General Description
Under DVP (Delivery Versus Payment) a principle of settlement securities trades is understood, that implies simultaneous transfer of money to the Vendor and securities to the Purchaser. Such principle allows both parties to avoid the risk of crediting a counterparty. That is why DVP is a standard long ago adopted on stock markets of all developed economies. The fact that a market participant uses DVP indicates that risk management is a priority for the company and it has an opportunity not to assume other participants’ risks.
In Russia this technology was first launched in 1999 by OJSC "Russian Trading System" Stock Exchange".
Starting from June 30th, 2008 clearing of all DVP trades with payment in RUR or USD will be performed by CJSC "Depository Clearing Company" (DCC).
This settlement mode is available for all securities registered in DCC.
Currently over 90 % of all securities trades executed on RTS Classic Market are settled via DVP technology.
Connection
DVP services are available to those depositors that became participants of DCC clearing, opened the necessary cash accounts and submitted to DCC all the required documents.
For settlement in rubles it is necessary to open a special account in the RTS Settlement Chamber that will be used only for DVP trades (hereinafter DVP-account).
For settlement in US dollars you will need a special account in the RTS Settlement Chamber, in JPMorgan Chase NY or Citibank NY.
When using a ruble or dollar DVP-account in the RTS Settlement Chamber one is also to apply for opening a corresponding account, further managed by DCC (hereinafter – "depository account").
There is no need to open additional accounts in DCC as settlement is performed via the so called "primary accounts".
Any professional stock market participants having an account in DCC can become a clearing participant.
Clearing participants can provide client services to any investors served by DCC depositors including asset management companies and joint stock funds, both Russian and foreign ones.
Using cash accounts
Ruble accounts functioning mode
On a daily basis by 9 a.m. RTS Settlement Chamber transfers all funds from DVP-accounts to depository accounts and provides DCC with information on the balance of depository accounts.
Every day at the end of the last clearing session DCC transfers all the funds from depository accounts back to DVP-accounts of the participants.
During the day a participant can submit to RTS Settlement Chamber payment orders to withdraw funds from DVP-accounts that are executed only after DCC confirms that there is enough money on the corresponding depository account.
All funds credited to the DVP-accounts during the day (up to the end of the last clearing session) are automatically transferred to depository accounts and can be used in DVP settlement.
Dollar accounts functioning mode
There is a slight difference in using dollar accounts opened for settlement via DVP technology.
For crediting US dollars to the depository account opened with RTS Settlement Chamber it is necessary to submit to RTS Settlement Chamber a special payment instruction.
For dollar settlement via DVP technology in JPMorgan Chase or Citibank it is necessary to credit the required sum to special accounts opened with these banking companies and managed by DCC.
To withdraw funds from both depository accounts in RTS Settlement Chamber and special accounts in JPMorgan Chase or Citibank you are to submit an instruction to DCC – either via DCC Client System or by stating the daily necessity of maintaining a zero balance when registering the account.
During the day a clearing participant can also submit to RTS Settlement Chamber payment orders to withdraw funds from DVP-accounts that that are executed only after DCC confirms that there is enough money on the corresponding depository account.
Cash funds netting
In performing DVP settlement DCC minimizes the number of cash transactions with the help of netting. However all cash accounts opened by the participants correspond only to the central clearing account.
Procedure
Conditions for settlement of a DVP-contract
Contracts signed in the Electronic Document Circulation system as well as any other contracts including paper contracts or contracts between a professional participant and their client can be settled on DVP terms.
To settle a trade:
- The vendor and the purchaser shall submit to DCC clearing orders complying with the rules of matching orders in DCC (if the order is submitted with reference to a contract signed in EDC it is advisable to specify the contract’s number);
- The Vendor shall ensure the required number of securities on the DCC depository account on the settlement day;
- The Purchaser shall ensure the required amount of cash assets on the cash account on the settlement day.
Clearing Sessions
During the working day DCC holds 5 clearing sessions that result in settlement of quitted pairs of DVP orders, secured by cash assets of the purchaser and securities of the vendor.
On official US holidays only ruble DVP trades are settled.
Clearing is performed at 9:00 am, 10:30 am, 12:30pm, 3:00pm and 5:00pm.
If the orders contained reference to a contract signed in the Electronic Document Circulation after the clearing session is over DCC informs the EAC whether the contract was settled or not. A EDC user can monitor the contract’s settlement status or the reasons for which the contract was not settled.
