CSDR: Resolving reconciliation breaks
In order to comply with the Central Securities Depositories Regulations (CSDR), Clearstream Banking1 continues to apply necessary measures to prevent reconciliation breaks from occurring and takes action to resolve them when they happen.
Background
A reconciliation break may result from extended settlement delay related to redemption orders placed by Vestima distributor banks. Redemption orders that are confirmed by a contract note (from the order receiver), require the Vestima distributor banks to instruct a settlement (delivery of shares). Unfortunately, it is sometimes the case that the Vestima distributor banks put this settlement instruction on "hold release“, effectively postponing the settlement for a prolonged period of time and delaying settlement accordingly.
In such cases, Clearstream Banking faces a reconciliation break (the difference between holdings on register, as per trade confirmation, and pending settlement instructions), that must be resolved.
Impact on customers
Clearstream Banking’s governing documentation already makes provisions for such resolutions (CBL Customer Handbook section 9.1), by means of a process of purchase and debit initiated by Clearstream Banking.
In addition, failure to resolve the break may result in Clearstream having to take immediate and strict action in accordance with CSDR requirements.
Further information
For full details on the CSDR please refer to the Customer Readiness information on the Clearstream Banking website.
Further information is available from your dedicated Relationship Manager or Clearstream Banking’s Client Services teams.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.