This settlement feature ensures that custodian clients settle their sell trades with Dubai Clear directly on a DVP basis instead of through the Clearing Member of the trade execution Trading Member.
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 Settlement Agent, the Settlement Agent may reject settlement of the sell trade to the selling Trading Clearing Member for settlement.
The Settlement Agent is given a two-day late confirmation period (subject to penalties on the Settlement Agent’s client) to confirm the rejected sell trade for settlement if matched settlement instructions are subsequently received from the Settlement Agent’s client. During the Late Confirmation Period, the selling Settlement Agent 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 Dubai Clear 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.
For further details, please refer to the ‘DVP Procedures’ under the ‘Regulations, Policies and Procedures’ section.