Settlement process - Czech Republic
Settlement cycles
For trades excecuted on the PSE: | T+2 |
For OTC trades: | T+0 to T+99 (negotiable) |
OTC Trades with equities usually settle in a T+2 settlement cycle as market practice follows the XETRA® mandatory settlements cycle.
Settlement flow
Keys steps at CSD Prague for settlement are as follows:
| SD-1: | |
by 13:00 | Sub-custodian receives settlement instruction. |
by 16:00 | Sub-custodian pre-matches with the counterparty in the CSD’s system via an interface connection and reports results to the client. |
07:30 - 16:30 | Settlement instructions are accepted from CSD Prague members via online link. |
16:00 - 17:00 | CSD Prague processes the instructions. |
18:15 | Report on projected cash position is available to clearing banks. |
| SD: | |
07:00 - 08:00 | CSD Prague processes morning settlement cycle. |
08:00 | Report on executed securities transfers is available to participants. Report on initiated cash transfers is available to CSD Prague members. |
08:00 - 11:00 | Sub-custodian pre-matches with the counterparty the trades in T+0 in the CSD’s system via an interface connection and reports results. Settlement instructions are accepted from CSD Prague members via online link. |
11:30 | Report on executed CSD Prague transfers is available to participants. Report on initiated cash transfers is available to CSD Prague members. |
12:30 - 16:30 | Sub-custodian pre-matches free of payment transactions with the counterparty in T+0 in the CSD’s system via an interface connection and reports results. Free of payment instructions are accepted from CSD Prague members via online link. |
17:15 | CSD Prague processes free of payment transfers. |
17:40 | Report on executed securities Free of payment transfers is available to participants. |
Cash clearing
The Czech Republic has a national automated clearing system organised by the CNB and covering payment orders and direct debits. Processing is done in batches. The latest amendment of the Payment Act states that payments are to be credited on the client’s cash account within two working days from the date of remittance, but prevailing market practice is to reduce this to same-day for securities settlement funds transfers.
Finality of cash payment settlement is reached when the bank’s account with the CNB Clearing Centre is credited with incoming funds in favour of the beneficiary and the bank is advised by the CNB. The CNB Clearing Centre reserves the right to advise the recipient bank no later than 09:00 of the following business day. The deadline is guaranteed by the CNB. However, the CNB typically advises of the credits on a recipient bank’s account at 17:00 on value date.
Registration
Book-entry securities
The Securities Account Holder at the CSD Prague is identified as the beneficial owner of the securities, as securities instruments can be traded and settled in bearer form in the Czech Republic. In the CNB Registration Centre it is possible to open a so-called owner account, where the account holder is identified as the beneficial owner of the securities, or so-called client account, which is held by custodians. Custodians must then maintain an evidence of underlying investors in its own books. Securities are recorded automatically when credited on the account holder's account during the settlement process initiated by the CSD Prague/SKD system.
Physical securities
- Bearer
For physical securities immobilised at CSD Prague, the case is the same as for book-entry securities.
Securities are credited to the account on settlement date by agent banks upon settlement confirmation from CSD Prague (in the case of immobilised securities listed on the PSE) or upon the physical receipt of securities into the bank’s vaults. The securities are then recorded. - Registered
The issuer’s registrar records the beneficial ownership of registered physical securities and effects the change in ownership as evidenced by endorsement on the securities without undue delay once securities are received by the issuer’s registrar for registration. Transfer of ownership in respect of the issuer is affected as of the registration date. Registration of physical securities takes on average approximately one month.
Securities can be freely traded during registration but those that are out for registration will generally not be available for settlement.
Blocking is not part of the standard registration process.
Stamp duty
Stamp duty is not applicable in the Czech market.
Penalties
Buy-ins
A buy-in can be executed for on-exchange trades concluded on XETRA®.
The amended Short-Term Bond System (SKD) rules, applicable as of
1 March 2018, outline the possibility of a buy-in of securities held in asset accounts. There was an adjustment made to the settlement failure procedure. Article 24 (paragraphs 7 to 12) states that settlement instructions failing for four days will be cancelled automatically and a buy-in procedure may be initiated.
Cash penalties
Penalties will be calculated and applied on matched settlement instructions that fail to settle, in full or in part, on and after their intended settlement date (ISD), if both the settlement instruction and the relevant financial instrument are subject to cash penalties.
Instruments subject to cash penalties
Any financial instrument listed in the Financial Instruments Reference Data System (FIRDS) database maintained by ESMA will be subject to cash penalties. However, cash penalties will not apply to shares listed in the Short Selling Regulation (SSR) exemption listed in the Short Selling Regulation (SSR) exemption list.