Markdown service
Clearstream Banking offers the option of removing securities from a customer’s portfolio upon formal instruction by the customer, to permanently markdown specific securities1 . This service is offered only to securities of domestic markets and defaulted securities. This option is subject to confirmation by Clearstream Banking’s depository or agent appointed for the market of the security to be removed from the customer’s portfolio.
Important notes:
- Markdown investigations are the first step of the markdown process, and it will not be provided separately. Clearstream will not accept any investigation requests regarding markdowns received without a markdown instruction. Investigation requests will only start upon the receipt in Clearstream of the formal markdown request sent via SWIFT message, Xact Web Portal or CreationOnline free-format messages, using the below template.
- The markdown service requires an investigation and manual processing of customer instructions and is therefore subject to fees as published in the Clearstream Banking Fee Schedule. The fees are always going to be charged, according to Clearstream Banking Fee Schedule, disregarding the result of the investigation, either positive or negative. Therefore, even if the investigation concludes that the markdown of the security cannot be processed, the investigation fees still apply. The fees applied differ according to the status of the securities: defaulted or non-defaulted securities. Exception: securities listed as “PREM” securities2 by DTCC, these markdowns will be always charged as non-defaulted securities, independently of being defaulted or non-defaulted.
- Once the instruction to request the removal of a security (markdown) is sent to Clearstream Banking, it is irreversible. Therefore, by sending the instruction, customers acknowledge and consent to the permanent loss of all their rights and entitlements on any future changes in the status or pay-outs of the marked down securities. Exception: in relation to securities listed as “PREM” securities by DTCC, the instruction received by Clearstream Banking shall not prevent the credit of proceeds associated or not to a late reinstatement of holdings, as the case may arise. The customer shall be deemed to have authorized Clearstream Banking to credit such proceeds on its account or, should the Customer no longer have any active account with Clearstream Banking S.A. at the time of said reinstatement of holdings, Clearstream Banking S.A. shall make reasonable efforts to liaise with the Customer with the intent to obtain alternative instructions about the aforementioned proceeds, failing which Clearstream Banking S.A. shall implement its internal policies and procedures regarding the handling of unclaimed amounts.
- This service is not offered to markdown holdings in Alternative Investment Funds (AIF) or Undertakings for Collective Investment in Transferable Securities (UCITS).
- Customer instructions to remove a holding are acceptable to Clearstream Banking only upon receipt of the depository/agent’s acceptance and confirmation that the holding is removable from its own books. As the process of obtaining the depository/agent’s approval may involve investigations with the Issuer, or other entities, Clearstream Banking cannot commit in advance to a time frame by when the securities will be removed. The securities holdings, for which the markdown request was sent, will be blocked for the period of investigation.
- If the above-mentioned investigations conclude that the markdown request instruction cannot be processed, Clearstream will inform the client accordingly, via SWIFT message.
Exceptions
The markdown service is not available for the following markets: Austria, Finland, Germany, Slovakia, Slovenia, Sweden.
How to instruct
Customers must instruct Clearstream Banking via MT599, MT568, MT565 or Xact Web Portal Message Exchange, using the template provided below. Customers must only include one instruction per message. One instruction consists of:
• one financial instrument identification number ISIN;
• Common Code or safekeeping place and name;
• one account number and name;
• the quantity of securities to be debited; and
• the Waiver and Release disclaimer.
Instruction template
ATTN: CORPORATE ACTIONS SINGAPORE (SCA) for APAC markets, or
CORPORATE ACTIONS PRAGUE (PCA) for all the other domestic markets, or
CORPORATE ACTIONS LUXEMBOURG (OCE) for defaulted securities
THIS INSTRUCTION HEREBY AUTHORISES AND DIRECTS CLEARSTREAM BANKING S.A.TO REMOVE THE BELOW DESIGNATED POSITION FROM OUR CUSTODY ACCOUNT.
ISIN CODE AND NAME: XXXX
COMMON CODE OR SAFEKEEPING PLACE: XXXX
NOMINAL: XXXX
A/C NUMBER AND NAME: XXXX
WE AND OR OUR CLIENT HEREBY IRREVOCABLY RELINQUISH ALL RIGHTS OF OWNERSHIP AND OTHER INTEREST IN SUCH SECURITIES INCLUDING FUTURE DISTRIBUTIONS, IF ANY. WE AGREE TO HOLD CLEARSTREAM BANKING S.A. HARMLESS AND INDEMNIFY IT AGAINST ANY LOSS; CLAIM, DAMAGE LIABILITY OR EXPENSE, INCLUDING ATTORNEY’S FEES, IMPOSED ON OR INCURRED BY OR ASSERTED AGAINST CLEARSTREAM BANKING S.A. AS A RESULT OF THIS INSTRUCTION.
WE HEREBY REPRESENT THAT WE HAVE AUTHORITY TO ISSUE THIS INSTRUCTION ON BEHALF OF THE BENEFICIAL OWNER OF THE SECURITY.
WE ACKNOWLEDGE THAT THIS SERVICE IS SUBJECT TO INVESTIGATION AND PROCESSING FEES AS PUBLISHED IN CLEARSTREAM BANKING S.A. FEE SCHEDULE. WE ACKNOWLEDGE THAT IF, UPON INVESTIGATION, THIS MAKDOWN REQUEST INSTRUCTION IS DEEMED IMPOSSIBLE TO EXECUTE, THE INVESTIGATION FEES WILL NONETHELESS BE CHARGED. WE AUTHORIZE CLEARSTREAM BANKING S.A. TO CHARGE THE APPLICABLE FEES.
IF THIS INSTRUCTION OF MARKDOWN REGARDS A “PREM” SECURITY ON THE USA MARKET, WE AKNOWLEDGE THAT IN CASE OF RESINSTATEMENT OF HOLDINGS, CLEARSTREAM BANKING S.A. MAY RECEIVE CERTAIN PROCEEDS AS A RESULT THEREOF. WE IRREVOCABLY AUTHORIZE CLEARSTREAM BANKING S.A. TO CREDIT ALL SECURITIES AND CASH FORMING PART OF SUCH PROCEEDS (i) ON OUR ACCOUNT OR (ii) ON SUCH ALTERNATIVE ACCOUNT WHICH MIGHT THEN HAVE REPLACED OUR INITIAL ACCOUNT OPENED IN CLEARSTREAM BANKING S.A.’S BOOKS. WE ACKNOWLEDGE AND AGREE THAT, SHOULD CLEARSTREAM BANKING S.A. FAIL TO LIAISE WITH US AFTER SPENDING REASONABLE EFFORTS THEREFOR, CLEARSTREAM BANKING S.A. SHALL NOT INCUR ANY LIABILITY FOR IMPLEMENTING ITS INTERNAL PROCEDURES REGARDING UNCLAIMED AMOUNTS. THE AUTHORIZATION HEREINABOVE GRANTED SHALL APPLY FOR AN INDEFINITE PERIOD OF TIME.
On a case by case basis, Customers will be requested to provide a Letter of Indemnity to Clearstream or the agent. Clearstream will advise the customer accordingly.
The reporting of markdown is done via MT566 containing in the narrative “mark-down as per your request”. Additionally, Clearstream Banking sends out a settlement confirmation MT546/MT548.
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1. Markdown is a process on securities with low or none price removing them from the customer account.
2. DTC (Depository Trust Company) classifies and publishes a list of “PREM” securities, that is, securities for which the DTC’s Position Removal (PREM) function is available: positions are deleted “in issues of non-transferable securities certificates from their participant accounts”, (DTC destroys certain certificates representing positions in securities for which transfer agent services are no longer available). Warning: in what concerns “PREM” securities, there is an unlikely possibility in the future of a reinstatement of the holdings, to allow the processing of a corporate event, and in such a case, the original holdings will be re-instated on the client’s account, and the event proceeds, (which may be cash or securities), will be credited on the client’s account accordingly.