Rules of the Collateral Management Service · 2013-05-28 · PART II THE COLLATERAL MANAGEMENT...

Entry into force on 11 September 2012 1

I n f o r c e : 1 1 S e p t e m b e r 2 0 1 2

Rules of the

Collateral Management Service

T h e I t a l i a n t e x t s h a l l p r e v a i l o v e r t h e E n g l i s h v e r s i o n

Entry into force on 11 September 2012 2

Rules of the Collateral Management Service

PART I GENERAL PROVISIONS

TITLE I Legal basis and organizational principles

TITLE II Participation in the Service

PART II THE COLLATERAL MANAGEMENT SERVICE

TITLE I The operation of the System

TITLE II The acquiring and matching of Transactions

TITLE III The settlement of Transactions

TITLE IV The administration of Collateral

The provisions in italic type will come into force in italic type with a subsequent communication

Entry into force on: 11 September 2012

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ART I

GENERAL PROVISIONS

TITLE I

LEGAL BASIS AND ORGANIZATIONAL PRINCIPLES

Article 1

Definitions

1. In these Rules:

a) [«Settlement Agent»: shall mean the person who makes central depository accounts and/or PM accounts in TARGET2 available to Participants for the operation of the Collateral Management Service;]

b) «Central Counterparties»: shall mean persons who, in the operation of a clearing and guarantee system for financial instruments pursuant to Article 70 of the Consolidated Law on Finance, interpose themselves between the direct participants in the system and act as exclusive counterparties with respect to their transfer orders;

c) «Pool Account» shall mean the account of a Participant in Collateral Pooling Management System of Bank of Italy in which are recorded the eligible assets provided as collateral for Eurosystem credit operations;

d) «Euro System Eligibility Criteria and Valuation Principles» shall mean the general characteristics of monetary policy instruments and procedures as defined in Annex I of the European Central Bank publication ECB/2000/7;

e) «Giver»: shall mean Participant who has undertaken the obligation to transfer the financial instruments as a collateral to another Participant in the System or to Bank of Italy in its capacity as a Receiver of collateral with reference to Collateral Transactions with Bank of Italy;

f) «Bilateral Exposure»: shall mean the net balance of the outstanding positions of two Participants, calculated at the end of every settlement cycle by aggregating the Transactions having the same closing date, or without a closing date, and the same settlement currency;

g) «Collateral»: shall mean financial instruments being transferred to and recorded in Participants special accounts within the Central Depository System or in Bank of Italy third party account in its capacity of Receiver with reference to Collateral Transactions with Bank of Italy;



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h) «Instructions»: shall mean the implementing provisions of these Rules;

i) «Markets»: shall mean the regulated markets referred to in Articles 63(2) and 67(1) of the Consolidated Law on Finance (CLF), the wholesale government securities markets referred to in Article 66 of the CLF, and the multilateral trading facilities referred to in Articles 77-bis and 79 of the CLF;

j) «Monte Titoli»: shall mean Monte Titoli S.p.A. as provider of the Collateral Management Service;

k) «Transactions»: shall mean Collateral Transaction between Participants and Collateral Transactions with Bank of Italy;

l) «Collateral Transactions between Participants»: shall mean DVP or FOP transfer orders deriving from the same contract and entered into the Collateral Management System by Participants and by Markets, different from Collateral Transactions with Bank of Italy;

m) «Collateral Transactions with the Bank of Italy»: shall mean operations related to the Bank of Italy Collateral Pooling Management System, providing the transfer of financial instruments by means of free-of-payments transactions between a Participant account and Bank of Italy third party account and entered by a Participant and/or by Monte Titoli within the Collateral Management System;

n) «Participants»: shall mean persons who are members of the Collateral Management Service, other than Bank of Italy in its capacity of Receiver of collateral in Collateral Transactions with the Bank of Italy;

o) «Receivers»: shall mean Participants who receive Collateral from another Participant in the Service;

p) «Bank of Italy Consob Regulation»: shall mean the Regulation of 22 February 2008 issued jointly by the Bank of Italy and Consob in implementation of the Consolidated Law on Finance;

q) «CSD Rules» shall mean the Rules pursuant to Article 81, paragraphs 2 and 2-bis of CLF, governing the Central Securities Depository Services and related and instrumental activities performed by Monte Titoli;

r) «Operational Rules of the Settlement Service (Express II)»: shall mean the rules of the settlement services and ancillary activities, adopted by Monte Titoli pursuant to Article 69 of the Consolidated Law on Finance

and Article 46 of the Bank of Italy Consob Regulation;

s) «Request for Services»: shall mean the contract proposal signed by the Participant and containing the request for provision of the Service;



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t) «Liquidity Reserve»: shall mean the amounts held on TARGET2 accounts to cover the Multilateral Balances calculated by the System;

u) «Multilateral Balances»: shall mean, for each security and for cash, the difference between the sum of the transfers that a Participant must receive from the other Participants in the System and the sum of the transfers that the Participant in question must make to the other Participants in the context of each settlement cycle;

v) «Uncovered Part»: shall mean the part of the securities or cash Multilateral Balance that cannot be settled because the necessary securities or cash are not available on the Participant’s accounts;

w) «Collateral Management Service or the Service»: shall mean the Service of Collateral administration governed by these Rules in which Monte Titoli settles Transactions and administers the securities provided as Collateral;

x) «Settlement Services»: shall mean the services managed by Monte Titoli for the clearing and settlement and gross settlement of financial instruments other than derivatives admitted to the Central Depository Service;

y) «Collateral Management System or the System»: shall mean the technological infrastructure by means of which Monte Titoli manages the Collateral Management Service;

z) «Collateral Pooling Management System» shall mean the system that allows for the management of collateral eligible for Eurosystem credit operations as provided by “Contratto quadro sulle garanzie per le operazioni di finanziamento” (Pooling Framework Agreement) underwritten by Participants and Bank of Italy and also governed by “Il sistema di gestione delle garanzie in pooling e dei depositi in titoli – Guida per gli operatori” (Membership Guide);

aa) «TARGET2»: shall mean the Trans-European Automated Real-time Gross settlement Express Transfer system governed by the guideline of the European Central Bank published on 26 April 2007;

bb) «Market Management Companies»: shall mean the companies that organize and manage the Markets;

cc) «Equivalent Securities»: shall mean financial instruments of the same issuer or debtor, forming part of the same issue or class and of the same nominal amount, currency and description;



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Article 2

Legal basis and organizational principles

1. Monte Titoli shall perform the activity of administering Collateral pursuant to

Article 9(1)(e) of the Bank of Italy Consob Regulation in a non-discriminatory manner and in accordance with procedures established on a general basis.

2. Monte Titoli shall perform the activities of account keeping and settlement of Transactions in the context of the Collateral Management Service, pursuant to Articles 80 and 69 of the Consolidated Law on Finance.

3. The provisions of these Rules shall supplement and complete the Rules governing the Central Depository Service and the Operational Rules of the Settlement Service (Express II).

4. Monte Titoli shall use IT and organizational structures able to safeguard the data concerning the Collateral Management Service and ensure their physical and logical security, as well as the continuity and accuracy of their processing.

5. Monte Titoli shall adopt recovery procedures for its data processing aimed at permitting the continuity of the Service.

6. Monte Titoli shall retain the data related to the operation of the Collateral Management Service for ten years.

Article 3

Subject of the Rules

1. These Rules shall govern the operation of the Collateral Management Service and, in particular:

a) the procedures for participating;

b) the acquisition, matching, settlement of Transactions entered into the Collateral Management System;

c) the administration of the Collateral.

2. The Instructions shall supplement the Rules by specifying the System’s operational procedures.

3. The Rules and the Instructions, together with the service participation contracts, shall also regulate the relations between Monte Titoli and Participants.

4. Monte Titoli shall not enter into any obligation deriving from the financial collateral arrangements concluded between the parties that use the Service. Matters relating



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to such arrangements shall have no effect on the operation of the Collateral Management Service.

5. The provisions of these Rules and the Instructions shall always prevail over any incompatible clauses in the bilateral agreements concluded between Participants.

Article 4

Service communications

1. Monte Titoli shall provide, with a periodicity related to the nature of the data, information in electronic form on, among other things:

a) Participants admitted to the System;

b) Market Management Companies for which the Service is available;

c) operating hours of the Service;

d) types of financial instruments admitted to the Service, the eligibility criteria, the valuation principles and those procedures for partial settlement and the management of Collateral in the event of corporate actions applicable in the absence of specific indications given by Participants;

e) sources of the prices used to value Collateral.



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TITLE II

PARTICIPATION IN THE SERVICE

Article 5

Eligible persons

1. The following may participate in the Collateral Management Service:

a) Banks authorized in Italy and other EU banks, as defined in Article 1(2) of the Consolidated Law on Banking;

b) [investment firms entered in the register and/or in the attached list referred to in Article 20(1) of the CLF;

c) insurance companies;

d) UCITS;

e) asset management companies;

f) companies with shares admitted to trading on regulated markets;

g) Central Counterparties;

h) Poste Italiane S.p.A.;

i) Cassa Depositi e Prestiti].

2. Central Banks may also participate in the Service.

3. For Collateral Transactions with the Bank of Italy, the latter participates in the Service as expressly provided by this Rules as integrated by agreement to this end signed with Monte Titoli.

Article 6

Participation requirements

1. In order to participate in the Service, it is necessary:

a) to have securities accounts with Monte Titoli’s Central Depository System;

b) to have a TARGET2 PM account;



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c) to use the technical protocols and standards required by Monte Titoli in order to access the Collateral Management Service;

d) to have an organizational structure and technological and IT systems able to guarantee orderly, continuous and efficient management of the dealings and activity deriving from membership of the Collateral Management Service.

2. In addition to the provisions referred to in paragraph 1, for the Collateral Transactions with Bank of Italy, the Participants shall be holders of a Pool Account at Bank of Italy.

3. [For the requirements referred to in paragraphs 1(a) and 1(b), Participants may use a Settlement Agent. There must be only one Settlement Agent for each Market and/or Central Counterparty. In the case referred to in paragraph 1(a), the Settlement Agent must request Monte Titoli to open accounts in its name and dedicated to each Participant on whose behalf it operates. For the Collateral Transaction with Bank of Italy, the Settlement Agent shall coincide with the bank in charge of handling the Collateral of the Pool Account of the Participant to the Collateral Pooling Management System.

4. Participants shall be subject to the obligations deriving from these Rules and the Instructions even if they use a Settlement Agent to perform the tasks in question.]

[Article 7

Relations between Participant and Settlement Agent

1. When either the Settlement Agent or the Participant decide to withdraw from their bilateral agreement signed for the purpose of the Service participation, he must notify his decision to the counterparty and to Monte Titoli. This notification must specify the date from which the withdrawal takes effect.

2. After the date from which the withdrawal takes effect:

a. The Participant shall not entry new Transactions apart FOP Transactions referred to in article 16, without the indication of the forward settlement date. In this case the settlement date of the closing Transaction shall not be later than the last forward Transaction already in the System or, where there are not forward Transaction, the settlement date of the closing transaction will be agreed among the Participant, Settlement Agent and counterparty ;

b. The Settlement Agent, under his only responsibility, may request to Monte Titoli the cancellation of Participant’s spot unsettled Transactions when the Participant does not provide cash for the settlement.



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3. The Settlement Agent must keep the accounts available to the Participant in order to allow the settlement of the forward Transactions.

4. If, before the withdrawal takes effect, the Participants notifies to Monte Titoli that a new agreement with another Settlement Agent is taking effect, the settled spot transactions and the forward transactions will be modified by Monte Titoli as referred in to the Instructions.]

Article 8

Application for the Collateral Management Service

1. Persons intending to participate to the Collateral Management Service must send Monte Titoli a duly signed Request for Services and the related documentation.

2. After verifying that the participation requirements are satisfied and that the documents sent are complete and in order, Monte Titoli shall inform the applicant of its admission to the Service and the start date of operations or the reasons for the rejection of its application.

3. On participating the Collateral Management Service, Participants shall be subject to all the requirements deriving from these Rules, the Instructions and the service participation contracts.

Article 9

Rules of conduct for Participants

1. Participants shall comply with these Rules, the Instructions and the Service Manuals.

2. Participants shall ensure that their conduct is correct, diligent and professional in dealing with each other, in fulfilling their obligations towards Monte Titoli and in using the various technological Systems.

3. Participants shall promptly inform Monte Titoli of any circumstance of which they are aware, including any technical malfunctioning of their Systems, that prejudices or could prejudice the regular operation of the Collateral Management Service.

4. Participants shall refrain from performing acts that could prejudice the regular operation of the Collateral Management Service.

5. Participants shall be liable to Monte Titoli for the behavior of their employees and collaborators.

6. To foster the regular operation of the Collateral Management Service, Participants must monitor the quantities on their securities accounts and ensure that they are



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adequate in relation to their total exposure towards other Participants in the System.

Article 10

Measures taken against Participants

1. Monte Titoli may suspend Participants from the Service:

a) that momentarily do not satisfy one or more requirements referred to in Article 6;

b) that are subject to an administrative measure adopted by the competent regulatory authorities capable of affecting their operations in the context of the Collateral Management Service and, in particular, their ability to fulfill their obligations towards other Participants in the System;

c) if they commit serious irregularities or engage in conduct prejudicial to their dealings with other Participants, the fulfillment of their obligations towards Monte Titoli or the regular operation of the System.

2. Suspended Participants may not enter new Transactions into the System.

3. Suspension measures shall be notified to Participants by Monte Titoli and shall be effective until time mentioned in the measure itself or until Monte Titoli notifies that the circumstances that led to their adoption has ceased to exist.

4. Monte Titoli may adopt the measures needed for the management of suspended Participants’ positions. It shall specify any operational procedures for the management of their accounts in the suspension measures in order to protect the regular operation of the System and Participants’ interests.

5. In relation to the procedures for call or recall Collateral, if Participants fail to fulfill their obligations in the manner and within the time limits specified in the Instructions, the counterparty may ask Monte Titoli to carry out, on its own responsibility, the operations needed to manage the Bilateral Exposures in the manner specified in the Instructions.

6. This article shall not apply to Central Banks or Central Counterparties.

Article 11

Exclusion of Participants

1. Monte Titoli shall exclude Participants from the Service:

a) that no longer belong to one of the categories referred to in Article 5(1);



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b) that fail to satisfy one or more requirements referred to in Article 6 for more than 6 months;

c) that are subject to bankruptcy proceedings, have been declared insolvent or are subject to an administrative measure adopted by the competent regulatory authorities that definitively prejudices their operations in the context of the Collateral Management Service;

d) if they repeatedly commit serious irregularities or engage in conduct prejudicial to their dealings with other Participants, the fulfillment of their obligations towards Monte Titoli or the regular operation of the System.

2. Monte Titoli may adopt the measures needed for the management of excluded Participants’ positions. It shall specify any operational procedures for the management of their accounts in the exclusion measures in order to protect the regular operation of the System and Participants’ interests.

3. This article shall not apply to Central Banks or Central Counterparties.

PART II

THE COLLATERAL MANAGEMENT SERVICE

TITLE I

THE OPERATION OF THE SYSTEM

Article 12

Financial instruments eligible for the Service

1. Monte Titoli shall inform Participants of the financial instruments that, also temporarily, may not be used by Participants.

Article 13

Structure of the accounts

1. Provision shall be made for the Collateral Management Service to have the following types of accounts:

a. giver-accounts: on which to record financial instruments that can be transferred as Collateral;

b. receiver-accounts: on which to record financial instruments that have been received as Collateral.



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2. Participants may ask to open more than one receiver-account in order to segregate their Transactions in the context of the Service as indicated in the Instructions. For each receiver account Participants may ask that such accounts permit re-use within the System of the financial instruments recorded thereon.

3. Financial instruments are entered in the giver-accounts by transferring them from Central Depository accounts other than those dedicated to the Collateral Management Service. Financial instruments may be transferred to Central Depository accounts other than those dedicated to the Collateral Management Service only by those Participants that have entered the financial instruments in the giver-accounts.

4. Financial instruments recorded in accounts dedicated to the operation of the Collateral Management Service may not be used in the context of the Settlement Services (Express II).

5. In Collateral Transactions with the Bank of Italy, Bank of Italy acts as a Receiver of Collateral. The financial instruments transferred as Collateral are registered in to the third party account of Bank of Italy of Central Securities Depository System.

Article 14

Participants’ activity

1. To operate as Givers of Collateral, Participants may use financial instruments entered in their giver-accounts or in their receiver-accounts set up to permit re-use.

2. To operate as Receivers of Collateral, Participants must specify the criteria to be applied for its selection and valuation; if they do not, the Collateral Management System shall apply the general criteria notified in accordance with Article 4(1)(d).

3. For Collateral Transactions with the Bank of Italy, the System shall apply collateral eligibility and assessment criteria as provided by the “Contratto quadro sulle garanzie per le operazioni di finanziamento” (Pooling Framework Agreement).

Article 15

Operational phases

1. The Collateral Management Service shall be divided into the following operational phases:

a) acquisition and matching of Transactions;

b) settlement of Transactions;



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c) valuation and administration of Collateral.

Title II

THE ACQUISITION AND MATCHING OF TRANSACTIONS

Article 16

Eligible Transactions

1. The Collateral Management System acquires Transactions:

a) from Participants other than Central Counterparties;

b) [from Markets and Central Counterparties;]

2. Transactions acquired may be settled:

a. [through the transfer of securities on a delivery-versus-payment (DVP) basis; or]

b. through the transfer of securities on a free-of-payment (FOP) basis.

3. The System shall provide for the entry of DVP Transactions with an indication of the spot and forward settlement dates and of FOP Transactions with an indication of the spot settlement date and with or without an indication of the forward settlement date. If the Participants have simultaneously indicated the spot and forward settlement dates, the closing Transaction shall be generated directly by the System. If, instead, the forward settlement date was not indicated, the closing Transaction must be entered by the Participants.

4. For the settlement of a forward Transaction, the System shall select Equivalent Securities to those transferred as Collateral.

Article 17

The acquiring and matching of Transactions

1. Transactions shall be entered into the Collateral Management Service by Participants in the manner specified in the Instructions and subsequently pass through the following phases:

a) Acquisition, which is divided into the following steps:



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- validation, specific to the type of Transaction entered, shall consist in formal, logical and consistency checks on the elementary data of individual Transactions;

- enrichment, carried out only if no errors were found in the validation phase, shall proceed to the calculation of the missing accounting values according to the type of Transaction entered;

b) Matching, for Transactions that have passed the acquiring phase, shall verify the correspondence of the declarations relating to a given contract, on the basis of checking criteria specific to each type of Transaction.

2. Transactions acquired from Markets and Central Counterparties and Collateral Transactions with the Bank of Italy shall be deemed automatically matched.

3. Matched Transactions may not be altered by Participants. If mistakes were made in the entry phase, Participants must apply for Transactions to be cancelled under Article 18.

4. The System shall provide Participants with complete information on the progress of Transactions in which they are involved.

Article 18

Cancellation of Transactions

1. Individual Participants may request the cancellation of Transactions until they are matched.

2. Matched Transactions may be cancelled by the System at the request of both the Participants involved. In such cases, the requests for cancellation, sent by the Participants in the manner and within the time limits specified in the Instructions, shall be subjected to the acquiring and matching phases.

3. The System shall confirm the cancellation of Transactions to the Participants that are the counterparties thereto.

4. Transactions acquired from Markets and Central Counterparties shall be cancelled in the manner and within the time limits established by the operational rules applying to these systems.

5. Settled Transactions may not be cancelled.

6. The unsettled portion of partially settled Transactions may be cancelled only by Monte Titoli at the request of the Participants in the manner specified in the Instructions.

TITLE III



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THE SETTLEMENT OF TRANSACTIONS

[Article 19

Irrevocability and finality of Collateral Transactions between Participants

1. Collateral Transactions between Participants shall be irrevocable from the time they are matched and final from the start of the first settlement cycle in which they are entered.

2. In the event of a manifest technical error, at the request of the Management Companies and under their responsibility, Monte Titoli shall carry out the Transactions transmitted under error handling procedures in compliance with Legislative Decree 210/2001.

3. Transactions that were final before the opening of insolvency proceedings against a Participant shall complete the settlement cycle under way and, if they are not settled, shall not be resubmitted in the subsequent settlement cycles.

[Article 20

Notification of the amount of cash available]

1. For the purpose of the settlement of Transactions that provide for the exchange of securities for cash, Participants or the Settlement Agents they use, must inform TARGET2, in the manner this specifies, of the amounts they intend to set aside as liquidity reserves.

[Article 21

Settlement of Collateral Transactions between Participants]

1. The settlement procedure shall be activated in the manner and within the time limits specified in the Instructions for the period of the Service’s daily activity.

2. In the context of each settlement procedure, the Collateral Management Service shall use an algorithm to optimize the number of Transactions that can be settled. To this end the System, in the manner specified in the Instructions, shall verify the amounts available on the securities and cash accounts and shall settle the Transactions on a multilateral net basis. The Multilateral securities Balances shall be settled on the accounts dedicated to the Collateral Management Service in the Central Depository System and the Multilateral cash Balances shall be settled on the accounts in TARGET2.

3. Unsettled Transactions shall be resubmitted in the subsequent settlement cycles unless the Participants request their cancellation under Article 18.



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4. At the settlement date of forward Transactions, spot Transactions that have not been settled or, if partially settled, the unsettled portion of spot Transactions shall be automatically cancelled by the Collateral Management System. This provision shall not apply to Transactions acquired from Markets or Central Counterparties if their operational rules provide otherwise.

5. Participants may ask for the partial settlement of Transactions within the limit of the liquidity reserve or the available securities. This request is submitted on general basis according to the procedure laid down in the Instructions.

Article 22

Settlement of Collateral Transactions with the Bank of Italy

1. Collateral Transactions with the Bank of Italy shall not entail settlement of the cash component using the settlement procedure established for Transactions entered into the Collateral Management System. These Transactions are free-of-payment transaction pursuant of the articles 24, 25 and 26 of the CSD Rules.

2. Collateral Transactions with the Bank of Italy shall be irrevocable at the end of the acquisition phase and final from the time they are recorded on Participants’ accounts; this provision supplements those regarding irrevocability and finality for free of payments transfer transaction set in Article 25 of the CSD Rules.

3. Collateral Transactions with the Bank of Italy shall be settled on a gross basis; to this end the System:

a. at the beginning of the settlement cycle, freezes the securities accounts of the Collateral Givers;

b. verifies the availability of the securities;

c. carries out the securities settlement, debiting the Giver’s account and crediting the third party account of Bank of Italy.

4. Bank of Italy having received the notification of registration of securities in its third party account at Monte Titoli, carries out checks and valuations of the Collateral and record it in the Pool Account of the Participant. Bank of Italy maintains separate evidence of Collateral transferred by means of the Collateral management System.

5. Collateral Transactions with the Bank of Italy not settled shall be resubmitted in the subsequent settlement cycles, unless the Participants require the cancellation, as provided in Article 18.

6. At the date of the settlement of Collateral Transactions with Bank of Italy, the unsettled, or partially settled, spot transactions are automatically cancelled from Collateral Management System, for the entire amount or for the unsettled part.



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7. For the closing of Collateral Transactions with the Bank of Italy, the System shall select the securities to be returned and send a return request to Bank of Italy; the latter, having verified the compliance of the conditions for the return of the Collateral from the pool account of the Participant, send to Monte Titoli the instructions for the return of the Collateral from its third party account in Central Securities Depository Services to the Giver’ s account.

8. Participants may ask for the partial settlement of Transactions within the limit of the available securities. This request is submitted on general basis according to the procedure laid down in the Instructions.

TITLE IV

THE ADMINISTRATION OF COLLATERAL

Article 23

Selection of Collateral

1. The Collateral Management System shall select the financial instruments for the transfer of Collateral using an algorithm based on the following parameters:

a) amount to be secured;

b) eligibility rules and valuation principles specified by the Participants;

c) concentration limits;

d) close-links;

e) partial settlement option.

Article 24

Valuation of Collateral

1. With the periodicity specified in the Instructions, the Collateral Management System shall value the financial instruments provided as Collateral and notify the values to Participants in the manner and within the time limits specified in the Instructions.

2. Collateral shall be valued with reference to the Bilateral Exposure referred to in Article 1(g).

3. If the value of the Collateral transferred is found to be insufficient to cover a Participant’s Bilateral Exposure to counterparty, the System shall automatically select and top-up the Collateral in the manner specified in the Instructions and



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inform the interested Participants accordingly. If there are not enough securities to top-up the Collateral fully, the System shall top it up partially.

4. If the Collateral cannot be topped up fully or partially, the System shall send Participants a request to place new Collateral in their giver-accounts in the amount needed to top up the collateral fully.

5. If the value of the Collateral exceeds the Bilateral Exposure to counterparty, the System shall return the excess Collateral in the manner specified in the Instructions.

6. Collateral shall be topped-up or returned only if the ratio of the Bilateral Exposure to the value of the Collateral exceeds a tolerance threshold established by Monte Titoli and notified to the Participants in the Service.

Article 25

Substitution of collateral

1. A Giver may request the substitution of the financial instruments transferred as Collateral with other financial instruments satisfying the eligibility criteria specified by the Receiver.

2. Collateral shall be substituted in the manner and within the time limits specified in the Instructions.

Article 26

Financial instruments subject to corporate actions

1. In the three days before the date set for a corporate action the System shall prevent the transfer of the financial instruments interested.

2. Pending a corporate action involving financial instruments transferred as Collateral, the System, in the manner specified in the Instructions, shall try to substitute such financial instruments three days before the date set for the corporate action.

3. If the substitution of financial instruments involved in a corporate action is not successful, the cash proceeds deriving from the financial instruments provided as Collateral shall be credited to the Receiver and may be remitted to the Giver by the System in the manner specified in the Instructions.

4. The cash proceeds deriving from the financial instruments registered in third party account of Bank of Italy in the Central Securities Depository System shall be received by the Bank of Italy and remitted to the counterparty as regulated by “Contratto quadro sulle garanzie per le operazioni di finanziamento” (Poollig Framework Agreement) and by Bank of Italy’s document “Il sistema di gestione



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delle garanzie in pooling e dei depositi in titoli – Guida per gli operatori” (Membership Guide).

5. During the period in which financial instruments are transferred as Collateral, the exercise of the other property and administrative rights attached thereto shall be governed by the applicable law except where Participants agree otherwise.

[Article 27

Re-use of collateral

1. Financial instruments received as Collateral may be re-used in the context of the System for Collateral Transactions with other Participants in the Service.

2. Participants that intend to exercise the right to re-use Collateral shall ask Monte Titoli to arrange for their receiver accounts to provide this functionality.]



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Copyright © September 2012 Monte Titoli S.p.A., company subject to direction and coordination of Borsa Italiana S.p.A. and belonging to the London Stock Exchange Group. Borsa Italiana's logo is registered trade mark of Borsa Italiana S.p.A Monte Titoli is registered trade mark of Monte Titoli S.p.A. London Stock Exchange and the coat of arms device are registered trade marks of London Stock Exchange plc. The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership of the same. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities. Monte Titoli S.p.A. Piazza degli Affari, 6

20123 - Milano

www.montetitoli.it

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Rules of the Collateral Management Service · 2013-05-28 · PART II THE COLLATERAL MANAGEMENT...

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