This settlement feature ensures that custodian clients settle their sell trades on the DFM on a DVP basis.
All sell trade orders are pre-validated for availability of securities balances before the orders become valid sell orders in the trading system. Once validated, securities balances are earmarked in the selling custodian client’s depository account for settlement on T+2. On T+2, if matched settlement instructions are not received by the client’s Custodian Clearing Member, the Custodian Clearing Member can reject the sell trade to the selling Trading Clearing Member for settlement.
The Custodian Clearing Member is given a two-day late confirmation period (subject to penalties on the custodian client) to confirm the rejected sell trade for settlement if matched settlement instructions are subsequently received from the custodian client. During the Late Confirmation Period, the selling Custodian client will not be entitled to corporate actions.
Should the rejected sell trade remain unconfirmed on T+4, a mandatory buy-in is invoked by DFM Clearing against the selling Trading Clearing Member. Should the mandatory buy-in be unsuccessful, a cash closeout against the selling client for the unsuccessful mandatory buy-in quantity is invoked whereby the selling client is paid a financial settlement.