Late/Failed Settlement Claim Process

Claims as a Result of Penalties & Fines

Status: Best Practice Finalised, Last Updated: 06/10/2020

Partial Close & Claims
Counterparties should endeavour to settle partial sales of stock wherever possible (see IBP-307), and should accept partial returns or recalls. Counterparties will only be liable for 'sale fail' costs for the portion of the sale that fails due to an outstanding loan position which has been recalled and not delivered in the required timeframe.

It should be noted that in some markets, additional charges may be incurred for late settlements. Where these charges are incurred due to a failing recall, the failing party is liable. Equally if overdrafts are incurred the impacted party may consider raising a claim for any costs from the failing party. (IBP-140)

Claims Issuance & Settlement

Status: Best Practice Finalised, Last Updated: 28/01/2022

Issuance & Tolerance
For CSDR, counterparties should issue their claim(s) within 30 calendar days from the CSD penalty issuance. Please note that the proposed deadlines for CSDR triggered claims may be amended as the process matures.

For non-CSDR related claims, counterparties should issue their claim(s) within a maximum of 60 days from the claim inception date for example, the final settlement of a sale that triggered a recall.

It is recommended that one claim is raised per instruction. Claims should only be initiated when actual settlement has occurred.

The recommended minimum claim is 500 EUR or equivalent per instruction, or lower if bilaterally agreed (prior to activity). Parties may also agree consolidation of multiple failing transactions to pass a 500 EUR threshold. For example, if a penalty for a failing instruction is below the value of 500 EUR however, it fails for a number of days and the total cost of the penalty > EUR 500, this would be considered a reasonable claim.

The receiving party must endeavour to pay the claim within 30 days where possible and within a maximum of 60 days, from the CSD penalty issuance.

Claims should be sent electronically or via e-mail, preferably in PDF format, with signature. The recipient should acknowledge receipt of the claim within 24 hours.

Once the claim has been agreed by both trading parties, payment should be made within 5 business days. The claim issuer must confirm receipt of payment to formally close the claim.

The claim issuer should provide the following information:

• Claim Initiator Name and BIC

• Trade Date of failing instruction

• Intended Settlement Date

• Actual Settlement Date

• Security ID (ISIN) and Description

• Quantity

• Cash Currency & Value - Settlement value or recall value

• Claim Reference - PCOM or other relevant reference

• Claim Calculation (i.e., cash value, interest rate, No. of days of failing instruction)

• Claim/Penalty Currency

• Claim/Penalty Amount

• Reason for claim

• Payment Details - SSI’s (IBP-141)

CSDR Penalties

Status: Best Practice Finalised, Last Updated: 28/01/2022

Local Penalties
It is recognised that various markets include Settlement Penalty regimes, which may result in a credit or debit upon settlement failure.

Each party to a failing trade that triggers such penalties must be aware and responsible for related accounting of the penalty in addition to associated regulatory adherence and pass-on processes appropriate for that market. (IBP-335)

Netting of Claims

Status: Best Practice Finalised, Last Updated: 28/01/2022

Netting of Claims
Regarding a single failing event, claiming parties should incorporate and consider relevant credits and debits that may apply for each failing instruction.

Regarding total claims between parties, where applicable, parties should agree a net settlement (i.e., a single cash flow to resolve multiple claims within the same penalty period).

It is the objective of CSDR to penalise the failing party to the trade to promote more efficient settlement across EU capital markets and therefore, claims as a result of this, should not unduly enrich either party. (IBP-340)