Management of Settlement Failures
When a Settlement Instruction cannot be settled in its Intended Settlement Date (ISD), BME CLEARING will initiate the Fails Management Mechanisms.
In this respect, a Fail is a sell instruction that is pending settlement totally or partially at the end of its Intended Settlement Date (ISD).
End of Intended Settlement Date (ISD)
BME CLEARING receive from IBERCLEAR the information about the instructions that have not been settled in its ISD in T2S.
Subsequent sessions prior to the start of Buy-in
Unsettled instructions will remain in recycling and attempts will be made to settle them in the following sessions until ISD+7.
If a failed sell instruction has not been settled at the end of ISD+7, it is held in the system and the buy-in is initiated by BME CLEARING informing the market about the securities that will be subject to buy-in and the tender Price (maximum bid Price). Potential providers of securities will send their offers.
BME CLEARING will inform the selected securities provider that have been and the provider will commit to deliver the securities to the CCP one day later, in ISD+8, in the Settlement Account of the CCP in T2S.
Buy-in Procedure and Settlement
If all securities are not obtained to buy-in in the first attempt, BME CLEARING carries out more buy-in attempts in the following days (7 days like maximum) until all securities are obtained:
Cash Settlement
When performing the buy-in in ISD+7 is not possible (in case of the maturity of the value) or when the transaction keeps being failed at the end of ISD+13, a cash settlement will be performed with the following value day to settle the outstanding obligations of the failed seller with the CCP and the CCP with the affected buyer.
The affected buyer will be compensated with an amount of cash calculated by the cash settlement Price, and it will be performing through a cash amount equal to:
Cash settlement Price x Nominal – SI cash affected buyer to be cash settled.
Cash settlement Price = Max (latest closing SENAF Price* 2% + accrued interest in T+1; Price of the failed sale; Price of the affected buy).
