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+4.
If a failed sell instruction has not been settled at the end of ISD+4, it is held in the Settlement System and Buy-In procedure will be initiated by BME Clearing.
The buy-in initiation deadline for LATIBEX securities will be extended to ISD+7, with cash settlement taking place two days later if delivery of securities is not possible.
Buy–in Procedure and its Settlement
BME Clearing will inform about the number of days late of each failed position.
At the end of the DVP settlement period, BME Clearing will hold the fails instructions with ISD+4.
A broker, previously chosen, will execute a purchase on the stock exchange for the amount that has not been delivered by the fail member and On ISD+6 once broker´s purchase has been settled, the securities will be delivery to BME CLEARING within a bilateral trade.
In ISD+6 the CCP shall replace the failed seller's instruction with a new cash instruction for the difference between the cash from its initial failed transaction and the cash to be paid for the buy-in. All the instructions will settle during the ISD+7 Night Time Settlement Cycle.
The failed seller will bear the difference (if it is negative) between the cash position of the Buy-in and the cash position of the failed sale instruction and, in addition, the corresponding administrative costs.
Cash Settlement
BME Clearing will decide to perform Cash settlement after the no execution of the buy in due to illiquidity of determinate assets or once the broker´s purchase has not been settled on ISD+6.x
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 with the last available closing price of the security plus a configurable percentage. This cash settlement price cannot be lower than the unit price of the failed sell or the affected buy that will be settled in cash.
Cash Settlement Price = Max (last closing price + %; price of the failed sell; price of the affected buy)
