Billing

Status: Best Practice Finalised, Last updated: 09-11-2020

Introduction

The collection of income for lending securities is managed through a process commonly referred to as billing. (IBP-157)

Bill Issuance

Final bills should be issued within the first 7 business days of the month. Identification of disputes must be completed within the following 7 business days (14th business day of the month). On bill agreement funds should be received and the bill closed out within 24 hours. At the end of the first 14 business days any undisputed items should be paid. (IBP-159)

Delivery

Where counterparts agree to use a vendor platform, the vendor will advise on content and format to be supplied.

Where the party supplying details does not use a vendor, see ISLA Best Practice Billing format July 2009.pdf. (IBP-156)

Invoice Content

Where counterparts agree to use a vendor platform, the vendor will advise on content and format to be supplied.

Where the party supplying details does not use a vendor, see ISLA Best Practice Billing format July 2009.pdf. (IBP-158)

Accrued Income Calculation Method

Securities Lending rates/fees are expressed as annualised percentage and so the market standard calculation for accrued income is therefore:

For non-cash or cash pool activity is
Accrued Interest = Principal Amount * (Rate / DayCountDenominator) * Duration

For cash collateral (DVP/RVP) vs rebate is
Accrued Rebate = (Principal Amount + Margin) * (Rate / DayCountDenominator) * Duration
where Rate = either fixed rebate or an agreed benchmark rate +/- Basis Points as negotiated

Day Count Denominator is determined by the billing currency and 360 by default. However, for some currencies the DayCountDenominator may be 365 (e.g. GBP) which should be bilaterally agreed. (IBP-293)

Discrepancy Reconcilation

Counterparts should reconcile billing invoices in a timely manner to identify any issues requiring remediation. Any identified issues should be communicated to the other counterpart, detailing the issue and supporting data to explain and propose a correction. Counterparts, as part of their on-boarding process, should have clear escalation pathways should timely remediation not be possible.

It is also recommended that, during the reconciliation process, if both parties are using a market vendor tool, the functionality offered by that vendor should be fully utilised.
For example, use of comment functionality will greatly improved any required remediation. (IBP-160)