mutual funds will be
analysed in a separate study within the Nordic Single project and thus they
are not included in this consultation.
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3 International initiatives and standards
Many organisations, both authorities and market participants or their
associations, have published initiatives on harmonising the securities market.
The first significant initiative, Clearance and Settlement Systems in the
World’s Securities Markets, was published by the Group of 30 in 1989.
Probably the best known and almost globally implemented standard from that
publication is the T + 3 settlement cycle.
The trigger for all harmonisation initiatives is the remarkable growth in cross
border trading. Instead of investing only in domestic securities both
institutional and private investors have diversified their portfolios globally.
The need for harmonisation pertains to message types, interfaces and
processes.
3.1 European Commission’s initiatives
In 1996 the EU Commission established a committee that received the
mandate to identify inefficiencies in EU financial markets and to propose
practical solutions to improve market integration. The group is chaired by
Alberto Giovannini.
The Group has produced four reports. The first report on the impact of the
introduction of the Euro on capital markets was published in July 1997. It is
widely acknowledged as having been a major force in forcing a common
approach to the re-denomination of public debt into Euro and in establishing
common bond market conventions for the Euro-area. Since then, the Group
has published reports on the EU repo market, on co-ordinated public debt
issuance in the Euro area, and a report on EU cross-border clearing and
settlement arrangements.
The Giovannini Group published its second report, Second Report on EU
Clearing and Settlement Arrangements, in April 2003. The Group identified
fifteen barriers to efficient clearing and settlement in the EU area. The
removal of each barrier was addressed to different organisations like SWIFT,
ECSDA and ANNA. The Group also set up a schedule for the removal of the
barriers. So far one barrier (Barrier 8, National differences in issuance
practice, ISIN allocation) has been fully removed. The efforts to remove the
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arriers are monitored closely by the high-level CESAME group chaired by
the Commission. The CESAME group was established to advise and assist
the Commission in the integration of EU securities clearing and settlement
systems.
In addition to the CESAME Group, the Commission works in several streams
with respect to Clearing and Settlement in the EU:
• Legal Certainty (LCG) tackling the legal barriers
• Fiscal Compliance (FISCO) examining the removal of the fiscal barriers
• Regulatory Impact Assessment (RIA) examining the costs of the present
fragmented system and the benefits of further integration.
• Sector investigation conducted by DG Competition.
3.2 European Central Securities Depositories Association, ECSDA
The Giovannini Group has addressed Barrier 7 (opening hours), Barrier 4
(intra-day settlement finality in all SSS links) and Barrier 3 (harmonisation of
Corporate Actions) to ECSDA. For the removal of barrier 3 the mandate was
given to both ECSDA and the European Credit Sector Associations (ECSA).
The ECSAs have formed the Corporate Actions Task Force (CATF), with the
aim of identifying the obstacles that prevent efficiency in processing crossborder
corporate actions and making recommendations with regard to their
removal. This Task Force is comprised of expert practitioners from banks, as
well as ECSA representatives.
ECSDA’s work is carried out in separate working groups. Work Group 5
focuses on Corporate Action harmonisation. ECSDA published standards on
mandatory distributions in May 2005. This spring ECSDA will publish
standards on market claims and continue with creating standards for
mandatory distributions with options and finally reorganisation proceedings.
Both ECSA and ECSDA have produced recommendations to remove
Giovannini Barrier 3.. These recommendations have been coordinated
together as well as with other interested parties. Both associations have also
taken a coordination role in the adoption of the proposed recommendations at
national level.
As an ECSDA member NCSD is committed to implementing ECSDA
standards. The Corporate Action Working Group has also analysed the
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ECSDA Corporate Action standards and been unanimous in taking the
ECSDA Corporate Action standards as the bottom-line for Nordic
harmonisation. The Working Group has also agreed on adopting the ECSDA
Corporate Action definition which is as follows:
Corporate Actions cover all the processes which arise from the
announcement by an Issuer or his agent that an event affecting holders of the
relevant security is to take place up until the moment when all effects of that
event are complete.
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4 Structural issues
4.1 Account structure
In the document “White Paper Nordic CSD Structure Basic Principles” the
following basic principle was stated;
“The NCSD account structure is basically built on two different kinds of
securities accounts; investor accounts and intermediary accounts and defined
as follows:
Investor accounts: the account holder is regarded as owner of the securities
which are credited to the account.
Intermediary accounts: the account holder is regarded not as the owner but
as an intermediary who has securities credited to the account on behalf of its
customer (one or many).”
What is today regarded as a nominee account would be interpreted to be an
intermediary account in this Consultation Paper.
The term Account Operator/Nominee is used in this Consultation Paper when
talking about intermediary account holders.
This section elaborates further on the account structure, first with a section
from the C&S Consultation Paper (section 3.3). The next section, 4.1.2,
contains additional account structure issues related to the Corporate Action
area.
The below description of a NCSD ‘securities memorandum account’
corresponds to proposals regarding Corporate Action harmonisation in
NCSD. Even if the general idea is that an investor or intermediary of any
nationality will be able to have any security in the CSD system technically
credited and treated in the same way as if it was a domestic security, it is
worth noting that domestic legal requirements might lead to differences in
how different securities are handled on the securities memorandum account.
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4.1.1 Securities account structure
Background, drivers and requirements
Participants would prefer to have an account that can hold any security
defined in the CSD system. This would allow investors and intermediaries to
have all their holdings on one account. It should also be possible for an
investor or intermediary of any nationality to have any security in the CSD
system technically credited and treated in the same way as if it were a
domestic security. This would simplify and streamline routines for
participants as they would not have to have separate accounts in each CSD.
The memorandum account would give them “one view” or “one account”. In
addition, from an operational point of view, “one account” would streamline
reconciliation processes and discrepancy handling.
Proposal [ID 13]
One account that can hold any security in the system.
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 13]
The CSD system should facilitate functionality, an NCSD ‘securities
memorandum account’, which can record any security, held in the CSD
system. Each security should be connected to a primary CSD. Hence, the
CSD accounts for each security would be governed by the legislation of the
respective primary CSD.
The NCSD account should be a ‘securities memorandum account’, where the
recordings would reflect holdings on local CSD accounts, governed by
legislation of the primary CSD. Information regarding local CSD accounts is
available to participants through the NCSD account ID. Settlement
instructions should also be processed through the NCSD ‘securities
memorandum account’. All processing relating to the securities will be
performed under local jurisdictions allowing straight forward application of
the respective Companies act.
Participants need to comply with local requirements relating to administration
and entering registrations on CSD accounts. Hence, formally, in order to
register settlement instructions in a particular security, participants have to be
a local member (Account Operator) under the legislation of the primary CSD
of that security.
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NCSD securities memorandum account
Account: 55 666 7777 8888 9
Owner: Nnnn Nnnnnn
SE9000000681 100 000
NO2258774123 16 000
FI0001002233 10 000
DK0005012589 20 450
DK0022587741 5 000
DK0025887890 17 850
CSD accounts
Denmark Finland Norway Sweden
20 450
17 850
5 000
10 100 000
000 16 000
100 000
Figure2: The NCSD securities memorandum account and corresponding local CSD accounts.
The illustration above describes holdings on four different CSD accounts
under different legislations which are reflected on the NCSD ‘securities
memorandum account’. Each specific security is registered on a CSD account
governed by the legislation of the primary CSD of that security. For example,
the holdings in the Danish securities are registered on a CSD account
governed by Danish legislation.
Dependencies and implications
The above description of a NCSD ‘securities memorandum account’
corresponds directly to the settlement structure and the proposals regarding
standardised settlement process.
Either the CSD must provide some services where Corporate Action related
payments are exchanged to the preferred currency of the account holders or
the Account Operators would be required to have routines in place for
Corporate Action event occurring in securities which are held on any of their
administered accounts. Hence, although participants can instruct any currency
for the settlement of a specific security, participants may be required to have
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outines in place for the currency in which Corporate Actions occurs in that
security. For example, a Norwegian security may be settled in Euro but the
Account Operator would have to have payment routines in Norwegian kronor
for Corporate Action related payments.
4.1.2 Securities account structure and Corporate Actions
4.1.2.1 Securities memorandum account
As stated above, each security should be connected to a primary CSD and the
proposed structure implies that the CSD accounts are governed by the
primary CSD. This will also be valid for non-Nordic securities as they will be
connected to a primary CSD within NCSD as well. From an Issuer
perspective, the benefit of the securities account structure is that shareholder
register and other registers of holders would include all the holdings on the
securities memorandum accounts directly. In registers of holders, the
holdings will be presented on an investor level, i.e. an investor who has two
securities memorandum accounts will be presented as one in the register.
All the Nordic holdings would be in the primary CSD and as such on the
register of holders and make depository receipts arrangements between the
Nordic countries unnecessary.
Hence, an Issuer with a broad shareholder base in the Nordic region will only
receive one shareholder list covering all the Nordic countries. This will
enhance the communication with the shareholders in the Nordic region.
There should be a possibility for the investors to have several securities
memorandum accounts with one or several Account Operators. For various
reasons the investors may have a need to segregate securities holdings into
several accounts. The investors would still have a choice of how many
‘securities memorandum accounts’ they would hold i.e. the investors may
split holdings in one country into several accounts or segregate holdings in
different countries into different ‘securities memorandum accounts’. NCSD
would not force all holdings into one ‘securities memorandum account’.
Proposal [CA 1]
An investor should be able to have several securities memorandum accounts
with one or several Account Operators.
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As a result of this proposal it should be noted that Corporate Action
processing would be done on each securities memorandum account and not
on a shareholder level when a shareholder has divided the holding into
several accounts.
In relation to Corporate Actions, NCSD can offer participants additional
standard services attached to the accounts when there is demand for this from
several participants and economies of scale can be reached. This would mean
that participants could outsource some functions to NCSD at their choice.
4.1.2.2 Cash accounts
As many Corporate Actions, such as dividend and interest payments, result in
a cash distribution, it is important to have an efficient way of distributing the
cash. Like today, the investor would open also a cash account that would be
connected to the securities account.
The investor should have the choice to have one or several currency cash
accounts connected to his/her securities memorandum account. The cash
accounts would be with Account Operators and/or banks and not with CSDs.
The CSD system should not restrict the possibility to have the cash accounts
with another bank than the Account Operator administrating the
memorandum account.
Proposal [CA 2]
It should be mandatory for the investor to have at least one cash account in
one of the Nordic currencies connected to the securities memorandum
account. Investors should be able to have one or several currency cash
accounts connected to the memorandum account.
In cross Nordic Corporate Actions either the CSD must provide some
services where Corporate Action related payments are exchanged to the
preferred currency of the holders or the Account Operators would be required
to have currency exchange routines in place for Corporate Actions occurring
in securities which are held on their administered accounts. Hence, although
the participants can instruct, on behalf of the investors, any currency for the
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settlement of a specific security, participants may be required to have routines
in place for Corporate Action payments in the currency in which Corporate
Actions occur for that security. For example, a Finnish security may be
settled in Euro but the Account Operator would have to have payment
routines in Swedish Kronas for Corporate Action related payments, based
either on an active election made by the investor or the fact that the investor
only has a cash account in Swedish Kronas.
4.2 Participants, Issuers and Access
In this section, the two first sections covering participant roles and
membership access are extracts from the Clearing and Settlement
Consultation Paper (section 3.4). Sections 4.2.3 and 4.2.4 cover specific
issues within this area related to Corporate Actions.
4.2.1 Participant roles
Background, drivers and requirements
There are several different participant roles used in relation with the clearing
and settlement process, issuing and book-keeping of securities. Although
slightly different terms, many roles are similar across the Nordic markets.
There are, however, also roles that only exist in some of the markets. In
addition, requirements and responsibilities of the respective roles differ
between the markets.
There are statutory differences regarding requirements on participants that
need to be taken into account. For example, there are capital requirements
with different levels on some participant roles, leading to that a participant’s
capital could be sufficient for participating in one of the Nordic CSD’s
market but not in another.
Proposal [ID 14]
There should be common participant roles with harmonised requirements
and responsibilities.
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 14]
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In order to simplify the access to the Nordic market and to clarify the
structure and participants obligations, there should be common participant
roles with harmonised requirements and responsibilities. The multijurisdictional
model implies that local membership is needed to perform
registrations on CSD accounts governed by local legislation. Hence, formally
participants would have to apply for local memberships and relevant roles in
each of the Nordic countries, depending on which countries the participant
wants to operate in.
In the short term, there may be different statutory requirements on the
participants in the respective countries, but from a CSD point of view, the
requirements and responsibilities of the roles should be harmonised across the
Nordic markets. If there are harmonised roles, participants are able to
streamline their operations, using the same routines across all Nordic
markets.
Dependencies and implications
Having common roles with the same requirements and responsibilities is a
key to having one settlement process.
Harmonised roles will simplify the access and application processes for
participants.
Depending on the different legislations in the Nordic markets there may be
some hinders to fully achieve this for all requirements and responsibilities.
4.2.2 Membership and access
Background, drivers and requirements
Having one membership would simplify access to the Nordic marketplace.
The exchanges are striving to establish one membership to all the Nordic
exchanges.
However, there are also costs and resources related to setting up routines for
different markets resulting in that all participants may not want to participate
in instruments of all primary CSDs or handle all the different currencies. As
described under the section of settlement process, the registrations on CSD
accounts are governed by the primary CSDs local legislation. Hence,
page 22(62)

participants would need local memberships and need to comply with local
requirements. One way to handle this is to have the one membership but with
the possibility for participants to choose selective access, giving the
participant local membership to one or many of the different primary CSDs.
Proposal [ID: 15]
Membership with the possibility to choose selective access
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 15]
Participants should be enabled membership with the possibility to choose
selective access. The selective access could, for example, be defined as
instruments issued by a certain primary CSD, settlement in different
currencies, types of instruments or a combination of these.
Dependencies and implications
One membership requires that there are common participant roles which have
the same requirements and responsibilities.
The different central bank money models may require the participants to be
members in the central banks, depending on the currencies they wish to settle
in.
4.2.3 Issuing Agent
Background, drivers and requirements
Having common roles with the same requirements and responsibility is a key
feature for one harmonised way of processing Corporate Actions. One of the
participant roles that exist in some but not all Nordic CSDs is Issuing Agent.
The Issuing Agent acts as an administrator on behalf of the Issuer in relation
to the CSD and is appointed by the Issuer for a specific Corporate Action.
The Issuer can have either a one-time or a long-term agreement with Issuing
Agents.
The basic responsibilities of the Issuing Agent are to instruct the CSD of an
upcoming event and to process instructions from investors. The first
responsibility means that the overall responsibility of the Issuer to inform and
later to instruct the CSD of an upcoming event is transferred to the Issuing
page 23(62)

Agent whenever an Issuing Agent is appointed. The second basic
responsibility of the Issuing Agent implies that it needs to have access to the
securities memorandum accounts for the relevant instrument, regardless of
which Account Operator holds the account and hence has the contractual
relationship with the end investor.
The purpose of the Issuing Agent model is to make processing of Corporate
Actions as efficient as possible since one participant takes care of investor
communication instead of many Account Operators or banks being involved.
An example would be that only one instruction form, decided upon by the
Issuer and Issuing Agent, would be distributed to the relevant investors and
intermediaries. Intermediaries would still be able to create their own
instruction forms to their clients, as there might be a need to set their own
deadlines to the clients. The Account Operators/Nominees will also receive
the instructions from the underlying clients. As the communication between
the Account Operators/Nominees and the nominee registered holders already
today follows international standards, the Account Operators/Nominees
should be able to forward the instruction directly to the CSD system.
However, those instructions will be viewable for the Issuing Agent as it has
to have the total view of the instructions related to the Corporate Action. In
some cases, the instructions from the Account Operators/Nominees should be
put on hold in the CSD system and released only by the Issuing Agent. The
rationale to implement this participant role is also stressed by the Nordic
feature with a vast amount of beneficial owner accounts on the CSD level that
leads to a vast amount of individual instructions in a Corporate Action.
page 24(62)

Investor 1
Investor 2
Issuer
Issuing
Agent
Account
Operator/
Nominee
NCSD system
Figure 4: The communication process in the proposed Issuing Agent model. Investor 1 is
holder of an investor memorandum account and even though the contractual relationship is
between the account holder and the Account Operator, the Investor 1 communicates with the
Issuing Agent. Investor 2 is the underlying client for holdings represented on an intermediary
memorandum account. In this case, the Investor 2 communicates with the Account
Operator/Nominee.
The use of Issuing Agent will also substantially simplify the Issuers processes
related to a Corporate Action as they will only need to communicate with one
counterparty and still be confident that all relevant information will be
distributed to the market (e.g. CSD, exchange, investor etc.)
Proposal [CA 3]
There should be a participant role, Issuing Agent appointed by the Issuer,
acting as administrator of a certain Corporate Action.
GUI
ISO
Proprietary
Investor 1
Investor 2
Owner memorandum
account
Intermediary memorandum
account
Contractual relationship Communication
In order to make the market structure more efficient there should be a
participant role, Issuing Agent, acting as an administrator on behalf of the
Issuer in relation to Corporate Actions.
Proposal [CA 4]
An entity aiming to become an Issuing Agent should apply for the status in
each CSD within NCSD in which it plans to operate.
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Due to jurisdictional differences, an organisation has to apply for Issuing
Agent status at each local CSD in which it plans to operate. However, the
basic responsibilities and requirements should be the same within NCSD.
The requirement to use an Issuing Agent should only apply to voluntary
Corporate Actions, as one of the major responsibilities of the Issuing Agent is
to process individual instructions from owner registered holders. Voluntary
Corporate Actions are such in which the investor has a choice between
different alternatives. The Issuer communicates with the whole investor
community. First it informs the investors on the alternatives to be chosen
from. Secondly it receives the answers from the investors. The Issuing Agent
takes care of this communication process. In a mandatory Corporate Action
the investor does not have any choice, e.g. in a share split all shareholdings
will be split equally without any specific feedback from the investors.
There should not be any restrictions in relation to the number of Issuing
Agents assigned for a Corporate Action.
Proposal [CA 5]
The use of an Issuing Agent should be required for voluntary Corporate
Actions where the investor has a choice between different alternatives. For
mandatory Corporate Actions without options, the Issuer should have the
possibility to choose whether to instruct the CSD directly or to use an
Issuing Agent. (Please refer to chapter 5 for the definition of Corporate
Action types.)
Issuing Agents should also have access to the CSD system as they are acting
on behalf of the Issuers for example in voluntary Corporate Actions. As
shown in the picture below the Issuing Agent should have access to the
Corporate Action part of the system in order to deliver information and
instructions regarding an upcoming Corporate Action. Further, the Issuing
Agent needs to be able to deliver transaction instructions on account level.
Finally, the Issuing Agent should be granted a certain level of access to all
securities memorandum accounts holding the relevant security (-ies) in order
to process the instructions received from holders in an efficient manner.
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Figure 5: Access areas for the Issuing Agent.
Dependencies and implications
Even though the participant structures differ between the Nordic countries,
some CSDs have a direct relationship with the Issuer whereas others have the
structure with registrars, this should not prevent the use of Issuing Agents.
In markets where holders have the choice not to be registered by name, the
voluntary Corporate Action processing for such a holder should be done in
the same way as to a nominee registered holder.
The role of an Issuing Agent is explained also through a rights issue example
in chapter 5.5.6.
4.2.4 Issuer Access
Background, drivers and requirements
Issuers are generally granted an Issuer licence or permission to issue before
issuance of instruments may begin in the book-entry system. The aim for the
application process is to verify the identity and financial status of the Issuer
company and ensure that the Issuer is aware of the responsibilities it faces
when issuing instruments in the book-entry system. Before the issuance may
begin, the Issuer is generally required to enter into an agreement where it
agrees to comply with the CSD rules, regulations and decisions of the CSD
and relevant national legal statutes.
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In addition to the Issuer agreement entered into force with the CSD, the
Issuer may appoint one or several Issuing Agents to handle e.g. the necessary
information (terms) delivery to the CSD system on behalf of the Issuer. The
Issuer could also take on these responsibilities itself if it is able to handle all
necessary responsibilities itself. Information on all Issuing Agents used by the
Issuer should be disclosed to the CSD.
Proposal [CA 6]
An Issuer shall apply for an Issuer licence for each CSD within NCSD
where it plans to issue securities.
When Issuers have received the licence, it is important for the market to have
one centralised CSD system to which participants would be granted a secure
and easy access for processing Corporate Actions. With this centralised
system market participants and Issuers would be able to reduce costs. For the
market as a whole this would increase efficiency and reduce complexity.
Proposal [CA 7]
Issuers should have access to the CSD system through an interface and
provide the CSD with all the relevant Corporate Action information via this
interface.
Dependencies and implications
The CSD system should be built in the way that it would enable Issuers to
receive a secure and restricted access to the centralised system. This access
would be provided through an interface.
The access levels would differ and vary from a very limited access to a wider
access depending on the role of the participant and the Issuer. Issuers would
have access to the CSD system for entering and amending information and
instructions for an upcoming Corporate Action or for the purpose of issuing
instruments. The Issuers will also have an interface for owner information
related services.
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4.3 Securities Database
Background, drivers and requirements
At present market participants receive information on securities and
Corporate Actions from different sources. The information sometimes needs
manual search and there can be discrepancies in the information received
from several sources. Because the timeliness and accuracy of a Corporate
Action is very crucial, a centralised securities database would reduce the time
used for finding detailed information that would enable market participants to
advise their clients of an event. The ISO15022 standards require detailed
information about a Corporate Action for the purpose of sending a Corporate
Action notification to investors. As mentioned above, the Issuer/Issuing
Agent should have an easy access interface to the CSD system in order to
instruct on an upcoming event.
Proposal [CA 8]
NCSD should have a centralised securities database with relevant data on
Issuers, securities and Corporate Actions.
Proposal [CA 9]
Issuers and Issuing Agents should have access to enter data on upcoming
Corporate Actions.
Dependencies and implications
The participants would prefer to reduce manual work and to receive
information on Corporate Actions in a standardised form and from one
reliable source. For this purpose NCSD would provide a centralised securities
database for NCSD participants. This securities database would have
information on all NCSD Issuers, all securities as well as all Corporate
Actions, both ongoing and historical data.
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5 Corporate Actions
It should be noted that chapter 5 covers Corporate Actions related to different
types of instruments such as equities, fixed income instruments and certain
derivatives. Fixed income (debt) instruments include both bonds and money
market instruments. In this context derivatives refer to securities which value
depends on an underlying asset such as a share, a bond or an index and which
are registered in the CSD system at the time. This should not, anyway, set any
limitation on the scope of future CSD services.
Any unique features or special requirements due to the type of the instrument
or the Corporate Action have been highlighted. If no special remarks are
made the description and proposal should be considered to be general.
5.1 General objectives
Our general harmonisation objectives within the Corporate Action area are:
• To streamline the processing of Corporate Actions in the Nordic
region; a harmonised way of processing would be beneficial both for
local, Nordic and international counterparties
• To enhance direct relation with the Issuers and provide high quality
services for the Issuers
• To strengthen the role of the Issuing Agents; harmonise the
responsibilities and provide system support
• To provide the market with timely and reliable Corporate Action
information
• Implement the ISO 15022/20022 standard where possible and where
not possible use a Nordic standard (instead of country specific
formats)
• To create a Corporate Action environment characterised by
automation and STP, eliminating manual work and hence reduce
operational risk
• Integrate Corporate Action transactions with settlement process when
possible to enable more efficient use of securities and liquidity
• Promote the use of standards being developed on a European level,
especially the ECSDA Corporate Action standards.
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We aim to achieve a harmonised business model for Corporate Actions in the
Nordic countries. We base the Nordic Corporate Action model on four
cornerstones: 1. direct relation with the Issuers 2. harmonised Corporate
Action processes and schedules 3. Corporate Action transactions processed in
the settlement engine and 4. standardised messaging and a database service
for Corporate Action and securities data. These would be supported both by a
flexible account structure and by flexible and modular system.
In the Nordic Corporate Action model the CSD core functions would include
those services and processes that can be produced in the most efficient way as
central CSD functions. Efficient core services enable the participants to
concentrate on value-added services which can be based on the CSD core.
Single systems and service interfaces also enable the participants to
streamline the system connections. CSD could also offer additional standard
services attached to the accounts to the participants i.e. the participants
would, at their choice, outsource some of their services to the CSD. This
would only be done if there is demand from the participants and economies of
scale can be reached.
Dependencies
The Corporate Action Working Group has addressed a number of issues
related to defining a Nordic Corporate Action Model that are dependent upon
the participant, account, settlement or legal structure of the CSD model.
Some of these issues are dealt with in this Consultation Paper in the structural
issues. Some will be analysed in the forthcoming more detailed studies, such
as implementing the Issuing Agent role in Finland, automatic claim
functionality and update of pending transactions in the settlement engine and
multi-currency handling.
There are also dependencies and implications to Nordic Corporate Action
market practises and to stock exchange regulation. Further analyses on
Corporate Action timelines, key dates and process descriptions require close
cooperation with market participants and stock exchanges.
Issuers will encounter implications especially in the areas of Corporate
Action notifications, payment process, harmonised Corporate Action
timelines and the account structure. The aim is to provide high-quality,
harmonised services and standardised Issuer processes. This would bring
page 31(62)

about simplified and automated processes but may also create new or
changed requirements to Issuers.
5.2 Core CSD Corporate Action services
CSD core services should include the processing of Corporate Actions
transactions – both securities and cash - in its systems to the investor accounts
and to intermediary accounts at CSD level. The Account Operators/Nominees
should take care of the further processing of the Corporate Action to the end
investors when necessary. This means that Corporate Action processing to
nominee registered holders should not be part of CSD core services.
The securities and cash transactions should be created in the Corporate
Action system and processed in the Settlement system as Corporate Action
instructions. For cash payments the actual credit to end investors’ cash
accounts is not performed by the CSD, instead the CSD creates a file of
payment instructions. The settlement process can use both Central Bank
money and commercial bank money.
The processing of Corporate Actions at CSD level includes also income
payments, i.e. dividends, interest on bonds, any net value payments on
maturing covered warrants and other yield or return payments on investment.
This would imply that some other related processing such as tax withholding
and reporting to the authorities would be dealt with at CSD level.
Proposal [CA 10]
Corporate Action transactions should be processed to the investor accounts
and to the intermediary accounts by the CSD.
These issues will be further dealt with in the following sections followed by
some examples.
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5.3 Definition of key dates and entitlements
5.3.1 Key dates
In relation to Corporate Action processing, the definition and usage of
different key dates are crucial to achieve harmonisation and efficient
transaction management. Hence, it is our aim to implement a common
definition and usage of ex date, record date and payment date. It is also
important that the definitions of these dates are in line with the current work
by ECSDA in this area on European level. We realise that there are also other
important Corporate Action dates that are relevant for specific Corporate
Actions and/or instrument types. The above three dates are however the most
common ones.
Proposal [CA 11]
There should be common definitions of ex-date, record date and payment
date.
To further enhance the transparency in the Nordic markets, one important
feature is to define different attributes in a unified way to eliminate the risk of
misunderstanding in Corporate Action related messages. Also, in order to
eliminate any uncertainty related to trading and transaction management, it is
crucial to have clear cut definitions of those dates.
We propose the following definitions:
Ex-date – the date, defined as start of business day, when the security is
traded without entitlement.
Record date – the date, defined as close of business day, when determining
the eligible holders to receive the entitlement.
Payment date – the date when the entitlement in the local currency of the
Issuer/issuing currency is distributed on the participant level.
Some beneficial holders may ask to have the entitlement exchanged to
another currency. The time schedule for a distribution in another currency
depends on the foreign exchange transaction.
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Dates are fundamental in Corporate Action calculations and processing of
entitlements, and crucial in pricing of securities in the trading. There are two
important areas to be harmonised: common definitions and common
harmonised relations between the different dates.
On the general level, the proposal would be to have one general rule
governing the relationship between the ex-date and the record date. However,
the forthcoming more detailed Corporate Action descriptions may lead to the
conclusion that, for different reason, this general rule should not apply to
certain Corporate Action types or instruments types. Exceptions may be
necessary e.g. due to national regulation or due to the nature of some
instrument types.
Based on the fact that all Nordic countries apply a T+3 settlement schedule,
the general rule governing the relationship between the ex-date and the record
date should be that ex-date should be two days prior to record date.
In more general, if the settlement schedule is expressed as T+x, the ex-date
should always be n days prior to the record date, where n = x-1.
Proposal [CA 12]
As a general rule, the ex-date should always be n days prior to the record
date, where n is one day less than the applied settlement schedule.
The payment date, i.e. – the date when the entitlement in the local currency of
the Issuer/issuing currency is distributed on the participant level should occur
as soon as possible after the record date. However, there are differences
between Corporate Action types in when the soonest possible payment date
can be. For example, there may be certain processing, such as collection of
taxation data that needs to take place between record date and payment date.
These differences need to be explored further. The overall aim is to distribute
the entitlements as soon as possible after record date. However, the aim is
that the same types of Corporate Actions have unified payment schedules.
Proposal [CA 13]
The Payment date should occur as soon as possible after the record date.
The overall aim should be to have one harmonised time schedule between the
key dates for all Corporate Actions, although it can already now be concluded
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that the relationship, especially record date and the payment date, will be
different. The reason for the differences lies in the art and complexity of the
Corporate Actions. For example, payment date for a split will be the day after
record date whereas the payment date for a dividend payment might be three
days after record date due to tax reporting. From a market perspective, the
crucial relationship would be between ex-date and record date, and this
relation should be harmonised for all Corporate Actions.
In terms of all three dates, the relationship should be harmonised for each
corporate action type, i.e. split, dividend, rights offer etc.
Proposal [CA 14]
The time schedules between the key dates should be harmonised for each
Corporate Action type.
5.3.2 Determination of entitlement
Background, drivers and requirements
During the lifecycle of an instrument there are usually one or more Corporate
Actions that result in a distribution or a reorganisation. There are for example
dividend payments, rights offers, net value and interest (coupon) payments or
even partial redemptions reducing the face value of the instrument.
Corporate Action details are usually defined in the terms of the offer or a
right to perform certain functions is described in more general fashion in the
terms and conditions of the issue. An entitlement is the right to receive
securities, rights, cash or combination of these as a result of a Corporate
Action. Usually the underlying holding which gave rise to the entitlement is
unaffected but it is also possible that in the Corporate Action the underlying
security is replaced. The eligible holders of the entitlement are determined at
the close of business on record date. Generally the entitlements are paid at a
later date to the shareholders.
Determination of entitlement
As described in section 5.3.1 the ex date and the record date play a key role in
determining Corporate Action entitlements. In practice a trade executed prior
page 35(62)

to the ex date is traded with the right to entitlement. This is typically the case
for cash dividends when the T + 3 settlement cycle is applied. For some
instruments and/or Corporate Actions (e.g. interest payments for fixed
income instruments) there is no ex date. The entitlement is determined purely
on the holding on record date. Any unsettled trades are usually corrected after
the record date and entitlements are adjusted accordingly.
NCSD would always distribute entitlements to the accounts according to the
instructions received form the Issuer/Issuing Agent. Cash entitlements would
be processed through the settlement system, but there may be also
exceptional Corporate Actions where the cash amount is paid outside of the
settlement system.
5.4 Flow of Corporate Action data
Background, drivers and requirements
Today most of the data and information flows between Issuers, market
participants and CSDs is not STP, at times very manual and mainly in
proprietary standard messages that are fixed format service request messages
for Corporate Actions. The aim of NCSD is to enhance data flows in
international standard formats and when those are not applicable in standard
NCSD format. The aim is also to enhance data flows straight through in the
systems, provide interfaces for the Issuers to input data on new securities and
Corporate Actions and enable the usage of the data by participants in their
business processes in easily available electronic format.
In accordance with the ECSDA Corporate Action standards the aim is to
standardise the Issuer notification timelines. In addition NCSD also aims at
having standards for the minimum content of information for both
preliminary and confirmed Corporate Action information. These standards
may vary depending on instrument type or Corporate Action. Information on
a Corporate Action is considered to be confirmed once the Issuer has
officially made all relevant information (e.g. dates, ratios) as well as the terms
and conditions of the event public. Preliminary information usually consists
of limited information about an upcoming event which has been made public.
The aim is that NCSD participants would have all NCSD Issuer, securities
and Corporate Actions related information available in a centralised securities
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database. This would among other things reduce the time for members used
today in finding information from different sources and verifying possible
discrepancies in the information.
Proposal [CA 15]
The Corporate Action information flows between the Issuers and the
participants should be as automated as possible and delivered through the
NCSD system
Dependencies and implications
By standardising and making the notification process for Corporate Actions
more STP the market would greatly benefit from being more efficient, less
risky and more reliable. Participants would use less time on receiving detailed
and complete Corporate Action information as they do today.
Also in having more options in how to send transaction information and
Corporate Action instructions would allow participants to streamline their
operational Corporate Action processing. If e.g. received ISO standard
messages could be sent further to the NCSD without manual intervention this
would clearly reduce processing time for participants.
Standardisation and STP are the key elements that NCSD is driving for in all
of its processes. This can only be achieved in co-operation with all market
participants.
5.4.1 Corporate Action notifications
Background, drivers and requirements
The regulation on notifying the shareholders of Corporate Actions and their
timing is different depending on whether a company is a listed or an unlisted
company. For unlisted companies it is sometimes difficult to receive
Corporate Action information in a timely manner. At the moment information
is received through the stock exchanges, CSDs, different vendors, the Issuers
and Issuing Agents as well as from newspapers etc. There is an obvious
requirement that information on different Corporate Actions should be
available easily preferably through one source.
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Proposal [CA 16]
The timelines for Corporate Action notifications for all NCSD instruments
should be standardised.
Proposal [CA 17]
NCSD should have set data requirements for preliminary and confirmed
Corporate Action notifications.
Dependencies and implications
NCSD should have standard timelines for all Corporate Action notifications
from the Issuers on all instruments. In addition there should be set standards
on the minimum content for the Corporate Action notification. In practice this
would mean that Issuers or Issuing Agents would be required to send
information (preliminary and confirmed information) to the CSD system by a
set timeline. The system would advise the Issuer or Issuing Agent what
information is required for pre-advices and confirmed notifications. Once this
information has been keyed in by the Issuer it would become available to
NCSD participants.
It would be up to the participant to choose whether he would view the
information over an interface or whether he would select to receive all
Corporate Action information as messages for example in ISO or other
format.
By standardising the notification timelines for all Corporate Actions the
Nordic market would become more efficient and more attractive for
investors. In addition the standardisation would reduce risk and manual work
for market participants as all information would be available through one
source, the NCSD database.
Proposal [CA 18]
The Issuer/Issuing Agent should always verify every process to NCSD prior
to the record date.
Proposal [CA 19]
Participants should have the possibility to choose to receive Corporate
page 38(62)

Action related notifications from NCSD as standard electronic messages or
to view Corporate Action information trough an interface.
Participants should be able to select whether they would like to receive
automated (e.g. ISO) notification messages from NCSD on Corporate
Actions. The selection could e.g. be according to instrument type,
information type, Corporate Action type or other criteria. The notification
process for Corporate Actions should be STP wherever possible. For certain
instruments or Corporate Action types there may have to be a manual
intervention.
5.4.2 Corporate Action instructions
For voluntary Corporate Actions owner registered holders would always send
their instruction to the Issuing Agent. The implementation of the Corporate
Action ISO standards parallel to the proprietary messages would allow
Account Operators/Nominees to forward instructions received from clients
directly to NCSD. This usually applies for nominee accounts for foreign
shareholders. These Corporate Action instructions could be sent one by one
or on an aggregated account level.
These instructions would be kept on hold in the NCSD system until the
Issuing Agent either accepts or rejects them. NCSD would not process these
Corporate Actions instructions.
The Account Operators/Nominees could receive status notifications in ISO
format from the NCSD system for their instructions if they have subscribed
for this service.
Proposal [CA 20]
Corporate Action instructions from owner registered holders should always
be delivered to the Issuing Agent. Corporate Action instructions from
nominee registered holders should be delivered by Account Operators /
Nominees in electronic format to the NCSD system for further processing by
the Issuing Agent.
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5.5 Processing of Corporate Actions
5.5.1 Issuance of securities
In this chapter the issuance of securities is considered as the initial issuance
of new securities such as a bond issue or a share issue in an initial public
offering at NCSD. For example the issuance of new securities in relation with
a Corporate Action such as a split is not applicable to this chapter.
The Issuer should appoint an Issuing Agent for the initial issuance of
securities.
Equities always require registering into the trade register before the issuance
may take place. This is applicable also for convertible bonds. Fixed
income/debt instruments can be issued without prior registration. The
issuance of equities is typically done as FoP transactions where investors
receive securities from the Issuer without payment and the security is
available for transfers in the secondary market immediately after the delivery.
For fixed income securities the issuance is mainly performed as DvP
transactions. It must be noted that primary market instructions can be settled
in either FoP or DvP.
Upon issuance the whole amount of the new issue is transferred automatically
into the possession of the Issuer/Issuing Agent. The IA should be entitled to
deliver the securities transferred into its possession immediately on the
secondary market. Instructions related to deliveries on both primary and
secondary markets should however be able to be entered into the system
before the effective date provided that minimum amount of the security’s
information is available in the system.
Issuance related settlement instructions, if they are settled DvP, would require
matching like normal settlement instructions.
Proposal [CA 21]
The Issuer should appoint an Issuing Agent for the initial issuance of
securities. This proposal is not applicable e.g. to mandatory Corporate
Actions that might be considered as issuance of securities.
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Proposal [CA 22]
Issuing Agents should deliver primary market instructions into the CSD
system.
Proposal [CA 23]
Participants should be able to deliver primary and secondary market
instructions into the CSD system before the issue date.
The issuance of derivative instruments does not require prior registration into
the trade register. The Issuer/Issuing Agent is required to provide CSD with
the relevant details and information including the terms and conditions of the
issue. Once the documentation has been received and verified, CSD would
issue the derivative securities.
The need for verification depends on the instrument type. For example issues
of securities such as Exchange Traded Fund (ETF) units may require more
time for reviewing the terms and other documents. Also in general, CSD
should always have the right to decide on a verification period for any
instrument to ensure that the new issue is suitable for the CSD system.
Same day issuance
Background, drivers and requirements
At present there is a lot of manual work involved in the issuance process of
different instruments. NCSD is aiming to minimise the manual work for all
parties involved in order to eliminate risks and also to enhance the whole
issuance process. For some instruments this would result in the possibility of
same day issuance.
Dependencies and implications
The details of the issue always have to be completed before the actual
issuance may take place. This process usually takes longer for e.g. bonds than
for Money Market Instruments (MMIs) due to the complexity of the
instrument and therefore also the time required to verify the details of the
issue may differ between the instrument types and be presumably longer for
bonds. Currently the time reserved by the CSD for handling the application is
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approx 1-2 weeks. For MMIs the aim is to promote high STP and due to the
simplicity of the instrument the aim should be to enable same day issuance.
NCSD should anyway have the possibility to prevent the same day issuance
of certain new MMI if smooth running of the system would be at risk.
Proposal [CA 24]
The NCSD system should enable same day issuance for Money Market
Instruments with automatic verification.
By providing the Issuers/Issuing Agents the possibility to issue securities by
accessing the NCSD interface would allow them to provide the information
on the upcoming issue in one or more batches. Once the Issuer/Issuing Agent
has provided sufficient or complete details of the issue the system would
automatically generate an ISIN-code. ISIN-codes should be used as the
primary identification of all securities in the NCSD system.
All incomplete information (including information on ISIN code) would
remain confidential until it is officially published by the Issuer/Issuing Agent.
Proposal [CA 25]
ISIN codes should be used as primary identification of a security in the
NCSD system.
Proposal [CA 26]
An ISIN code may be allocated to the Issuer/Issuing Agent before all details
of the Corporate Action have been disclosed. The information about the
ISIN code would remain confidential until the Issuer/Issuing Agent gives
permission to NCSD to publish it.
In the following sections we have defined four different Corporate Action
categories. These definitions are also used by ECSDA. The purpose of
defining the different Corporate Actions is to define a commonly understood
terminology that will also help the future work of preparing the service
descriptions and detailed requirements for the Corporate Action processes.
page 42(62)

5.5.2 Mandatory distributions without options
Mandatory distributions without options are Corporate Actions where the
CSD automatically distributes entitlements or proceeds to the entitled
holders, without any action required form these holders. The distribution is
performed on CSD level according to instructions received from the
Issuer/Issuing Agent. Bonus issues, splits 1 , cash dividends and
interest/redemption payments for fixed income instruments are typical
examples of mandatory distributions without options. These Corporate
Actions are more commonly known as mandatory Corporate Actions.
Example: Redemption payments for fixed income instruments
A redemption payment is a partial return of the instruments principal where
the Issuer repays, typically according to a predefined payment plan, a
percentage value of the nominal to the holder of the note. Due to the
payment, the nominal value of the note decreases and this is shown as a
change in the nominal value of investors’ holding. The number of units held
by the investor however remains the same.
Proposal [CA 27]
NCSD should process mandatory distributions without options and
mandatory reorganisations without options automatically according to the
instructions received from the Issuer/Issuing Agent.
5.5.3 Mandatory reorganisation without options
Mandatory reorganisations without options are Corporate Actions where no
action is required from the security holder. The Corporate Action is
automatically performed on the CSD level according to instructions received
from the Issuer/Issuing Agent. A typical example of a reorganisation without
an option is a merger. These types of corporate actions are more commonly
known as mandatory Corporate Actions.
1 If a split is performed as a net payment without a change in the ISIN code it is considered to be a
mandatory distribution without options. If the split is performed as a gross payment where the splitted
amount is credited under a new ISIN code and the old ISIN code will be abolished, then it is
considered to be a mandatory reorganisation without options.
page 43(62)

5.5.4 Mandatory distributions with options
Mandatory distributions with options are Corporate Actions where the
security holder is required to choose from two or several options that are
available. The Corporate Action itself is mandatory. A typical mandatory
distribution with an option is an optional dividend payment. These Corporate
Actions are commonly seen as voluntary Corporate Actions because there is
the need for the investor to elect from a preferred option. The Issuing Agent
role would be applicable to these types of Corporate Actions.
Example: Optional dividends
In an optional dividend payment the shareholder has to choose whether to
receive the dividend in cash or securities. The default action for this type of
Corporate Action is usually cash, meaning that if the shareholder does not
send an election instruction he/she will receive the dividend in cash.
For these types of Corporate Actions the Issuing Agent would have to notify
the eligible shareholders of the different options and the default action.
Usually there are two options: cash or securities. The cash option is typically
set as default action by the Issuer so that the amount of responses can be
reduced. Therefore only those shareholders who select to receive the dividend
payment in securities send an election instruction to the Issuing Agent.
Owner registered shareholders would have to send an election instruction to
the Issuing Agent by a given deadline set by the Issuing Agent. The Issuing
Agent would then key into the NCSD system the selected option.
For nominee registered holdings the Account Operators/Nominees would
collect the instructions for their clients and send them in ISO format to the
CSD system. The selected option to receive securities would be automatically
updated in the CSD system. The Issuing Agent would receive the information
about the selected options for nominee account holders automatically from
the CSD system.
5.5.5 Mandatory reorganisations with options
Reorganisations are Corporate Actions where a security is replaced by one or
more securities or cash or a combination of both. Mandatory reorganisations
with options are Corporate Actions where the security holder is required to
page 44(62)

choose from two or several options that are available. The Corporate Action
itself is mandatory. An example of a mandatory reorganisation with an option
is a tender offer.
The action required from the shareholder is the same as for mandatory
distributions with options. The shareholder is able to select from different
options that are available to him or use the default action. These Corporate
Actions are also categorised more generally as voluntary Corporate Actions.
The Issuing Agent role would be applicable for these types of Corporate
Actions.
Proposal [CA 28]
For owner registered holdings elections on mandatory distributions with
options and mandatory reorganisations with options should be instructed
directly to the Issuing Agent by the end investor.
Proposal [CA 29]
For nominee registered holdings elections on mandatory distributions with
options and mandatory reorganisations with options should be instructed
directly to the CSD system in ISO format by the Account Operator /
Nominee for approval by the Issuing Agent.
Proposal [CA 30]
The NCSD system should automatically receive and store the election
instruction for nominee registered holdings for both mandatory distributions
with options and mandatory reorganisations with options once it has been
provided in ISO format. The information would be available to the Issuing
Agent.
5.5.6 Voluntary reorganisations with options
The participation in voluntary reorganisations with options is of course
always voluntary. If the shareholder likes to take part in the Corporate Action
he/she usually would be able to choose from several available options. A
typical voluntary reorganisation with options is a tender offer or a rights
offer, although SWIFT has raised the discussion that rights offers should in
page 45(62)

fact be treated as two separate events: the distribution of rights should be
considered as a mandatory distribution without options and the subscription
offer should be considered as a voluntary reorganisation with options. From
the Issuers point of view a rights offer is only one Corporate Action, but from
an operational point of view the split into two separate Corporate Actions
would mainly effect the Corporate Action notifications towards shareholders.
On a CSD level a rights offer is processed as two events already today. These
types of Corporate Actions are commonly known as voluntary Corporate
Actions.
Example: Rights offer
In a typical rights offer shareholders receive rights that are transferable for a
certain period according to the terms of the rights offer. The entitlement to
rights is determined at the close of business on the record date. The rights are
usually distributed to the shareholders’ accounts at the beginning of the next
business day. The distribution of rights would be performed by NCSD
automatically according to the instructions received from the Issuer/Issuing
Agent. Any open trades or late settlements would automatically create a
market claim in the NCSD settlement system. For market claims please see
chapter 5.5.7.
The shareholder who is entitled to the rights has different options from which
he/she can choose from. He can sell the rights, take up the rights and
subscribe for new shares or let the rights laps and become worthless. It may
also be possible to buy rights from the market. The transferability of the
rights is always subject to the terms of the offer and therefore not always
available. It should be noted that NCSD is not involved in the process of
trading with rights.
The Issuing Agent(s) would be in charge of notifying all shareholders who
are eligible to participate in the rights offer about the terms and conditions of
the offer as well as of the relevant dates (e.g. response deadline). For nominee
registered holdings Account Operators/Nominees would send out
notifications to their clients. As described in chapter 5.3 Account
Operators/Nominees would also receive and collect participation instructions
for intermediary accounts/nominee registered holdings and send them to
NCSD (in ISO format).
page 46(62)

Once the distribution of the rights to the accounts has been completed
investors would be able to trade the rights if they have been listed on the
stock exchange or send instructions to subscribe for shares. Any sell and
purchase instructions for rights would be normal trading instructions.
If the investor liked to subscribe for new shares he would have to send an
instruction and the subscription payment to the Issuing Agent (investor
accounts) according to the instructions and timelines he has received earlier
from the Issuing Agent. The Issuing Agent would then reconcile the
instruction and the subscription payment and process the subscription in the
NCSD system by accessing it through an interface. As a result the rights and
the cash would be removed from the shareholder’s accounts and he/she would
be credited with new interim shares.
For nominee holdings the Account Operator/Nominee could send the
subscription instruction in ISO format to NCSD. The subscription payment
would have to be credited to the Issuing Agent. The ISO formatted instruction
would be available in the NCSD system for the Issuing Agent to process.
This would be done once the Issuing Agent has reconciled the instruction and
the cash as described in the previous chapter.
After the offer period the Issuing Agent would reconcile all subscriptions,
unused rights and the subscription payments. Once the reconcilement process
has been completed and everything has matched the Issuer would be able to
register the increase of the share capital in the trade register. Once this has
been completed NCSD would according to instructions received from the
Issuing Agent replace the interim shares and credit the accounts with the
actual shares. NCSD would also remove any unused rights from the accounts.
Proposal [CA 31]
For owner registered holdings all voluntary reorganisations with options
should be instructed directly to the Issuing Agent by the end investor.
Proposal [CA 32]
For nominee registered holdings all voluntary reorganisations with options
should be instructed directly to the CSD system in ISO format by the
Account Operator / Nominee for approval by the Issuing Agent.
page 47(62)

5.5.7 Automated market claims related to Corporate Actions
Background, drivers and requirements section includes information on market
claims presented in the C&S Consultation Paper, p. 67ff. The following
section covers specific requirements related to Corporate Actions.
Background, drivers and requirements
In the Consultation Paper for Clearing and Settlement p.67ff the suggested
matching on intended settlement date, processing of Corporate Actions in the
settlement process, linking of instructions and the recycling of instructions
enables the possibility to automate market claims on Corporate Actions.
Automated market claim functionality will enable participants to reduce
manual work related to market claims and operational risk involved in the
claims process.
When an instructions fails settlement on intended settlement date in
conjunction with a Corporate Action a claim occurs. Automated market claim
functionality should when recycling a failed instruction automatically create a
market claim. The market claim should be new matched instructions, a
delivery instruction on behalf of the failing delivering participant and a
receive instruction on behalf of the receiving participant. The market claim
instructions should at the same time be linked to the original failed
instructions with the condition not to settle before the original instruction.
Participants should be able to treat the market claim instructions as any other
instructions, i.e. if both participants agree they can cancel the market claim
instruction.
For example, if participant A’s delivery to participant B fails to settle in
conjunction with a dividend payment a market claim would occur where
participant A should pay the dividend to participant B. In an automated
process when the failing instruction is recycled to the next settlement day a
matched payment instructions, where participant A should pay participant B,
is created by the system.
Proposal [CA 33]
There should be functionality for automated handling of market claims
related to Corporate Actions.
page 48(62)

The automated market claims functionality should apply for all Corporate
Actions. The market claims should result in new matched instructions that are
settled in the settlement process. This will enable participants to handle the
market claims as any instruction. However the market claims instructions
should be linked to the original instruction (that resulted in the market claim)
and it should not be allowed to settle before the original instruction has
settled.
Dependencies and implications
Automated market claims functionality requires the possibility to process
Corporate Actions in the settlement process, to recycle instructions, to match
instructions on intended settlement date and to link instructions.
Corporate Actions requirements
The above described functionality is in line with the ECSDA report on
Market claim standards which will be published in spring 2006.
Market claim processing is based on ensuring that an entitled party receives
all Corporate Action benefits that it should receive. The trigger to issue a
market claim depends on the Corporate Action dates that determine the right
to entitlement. Market claims associated with fixed income cash distributions
should be raised if the intended settlement date is on or before the record date
but the actual settlement date is after record date. For all other instruments
and types of distributions claims should be raised either if a) trade date is
before ex date and actual settlement date is after record date or b) trade date is
on or after ex date and actual settlement date is on or before record date.
5.5.8 General meeting and proxy voting
Background, drivers and requirements
Once a company has published information on an upcoming General Meeting
(GM) the shareholder needs to complete two steps in order to be able to
participate and vote at that meeting. The first step is to have the ownership
registered in the company’s shareholder list and the second step is to notify
the company of attendance.
page 49(62)

Depending on the account type step one may be completed without any
action needed from the shareholder. This is the situation for owner accounts.
Holdings on these accounts are always available und updated in the
shareholder register. For intermediary accounts the shareholder has to reregister
the holding and disclose his name and ownership in the temporary
shareholder list.
Currently in all Nordic countries nominee registered holdings have to be
disclosed for general meeting purposes. The disclosure is done by reregistering
nominee holdings in the name of the shareholder on or around the
record date. Depending on the country the information on the shareholders
will become public for the Issuer and/or for the public once the temporary
shareholder list of the GM has been created. This is usually done a few days
prior to the meeting date at the latest. Most Nordic CSDs are responsible for
the creation of the shareholders list.
Most of the re-registering and voting instructions for nominee shareholders
are sent by using ISO standards. These instructions are usually sent through a
large chain of intermediaries to the local Account Operator/nominee
(custodian bank). The information on the beneficial owners is then further
delivered to the CSD for the purpose of re-registration.
Once the re-registration process is completed the Account Operator/nominee
usually advices the Issuer of the attendance on the shareholders’ behalf. A
majority of foreign shareholders do not attend to the GM themselves; instead
they have someone representing them at the GM.
Proposal [CA 34]
NCSD should provide Account Operators/Nominees standardised ways for
providing re-registration instructions to the CSDs in electronic format. The
use of ISO standards for this purpose should be introduced.
Proposal [CA 35]
If appointed by the Issuer NCSD should be able to receive standard
electronic notices of attendance instructions of nominee shareholders.
page 50(62)

Dependencies and implications
In order to make the re-registration processing for local Account
Operators/nominees easier NCSD should provide standardised ways for the
delivery of the information to the CSD. The implementation of ISO standards
as well as other formats/tools for this purpose would help and speed up the
further delivery of the information to the CSD.
In addition it has been discussed that the CSDs should be able to receive also
the investors’ notices of attendances in electronic format. The information for
this purpose is to a large extent the same as given for re-registration purposes.
The investors’ proxy and other documents related to e.g. representative would
still be handled by the Account Operators/Nominees. This would eliminate
double processing of the same investor information for intermediary accounts
and reduce manual work in the process. This request would require that the
Issuers would appoint NCSD as an official notice of attendance recipient for
nominee holders.
5.6 Corporate Action Payments
The first two sections of this chapter repeat the basis for the relationship
between the trade settlement and Corporate Action transaction as stated in the
Clearing and Settlement Consultation Paper. Those readers that are familiar
with that document could proceed to section 5.6.3 where additional proposals
related to the Corporate Action area are stated.
5.6.1 Trade settlement and Corporate Action settlement
Background, drivers and requirements
Functionality should be provided to handle distribution of payments related to
Corporate Actions, both by using payment providers or settlement banks and
by using third party clearing systems / payment systems. However, payment
capacity checks should always be made within the CSD, in order to secure
that investors are treated equally in case of lacking payment capacity of
Issuer or agent of Issuer.
page 51(62)

Higher efficiency is obtained if the Corporate Action instructions, both
regarding payments and securities, are integrated with settlement of trade
related instructions.
That the payment capacity is checked within the CSD will result in net
payment requirements for participants. By processing Corporate Action
instructions with trade related instructions will enable for example settlement
instructions regarding new issues, through linking, can be processed
simultaneously as interest and redemptions. This will give the possibility to
have functionality so that an Issuer can not issue new securities before
fulfilling the total obligation of interest and redemption payments during a
settlement day.
Proposal [ID: 7A]
Corporate Action related instructions should be processed in the same
process as trade related instructions
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 7A]
In processing Corporate Action related instructions in the same process as
trade related instructions a higher efficiency is obtained. This also enables the
two following proposals, to distribute payments and to control the payment
capacity within the CSD.
Proposal [ID: 7B]
Participants should have the option to receive Corporate Action related
payments within CSD system or via external payment systems
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 7B]
The participant should be able to choose method when receiving payments
for different Corporate Actions. Either the participant can choose to receive
the payments within the CSD system and then distribute the payments to its
clients or the participant can choose a third party payment system for
distributing the payments to its clients.
page 52(62)

Proposal [ID: 7C]
Check for payment capacity for Corporate Actions should be done within
CSD system
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 7C]
To ensure that all participants and its clients are treated equally in a situation
where an Issuer or agent of Issuer is lacking payment capacity the control
should be done on the payment accounts within the CSD system.
Dependencies and implications
Due to the complexity of different Corporate Actions and due to different
market practices relating to trading of securities which are close to a
Corporate Action event, the integration between Corporate Actions
instructions and settlement instructions may not be achievable.
The functionality for simultaneous instruction processing in conjunction with
processing Corporate Actions in the settlement process will enable
participants to be faced with a net payment requirement.
In processing some Corporate Actions it is vital that all instruction or none is
settled, this require the conditional linking functionality. This also enables the
possibility to automate functionality for market claims for Corporate Actions
in the settlement process.
5.6.2 Linking and prioritisation functionality
Background, drivers and requirements
Linking functionality enables participants to link instructions, for example
insure that securities from a specific receive instruction is used for a specific
delivery, i.e. “deliver upon receipt”. This would be a link where one
instruction triggers another. However, there may be other types of conditional
linking as well, for example stating that either none or all instructions should
settle. These types of conditional links bring about restrictions in the
settlement process, resulting in it being more complex and less efficient. Also
if participants are allowed to set priorities on individual instructions, it would
have a negative effect on efficiency. The process would in these instances not
maximise the settlement ratio but the priority weighted settlement ratio given
be the conditions. Hence, there are reasons to restrict the usage of linkages
and individual priorities on instructions.
page 53(62)

For the CSD system, a linking functionality is important for example when
processing Corporate Actions. In such cases it might be a requirement that all
or nothing of a particular Corporate Action, for example a payment, should
be processed. This may be obtained by viewing the payments, related from
the Corporate Action, as settlement instructions and linking them, requiring
that all or none should settle.
Proposal [ID: 5A]
Linking of instructions
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 5A]
The system should have functionality to link instructions, requiring that all or
none of a set of settlement instructions should settle and that the settlement of
one instruction should trigger another instruction, i.e. “deliver upon receipt”.
However, since the linking of instructions may reduce the efficiency in the
settlement process, only some functionality for linking should be allowed, for
example under conditions as listed below.
“Trigger linking – Deliver upon receipt”
Participants should be able to set “trigger linking”, such links that the
settlement of one instruction triggers another. This type of linking
should be allowed for certain suitable types of instructions.
“Conditional linking”
The CSD system can set “conditional linking”, such types of linking
of instructions should be for securities and payment instructions
stemming from Corporate Actions and market claims.
Proposal [ID: 5B]
Prioritisation of instructions should only be done by the CSD system
Reference: High level description, Nordic clearing and settlement model: Proposal [ID: 5B]
In general, all instructions should be given the same priority by participants.
The sequencing of settlement instructions should be determined within the
settlement process in the CSD system.
page 54(62)

Dependencies and implications
Automated market claims for Corporate Actions would use the conditional
linking functionality by linking the market claims to the instruction causing
the claim.
Processing Corporate Action related instructions in the settlement process
would also use the conditional linking functionality.
5.6.3 Corporate Action related addition to the payment model
Background, drivers and requirements
Within the Corporate Action area, several kind of different payments are
handled by CSDs, for example dividends, redemptions, net value payments
and interest payments. There are today different processes for distributing
cash to account holders between the Nordic markets even though all markets
are characterised with an end investor account structure combined with a
nominee structure. To some extent, even within the same market, the
processes might differ between different types of instruments.
In order to achieve highest possible efficiency in the Nordic region, Nordic
CSDs should have the same way of processing Corporate Action related
payment. In practice, the model would mean benefits for both the participants
as well as for the Issuer. The former will gain in terms of netting possibilities
between for example received Corporate Action payments and payment
obligation related to trade settlement. Issuers will benefit as the usage of
payment provider gives the Issuer the flexibility to agree on the exact terms
regarding the availability of funds (pledging of instruments, credit line etc.)
As a regulatory framework, there is also a standard set by ECSDA stating that
for all instruments held within a SSS (securities settlement system), all cash
related to Corporate Actions (and market claims) should have the default of
being distributed within the SSS.
Proposal [CA 36]
NCSD should have one unified process for distributing Corporate Action
related payments.
page 55(62)

Although a unified process, the participant should be able to choose method
when receiving payments for different Corporate Actions. Either the
participant can choose to receive the payments within the CSD system and
then credit the payments to its clients or the participant can choose an
external payment system for crediting the payments to its clients.
As a general guideline, Corporate Action payments should be in the Issuer’s
local currency or the issuance currency (e.g. for debt instruments issued by a
Swedish company and denominated in Euro, the interest and redemption
payment should be in Euro). Another example of the possibility created by
the account structure would be that of a Finnish company with shareholders
in different Nordic countries linked via the Nordic CSDs.
Today, dual listed companies have different kind of agreements with Nordic
CSDs and in some cases they need to take care of the dividend payment in
relation to the different CSDs involved. The agreement might also include the
exchange into the foreign currency. In the future model, all holdings in that
company will be registered in the Finnish CSD and hence, the payment of the
total dividend will be handled within that local CSD. This means that this
Issuer only needs to make sure that needed payment capacity in Euro is
available.
Proposal [CA 37]
Corporate Action payments should be in the Issuer’s local currency or
issuance currency.
However, there might be cases where an Issuer, in accordance with the terms
and conditions, would like pay out the interest payment in another currency
that is neither the Issuers local currency nor the issuance currency. The above
stated proposal should be viewed as a general rule.
A result of the proposal will be that end investors that do not have a cash
account in the relevant currency or by some other reason have chosen to
receive the payment in another currency, would need exchange services. The
payment date might differ for those compared to end investors with a cash
account in the local currency of the Issuer/issuance currency.
page 56(62)

A consequence of integrating the Corporate Action payment into the
settlement process will be that those Issuers that are not also clearing
participants would need to assign a clearing participant (“Issuer payment
provider”) in order to create the payment capacity in the settlement process.
Clearing participants are banks or other financial institutions. However, the
model should provide flexibility for the Issuer to agree with the assigned
clearing participant the exact detail on how and when the funds should be
available.
On the payment date and in relation to the CSD, the responsibility will rest on
the payment provider to have the necessary payment capacity available. The
exact deadlines and number of payments processing will be set in the detailed
requirement work.
page 57(62)

6 Appendix
6.1 Definitions and abbreviations
Account Operator/Nominee The term is used to define a participant role responsible for
holding intermediary accounts
ANNA Association of National Numbering Agencies. Registration and
maintenance authority of ISO standard 6166, ISIN codes. All
Nordic CSDs are members of ANNA.
Cash account Investor’s or intermediary’s bank account that is linked to a
securities account with NCSD. There may be several cash
accounts linked to one securities account.
Corporate Action Corporate Actions cover all processes which arise from the
announcement by an Issuer or his agent that an event affecting
holders of the relevant security is to take place up until the
moment when all effects of that event are complete. (ECSDA
definition)
ECSA European Credit Sector Associations. The ECSA’s are: The
European Association of Cooperative Banks (EACB), the
European Savings Banks Group (ESBG) and the Fédération
Bancaire Européenne (FBE).
ECSDA European Central Securities Depositories Association
Effective date The first date as of which securities settle as affected by a
Corporate Actions in question.
Ex-date The date as of which a security is traded without entitlement.
Giovannini Report Second Report on EU Clearing and Settlement Arrangements by
the Giovannini Group. The report identifies 15 barriers to an
integrated EU clearing and settlement environment.
Income payment A distribution of cash or securities from an Issuer to the holders of
a security. The holders eligible to receive the distribution are
determined on a specific date called the record date. The
underlying holding, which gave rise to the distribution, is usually
unchanged by the event.
page 58(62)

Interim shares A share that an investor has subscribed but that has not been
registered in the Trade Register. An interim share does not have
voting rights.
Intermediary account The account holder is regarded not as the owner but as an
intermediary who has securities credited to the account on behalf
of its customer (one or many). (White Paper)
Investor account The account holder is regarded as the owner of the securities
which are credited to the account. (White Paper)
Mandatory CA Events that occur without any action on the part of the holders of
the security.
Nominee registered holding The ownership of securities is registered in the nominee’s name
instead of end investor(s) in the shareholder or respective holder
list. See also intermediary account.
Owner registered holding The ownership of securities is registered in the end investor’s
name in the shareholder or respective holder list. See also investor
account.
Primary CSD Either the issuer CSD of a security or the CSD, within NCSD,
which has registered a security in the CSD system of NCSD,
but where the issuer CSD an external CSD outside of the
NCSD group.
Record date The date established by an Issuer for the purpose of determining
the holders who are entitled to receive an entitlement.
Rights issue The issuing of rights, to existing shareholders of a security, to buy
a proportional number of new securities at a given price within a
fixed period.
Split The dividing of a company’s existing stock into multiple shares.
E.g. in a 2 for 1 split, each stockholder receives an additional
share for each share he/she holds.
SSS Securities settlement system
STP Straight Through Processing
SWIFT Financial industry-owned co-operative that supplies messaging
services and interface software to financial institutions.
page 59(62)

Tender offer An offer to purchase some or all shareholders’ shares in a
corporation. The price offered is usually at a premium to the
market price.
Trade register A public register of corporations specified by law. Local
legislation defines what information and activities companies have
to enter into the Trade Register and what judicial effects these
entries have. These task of upkeeping these registers is with
Bolagsverket (SE), Patentti- ja Rekisterihallitus (FI),
Enhetsregisteret (NO) and Erhvervs- og Selskabsstyrelsen (DK).
Voluntary CA Events in which holders of a security need to act if the event is to
affect their holdings. The issuing company will usually inform all
security holders of the event that is about to take place.
page 60(62)

6.2 Appendix II – Working Group Participants
Participant list (attended at least one meeting):
Madeleine Hansson Alfred Berg
Søren Kvade Christiansen Danske Bank
Päivi Kuitunen Evli Bank
Björn Möller FöreningsSparbanken/Swedbank
Erja Häkkinen FöreningsSparbanken/Swedbank
Inger Lindström FöreningsSparbanken/Swedbank
Marie Lindström FöreningsSparbanken/Swedbank
Carina Liljegren-Thärning Handelsbanken
Kristina Edhenholm Handelsbanken
Manne Gustavsson Handelsbanken
Michael Askebrink Handelsbanken
Ulf Ahrner Handelsbanken
Heidi Lehto Nordea
Jussi Haarasilta Nordea
Lena Wiberg Nordea
Marjan Mohr Nordea
Mari Koikkalainen OKO
Miikka Laine OKO
Eva Westerlund SEB
Jakob Stern SEB
Karl Johan Eriksson SEB
Lars Strand SEB
Päivi Ahola SEB
Andreas Lundell NCSD
Anu Saarinen NCSD
Annette Nyström NCSD
Arne Jansson NCSD
Bo Grolander NCSD
Hanna Vainio NCSD
Heikki Ylipekkala NCSD
Jouni Leinonen NCSD
Kimmo Koskinen NCSD
Lars Berggren NCSD
Leena Ruostetsaari NCSD
Peter Sving NCSD
Christian Fegler Capgemini
Mikko Vesa Capgemini
page 61(62)

6.3 References
Ref. # Title File name Ver. Date
1 NCSD - White Paper Nordic CSD NCSD White Paper Basic 2.0 2005-06-17
Structure Basic Principles
Principles 050617.doc
2 NCSD – Consultation Paper - High level NCSD C&S Consultation Paper 1.0
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3 Recommendations for
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4 ECSDA final Report of WG 5 on barrier ECSDA final Report of WG 5 on 2005-06-30
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6 Second Report on EU cross-border clearing_settlement_arrangements1 2003-04
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7 The European Central Securities ECSDA final report of WG5 on 2005-04-29
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