Posted By Steve On Thursday, October 15th, 2009 With 0 Comments

Settlements Cycle

Equities: T+3
– Primary Market Usually T+2 but not official
– Secondary Market
OTC: Not applicable
Money Market: Not applicable

Over-the-Counter (OTC)
Listed shares and stocks not listed on the PSE, but registered and licensed for sale by the Securities and Exchange Commission, may be traded over-the-counter by brokers. Transactions are executed by direct inquiries and negotiation between dealers.

Settlement Procedures

Book-Entry: PSE listed equities are settled on T+3 against payment by cheque.

T (Trade Date) A buy or sell order is placed with the broker and the trade is executed. All transactions posted into MAKTRADE are interfaced to the SCCPs Central Clearing and Central Settlement System (CCCS). The CCCS operates under under continuous net settlement system and as such daily multilateral netting occurs upon receipt of the Trades from the Exchange. The CCCS performs the netting process as soon as the Trades are uploaded to the system. Confirmation of the trade is sent to the investor. This confirmation is the basis for sending settlement and foreign exchange (FX) instructions to the custodian bank.

T+1 Investor advises the custodian bank of settlement details and arranges FX for value settlement date. The inclusion of FX instructions or establishing standing instructions will expedite settlement. FX instructions should specify funding for purchases or repatriation of sales proceeds. Standing instructions on the treatment of against payment trades will eliminate the need for individual FX instructions. These should be sent by authenticated means to ensure validity.

T+2 Trades are pre-matched with the counter-party. Although an auto pre-matching system was launched in 2004 not all participants have made the necessary adjustments in their respective systems, which is why pre-matching via phone and fax has not been entirely removed.

T+3 Settlement of shares for non-exchange transaction takes place through the PDTC. The strict deadline for deliveries is at 12:00 while receipts may be performed until 17:00. Finality of stock movement occurs when both the delivery and receipt orders in the PDTC have been executed by both parties. Cash settlement between brokers and sub-custodians is by manager’s cheque or by direct entry in the broker’s account and which must be received before 12:00. For exchange (broker-to-broker) transactions, the CCCS performs the netting process for both cash and securities. Clearing obligations of brokers are paid at designated Settlement Banks no later than 12:00 on settlement date.

Physical: For sale transactions, physical shares must be lodged in the broker’s PDTC account on SD. For certain issues, PSE require that all clients deliver stock certificates to the selling broker on or before trade date.

For purchase transactions, the sub-custodian remits payment against the receipt of the stock certificate.


Book-Entry: As the market is mainly scripless, there is no need for share registration as all immobilized shares are held by the Philippine Depository & Trust Corp. and are registered in the name of PDTC Nominee Corporation automatically. Safekeeping of shares via the PDTC is not mandatory. Shareholders have the option to retain shares in physical form, however the settlement of on-exchange trades is required to be conducted through the central depository.

Physical: Investors have the option to keep scrip shares. Physical shares can be registered in the following manner:

* registered in the client’s name
* registered in a nominee’s name
* held in street name.

The beneficial owner records maintained by the transfer agent cum registrar are considered final in the event of a discrepancy.

Government securities are dematerialized and are lodged in the Registry of Scripless Shares (RoSS).

For those clients requiring physical shares, a copy of the upliftment request (UR) to PDTC has to be forwarded to us by the broker evidencing that scripless shares have been uplifted to physical form. The UR is to be kept by us until receipt of actual physical certificates. Uplifted shares are monitored via outstanding registration report until receipt of physical certificates. Please note that physical shares for registration usually take 30-45 days.

A weekly listing of outstanding scrips receivable is prepared and both verbal follow-ups and written tracers are made with the brokers to ensure clients’ protection against brokers’ risks. An MT599 is generated upon delivery of shares to the registrar and again upon receipt of shares from the registrar.

Bank for International Settlements Model (BIS):

For Government Securities:
Model 1 – (if payment is done via cheque) – Gross settlement of securities followed by gross settlement of funds
Model 2 – Gross settlement of securities followed by net settlement of funds

For Listed Equities:
Model 2 – Gross settlement of securities followed by net settlement of funds

BIS Model 1 – a system in which there is a simultaneous transfer of securities and associated funds from the buyer to the seller. All transfers occur on a trade-by-trade (gross) basis with all transfers made via book entry. All transfers are final.

BIS Model 2 – Gross simultaneous settlement of securities followed by net settlement of funds, with finality at 11:00, 15:45 and 17:45.

Payment Systems:

The market deadlines for the various payment methods of local currency (Pesos) in the Philippines are as follows:

Clearing cheques 12:00
Administered by the Philippine Clearing House Corporation (PCHC) of which the transfer is subject to a three-day clearing period. Cheques received after the deadline are considered late for deposit and will start clearing the following business day.

Electronic Payment System 13:30
Commonly known as "Netting", this system is also administered by the PCHC. Although same day value is given, there is a 24-hour clearing period from receipt of payment for these transfers. Citibank is the settlement bank and linkage to the PCHC is via a network of terminals connected to each of the member banks.

Real Time Gross Settlement (RTGS) 16:00
Payment is given same day value with no clearing period. Administered by the Bangko Sentral ng Pilipinas (BSP), transfer instructions among banks are executed via SWIFT/telex instructions. Payments received via RTGS is subject to a fee of PHP50 per transaction. Payment orders done via RTGS is subject to a fee of PHP 500 per instruction for the account of the client. Quoted charges are that of HSBC and may differ from bank to bank. Both counterparties must agree on payment via RTGS.

Any cancellation/amendment instructions received after these deadlines shall be processed on a best efforts basis.

Overdraft Permitted:
Overdrafts are not permitted

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