Debt: T, T+1 or T+2*
Money Market: N/A
Over-the-Counter (OTC): Between counterparties
* agreed between counterparties
Book-Entry: CCASS settles all broker-to-broker and broker-to-custodian transactions for securities held at the depository. CCASS provides matching of trade and settlement details between participants on a batch basis. There are four settlement protocols: Continuous Net Settlement (CNS), Isolated Trades (IT), Settlement Instructions (SI), and Clearing Agency Transactions. Broker-to-custodian transactions settle via the SI system. Security positions move electronically on T+2. Same-day settlements can be processed if matching instructions are entered before 15:45 (local time).
Debt issues and certificates of deposit clear through the CMU. The CMU can settle securities traded in HKD, USD, EUR or other foreign securities as authorized by HKMA. Participants must agree on the settlement currency, amount and mode, either real-time or end of day, prior to settlement. Trades are prematched by telephone with scripless settlement typically on T+1 or T+2, as agreed between the counterparties.
HKSCC has introduced Real-time Delivery Versus Payment (RDVP) settlement. CCASS participants can settle against payment trades by RDVP, where settlement risk is contained, or by Non-RDVP, the existing settlement method, which is subject to overnight payment exposure.
The procedures for settling RDVP are as follows:
* both the delivering and receiving parties must agree on the settlement method before sending a trade to CCASS. Where no settlement method is specified, the default method is Non-RDVP
* for same-day value, all RDVP trades must be sent to CCASS on or before 13:30 (local time) on settlement date
* once a RDVP purchase transaction is matched in CCASS, the sub-custodian processes an interbank payment to HKSCC via CHATS (Clearing House Automatic Transfer System) on or before 15:30 (local time) on settlement date. A charge of HKD25 applies for each RDVP purchase transaction.
CCASS Settlement Process Flowchart (pdf)
Physical: Trades are pre-matched on a rolling basis until the afternoon of SD. Transactions settle on a trade-by-trade basis. Good delivery to and from the broker consists of delivering securities against payment by cheque which are confirmed next day (SD+1). Transfer deed(s) per certificate signed by the registered shareholder must be included. Transfer deeds are not required for debt instruments which are usually in bearer form.
Book-Entry: Registration in CCASS is automatic and shares are available for immediate redelivery. Subaccounting is maintained by the sub-custodian.
Physical: Share certificates are forwarded to the registrar along with an endorsed transfer deed. Physical registration usually takes 10 business days during which time the shares cannot be sold. Express registration is available subject to prior arrangement with the registrar. A standard registration tariff list and registration periods can be provided on request. The SEHK has mandated a standard registration tariff list and registration periods.
Bank for International Settlements Model (BIS):
Not applicable to the Stock Exchange of Hong Kong
The sub-custodian’s payment system can process clients’ payment instructions on a STP basis. When a client sends a payment instruction via SWIFT MT202 or MT103, as long as the instruction format fits the sub-custodians STP requirement and the account has sufficient funds, the payment will be effectively automatically to the receiving bank without any manual intervention. For payment to a local bank, it is normally completed through the Clearing House Automatic Transfer System (CHATS). Telegraphic transfer is used for payment to an overseas bank.
Manual repair is needed when the instruction has not quoted the correct information e.g. the BIC is incorrectly quoted or the beneficiary information is missing, or other incomplete information. If the account has insufficient funds to cover the payment, the payment will be put on hold in the authorization queue until the account is funded or it is approved by the relevant Relationship Manager.
Similarly, for inward payment, as long as the remitting bank sends the payment order, either via local RTGS or SWIFT, in the correct STP requirement format, and the cover fund has been received, the payment will be directly credited into the client’s account. The sub-custodian will clarify with the client if any information is absent or not clear and the payment will be kicked back if the client does not recognize it.
Investors can go overdrawn in their current cash accounts.