I nuovi servizi per gli emittenti - Monte Titoli

I nuovi servizi per gli
emittenti
Palazzo Mezzanotte, Milano, 28 Maggio 2013

I nuovi servizi per gli emittenti
XE Eurobonds – Raising the bar
Andrea Tranquillini
Head of Network Management & International Issuance
Monte Titoli
2

New Service
Main Features
1 “XE” ISIN
Key Service Differentiators
2 STP offered by MT-X and UnaVista
3
No requirement for ICSD agent
safekeeping and servicing
4 Central Bank Money
5 Streamlining of the execution process
6 Corporate Actions Automation
7 Significantly Lower Safekeeping Fees
Impact
Market neutral to accept new “XE” ISIN. Code is
neither a key driver of liquidity nor quality.
Great improvement on current processes and cost
savings
Simpler process brings efficiencies.
Further efficiencies with Dematerialisation option
Provides an alternative to the current Commercial
Bank Money service. Significant risk reduction
option
General simplification of the execution process
with benefits for Lead Managers, Sub Custodians
and Investors
Proposed development using XBRL taxonomy
offers benefit for Global Custodians, addressing a
significant concern raised previously
Major benefit for Global Custodians and
Investment Banks
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A new Numbering Agency
Securities coding
SECURITY CODE
• “XE” prefix – Unique for International Bonds & Debt Instruments
where MT is Issuer (I)CSD
X E 0 0 B 1 F 3 M 5 9 0
Code identifying
place of deposit (for
international bonds)
Filler
Seven digits alphanumeric code (using
SEDOL format)
Check
digit
• Additional request for membership submitted to the ANNA
(Association of Numbering Agencies)
• Membership not a showstopper to start allocating codes
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A new simpler structure
All functions imbedded within Monte Titoli
ISSUER
ISSUER’s AGENT
CBL
Monte
Titoli
LEAD MANAGER
PARTICIPANTS
INVESTORS
Key Benefits
AT ISSUANCE fewer parties reduced Operational risk.
SAFEKEEPING As per the ECB Standard 3, Monte Titoli has a unique and direct relationship with
the issuer.
FORM Global Note safe kept by Monte Titoli. Dematerialization possible with servicing
efficiencies.
COMMUNICATION All communications from Issuer or Agent directly to MT. Prime record with MT.
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Issuance structure
Issuer responsible for creating issue, settlement, and post-issuance servicing
Issue closed
Issue created
Securities distributed
Issuer
Issue A/C
(Debit)
Agent A/C
(Credit)
Participant
(Credit)
Investor
(Credit)
Issuer appoints, and notifies MT of
1. ISSUER AGENT responsible for
• Issue creation, and
• Post-Issuance servicing
2. PAYMENT AGENT responsible for
• interest & principle events
SETTLEMENT AGENT can be either:
- Lead Manager (for Syndicated
Issues), or
- Programme Agent (for direct
programme issuance).
As agreed bilaterally between Issuer
and Agent. Must be A/C holder
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Primary settlement roles
DVP Securities distribution and proceeds payment to issuer
Monte Titoli
Issuer
Option 1
Lead
Manager
Issuer
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EUR via T2
Option 2
Programme
Agent
Issuer
Investors
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Issuance process
Process flow
Securities
ISSUER
Cash
1. Security created in issuer
account (DR)
ISSUER’s AGENT
2. Simultaneous automatic credit
(FOP) according to “agent”
account for «distribution»
3. Distribution occurs on a realtime
DVP basis
1
2
MT
4
T2
4. Simultaneous DVP RTGS
settlement for cash leg via T2
3
Lead Manager/IPA*
PARTICIPANTS
INVESTORS
* Depending on the role performed and on the type of issuance
Key Benefits
Settlement Real time Gross Settlement in Central Bank money (T2).
Settlement Immediate finality in the early morning of issue date.
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Settlement with peers
Transferability of XE Eurobonds
Monte Titoli
Direct
Participants
T2
Express
Net &
(RTGS)
Transaction
input
Settlement &
confirmation
CBL
Realignment
EB
CBL
Sett. system
BRIDGE
EB
Sett. system
CBL 1
CBL 2
EB 1
EB 2
Key Benefits
Settlement No limitation in transferability of XE assets with peer ICSDs.
Currency Phase 1 EUR CeBM settlement in T2, Phase 2 Multicurrency in CoBM
Deadline Currently available during T2 opening hours. Overnight window planned
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Income processing
CURRENT PROCESS
• Funds advanced to Participants (at cost), based on;
– Credit standing of Participant, and
– Credit standing of Issuer
– Poor credit – funds credited next day, or when receipt determined (Upon
receipt of Funds)
NEW PROCESS
• Immediate payment to the market as soon as issuer paying agent pays. Most
payment in T2 settled by mid morning CET.
• Irrelevance of participant and issuer credit rating.
• Immediate finality of payment and minimization of reversal risk.
Key Benefits
Credit Risk Removal of overnight and intraday exposure for crediting proceeds
Operational Risk Substantial reduction of reversal risk.
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Assets servicing
CORPORATE ACTIONS
• In December 2012, Monte Titoli has
been recognized amongst the top CSDs for
CA standards implementation in the
T2S markets.
FISCAL SERVICES
• Pre-issuance and post-issuance services outsourced to market leading
provider ″GlobeTax″.
• Both relief at source and refund available if applicable.
• Electronic reporting for issuer agents.
Key Benefits
Corporate Actions Forerunner of European harmonization
Fiscal Service Specific assistance in the pre-issuance phase provided
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Collateral eligibility criteria
TYPE of EUROBONDS
• CGNs (Classic Global Note) eligible but not when held via common agents for EB or
CBL.
• NGNs – July 2006 – Created to enable EB & CBL to meet the ECB requirements,
addressing concerns around “Undue custody risk” on use of Common Depositaries.
(Standard 3 of ECB SSS Standards)
• Monte Titoli meets ECB requirements for both Global (CGN) and dematerialised.
EUROSYSTEM RULES
• Laid down in Annex I to Guideline ECB/2011/14 of 20 September 2011 on monetary
policy instruments and procedures of the Eurosystem.
Key Benefits
CGN Eligible if held with Monte Titoli as no Undue Custody Risk.
Book entry Eligible as held and settled with Eurozone SSS fulfilling ECB standards
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An innovative language – XBRL
eXtensible Business Reporting Language
• Point raised about SWIFT communication standards not ensuring exhaustive
transfer of information and need for interpretation of information in documents
• Examine a possible solution to Important information, not covered in SWIFT
messages, by using XBRL to tag the information and enable all parties to enjoy
STP
• Standard taxonomy (dictionary) of terms mandated in law by US and other
governments for financial reporting consistent with ISO 20022 messaging standard
used to ‘tag’ data in text-heavy documents
• Makes documents (e.g. Market Announcements, Term Agreements) machine
readable and reduces re-keying effort and associated error risks
• Establish a sub-Working Group to evaluate and take necessary steps towards
addressing this quickly
• GlobeTax helped develop the XBRL withholding tax taxonomy for corporate
actions
Key Benefit
Communication Increase quality of communication at issuance on securities data
Operations Reduce risk of reversal on payment date
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Cost reduction
• Significantly lower safekeeping fees (concentration of agency roles in
Monte Titoli expected to bring at least of 30% savings)
• Reduced servicing efforts and administrative burden for
intermediaries
• De-risked real-time DVP CeBM issuance process without credit
exposure
• Streamlined real-time Corporate Actions processing in CeBM in
Central Bank Money
• Reduction of operational risk thank to real time DVP settlement
• Dismantling of the credit exposure principle thanks to full STP RTGS
DVP
• Eligibility for ECB and CCP collateral
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Legal Structure
Enrica Cremonini
Legal Counsel
Gruppo Borsa Italiana
15

Legal Framework
Main aspects
• Monte Titoli operates within the legal framework of the Italian Finance Act
(Leg.D.58/1998), and the Monte Titoli rules on “Centralised Administration of
Securities” are approved by the competent authorities as complying with the
laws.
• This legal framework is fully compliant with the industry standards (ESCB
Recommendations for Securities Settlement Systems and BIS Principles for
Financial Markets Infrastructures, requiring a high degree of legal assurance for
each aspect of the clearing and settlement process, including:
• Legally valid and enforceable arrangements for netting and collateral
• Valid and enforceable rules on the entitlement to securities and the legal effects arising from a credit
book entry on a security account only the relevant account holder is entitled to exercise rights arising from
the securities
• No claims on securities can be exercised by MT
• Clear definition of the nature of the proprietary rights on book entry securities
• Full protection of Client’s assets in the event of the insolvency of a system participant or the CSD is
granted by strict asset segregation rules, both at CSD and Intermediary level and prohibition of actions or
attachments by the creditors of the intermediary or of the CSD against the securities which are the
property of the Intermediary’s client
• Settlement Finality rules implemented according to EU Legislation to protect the settlement system in
case of insolvency
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Legal Framework
Monte Titoli as Depositary and Safekeeper
In accordance with the legislation, and having a contractual relationship
with the Issuer, MT as authorized CSD, manages the securities settled
through its settlement system as follows:
• A securities account is opened for the issue on Monte Titoli’s books
• The issue is deemed to be completed when securities are credited on the
participants’ securities account
• Securities in certificated form: MT acts as a custodian of the physical
document representing the security. Upon receipt of the security, MT
registers the issue on the relevant securities accounts
• Securities in dematerialized form: MT provides for the registration on the
relevant securities account upon completion of the placement process and
upon instruction of the Issuer or of the Issuer Agent
• Reconciliation: at the end of each accounting day, MT verifies that the
amount registered in the securities account held by intermediaries is
equal to the amount registered in the issuer’s securities account
• Corporate actions management:
– Notices in relation to note holders meetings
– Income payments of principal and interests under the securities
– Tax services in relation to the relevant securities
Issue
closed
Issue
created
Securities
distributed
Ongoing
Servicing
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Legal Framework
Options for form of securities
• Securities cleared through MT may be either in certificated (global
or definitive) form or in uncertificated (“dematerialised”) form
• According to private international law, the form of securities will
be regulated by the law where securities are issued
– If the securities are issued in Italy, Italian law will apply to the form of
the securities
– If the securities are issued in another jurisdiction, the law of such
jurisdiction will apply to the form of the securities (e.g. if the securities
are issued in the UK, UK law will apply)
• Securities in dematerialized form are deemed to be issued when
the issuer’s securities account is opened and the relevant
securities are credited therein
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Legal Framework
Dematerialization rules
To the extent Italian law applies to the form of securities, article 83-bis of Italian
Finance Act and article 15 of the Joint Regulation set forth that the financial
instruments to be issued in dematerialized form are the following:
• Financial instruments traded or intended to be traded on Italian regulated
markets;
• Shares, other equity instruments, bonds and other debt instruments, as well as
any other financial instrument that gives the right to acquire other financial
instruments issued by an entity having financial instruments listed on an Italian
regulated market or is included in the list (held by CONSOB) of issuers having
shares diffused to the public;
• Bonds and other debt instruments issued for an aggregate amount of at least
Euro 150 millions (below this amount form is optional) ;
• Other financial instruments for which the issuer opts for the dematerialization
regime.
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Legal Framework
Guidelines on documentation amendments
The new structure will modify the operations and timing of both the issuance process
and the ongoing servicing. As a consequence this will have to be appropriately
reflected in all the relevant legal documents related to the issue such as:
1. Prospectus/Offering Circular
2. Subscription Agreement/Progamme Agreement
3. Global Note
4. Agency Agreement ( and Trust Deed)
5. Operative and Administrative Procedure Memorandum
6. Signing & Closing Memorandum
• A&O drafting
documentation templates
• ICMA Legal & Docs
Committee to review
In amending these documents, considerations are:
1) For certificated issues in Monte Titoli, securities will be in CGN form. Normally
the wording used in programmes already includes both NGN or CGN
2) Monte Titoli will be indicated as the depository and safekeeper of the note
3) The Operative and Administrative Procedure Memorandum and the Agency
Agreement needs to reflect timing and procedure in line with Monte Titoli
operations.
4) The Issuer will have an agreement with Monte Titoli with standard terms and
conditions both for custody and safekeeping service.
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Contacts
Sales Team
Alessandro Zignani
Head of Post Trade Sales
Cristina Belloni
Global Post Trade Sales
Giovanni Costantini
Global Post Trade Sales
XE Eurobonds team
Andrea Tranquillini
Head of Network Management & International
issuance
Enrica Cremonini
Legal Counsel
Details
azignani@londonstockexchange.com
T +39 02 33635 212; M +39 366 6120430
cbelloni@londonstockexchange.com
T +39 02 72426504
gcostantini@londonstockexchange.com
T +39 02 33635283
Details
atranquillini@londonstockexchange.com
e.cremonini@montetitoli.it
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Grazie della Vostra
attenzione

• The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to be
considered as a recommendation by Borsa Italiana S.p.A. as to the suitability of the investment, if any, herein described.
• This document has not to be considered complete and it is meant for information and discussion purposes only. Borsa Italiana
S.p.A. accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for
decisions and/or actions taken by any party based on this documents.
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an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring
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accordance with national and community legislation, applicable rules and decisions of the competent Authorities
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