Instruction Process Step Description Initiator Instruct intra-position movement Instruct a movement from one sub-balance to another or from one balance status to another on a request received by a client or not. Instructing Party Process instruction Technical and business validation of the details of the request before further processing or not. Executing/Servicing Party Processed Yes/No If YES, that is, the instruction is ready for further processing, the next step is the intra-position movement process. If NO, the update status activity is done. Executing/Servicing Party Monitor intra-position movement instruction Monitor the status of the instruction Instructing Party Intra-position movement process Attempt the movement from one sub-balance to another or from one balance status to another. It may lead to an instruction being sent further down the chain. Executing/Servicing Executed No/Yes If NO, go to update status activity. If YES, go to move position activity. Instructing Party Executed No/Yes If NO, go to update status activity. If YES, go to move position activity. Executing/Servicing Party Update Status Update status (and inform about it). Instructing Party Update Status Update status (and inform it). Executing/Servicing Party Move position Move the holding from one sub-balance to another or from one balance status to another. Instructing Party Move position Move the holding from one sub-balance to another or from one balance status to another (and advice about it). Executing/Servicing Party Partial Settlement Confirmation Step Description Initiator Instruct settlement Instruction of the settlement, based on an instruction received by a client or not. Instructing Party Process instruction Technical and business validation of the details of the instruction before further processing or not. Executing/Servicing Party Processed Yes/No If YES, that is, the instruction is ready for further processing, the next step is the matching and settlement activity. It is understood that, though not shown on the diagram, a status update may also occur following a YES. If NO, the update status activity is done Executing/Servicing Party
Settle closing Settle the closing leg of the transaction. Securities financing Instructing Settle closing Settle the closing leg of the transaction and advise the instructing party. Securities Financing Servicing Party If it is a Repo with multiple pieces of collateral, there should be one securities financing instruction per piece of collateral as today. Two Parties (Securities Financing Servicing Party and the Settlement Executing Party are the Same) Step Description Initiator Instruct securities financing transaction Instruction of repo, reverse repo, securities lending settlement and securities borrowing settlement transactions, based on an instruction received by a client or not. Securities Financing Instruction Party Process instruction Technical and business validation of the details of the instruction before further processing or not. Securities Financing Servicing Party/Settlement Executing Party Processed Yes/No If YES, that is, the instruction is for further processing, the next step is the instruct settlement and monitor activity. It is understood that, though not shown on the diagram, a status update may also occur following a YES. Securities Financing Servicing Party/Settlement Executing Party Create securities financing transactions settlement and monitor Instruction of the opening and closing leg for settlement in a scenario where the next party in the chain will only execute the settlement of the opening and closing legs. Securities Financing Servicing Party/Settlement Executing Party Process instruction Opening and closing and opening. Securities Financing Servicing Party/Settlement Executing Party Manage securities financing transaction Monitor the transaction and report to client on status and confirmations received from the securities financing servicing party. Securities Financing Instruction Party Manage securities financing transactions Monitor the transaction and report to client based on status and confirmations received from the settlement executing party. Securities Financing Servicing Party/Settlement Executing Party Opening settled No/Yes If NO, go to update status activity. If YES, go to settle opening activity. Securities Financing Instruction Opening settled No/Yes If NO, go to update status activity. If YES, go to settle opening activity. Securities Financing Servicing Party/Settlement Executing Party Closing settled No/yes If NO, go to update status activity. If YES, go to settle closing activity. Securities Financing Instruction Party Closing settled No/yes If NO, go to update status activity. If YES, go to settle closing activity. Securities Financing Servicing Party/Settlement Executing Party
Status Reporting Process For context business process description, see all Instruction and confirmation as well as modification processes. Instruction Status Advice The following decision diagram was agreed by the SMPG. Cancellation Request Status Advice Instruction Cancellation Advice This covers the advice of a cancellation initiated by the executing party. This is part of the Instruction Status Advice process. Intra-position Instruction Status Advice Request for Status or Statement Status Advice Processing Change or Modification Status Advice Modification Process Processing Changes – Hold and Release scenario Step Description Initiator Create instruction Instruction of the original instruction with status on hold or released. Instructing Party Processing matching and settlement process Not described in details, the focus is on hold/release. Executing Servicing Party Monitor matching and settlement process Not described in details, the is on hold/release. Instructing
Matching and settlement process Not described in detail here. Executing Party needed Yes/No If YES, that is, a pending instruction need to be split, the next step is the instruct split activity. If NO, the pending instruction goes on its matching and settlement life cycle. Instructing Party Instruct split Instruction of the split on a pending instruction. The split may be reported to the client. It is to be noted that an instruction resulting from the split could be split itself, etc. Instructing Party Execute Execution of the The internal process performed to execute the split may differ from one system to another. It is not important as long as the communication regarding the split is harmonised. Executing Party Monitor matching and settlement process This activity is not described in detail here. Applies to all instructions, resulting from a split or not. Instructing Party Monitor matching and settlement process This activity is not described in detail here. Applies to all instructions, resulting from a split or not. Executing Party Settled Yes/No If NO, go to update status activity. If YES, go to settle trade activity. Applies to all instructions, resulting from a split or not. Update status Update status (and inform about it). Applies to all instructions, resulting from a split or not. Settle instruction Settle the instruction in the custody system. Applies to all instructions, resulting from a or not. Allegement Process Step Description Initiator Process allegement Process the allegement and allegement removal received from the Executing/Servicing Party Instructing Party Allege Following the receipt of counterparty instruction, an allegement is sent. Executing Instruction sent or not If an instruction has been sent, go to Investigate and contact counterparty. If NO, go to Initiator or not? Instructing Party Investigate and contact counter Investigation of the and contact of counterparty if needed. Instructing Party Processing and matching process not describe here. Executing Party Initiate or not If the Instructing Party is the initiator of the instruction, then instruct. If not, allege client Instructing Party Matched with the alleged instruction If yes, go to remove allegement. If not, go to allege counterparty Executing Party Instruct Instruct the missing instruction. Instructing Party Remove allegement Remove the allegement previously sent. Executing Party Allege client Allege the next party in the chain, that is, the client. Instructing Party Allege counterparty Allege the counterparty. Executing Party
The executing/servicing party may send back to the instructing party and in turn the client a processing status and/or a settlement/matching status referring to the state for both transactions. The same flow takes place on the counterparty's side. When the transactions settle at the executing/servicing party, this latter sends two SecuritiesSettlementTransactionConfirmation to advise the instructing party and then in turn the client that the settlement has taken place. The same flow takes place on the counterparty's side. Unilateral Splitting Unilateral splitting is when only one party instructs the split. This happens, for example, in the UK and the US. This diagram shows the messages flow between the client, the instructing splitting party, the executing/servicing party in addition to the counterparty's client and instructing party. A client sends a SecuritiesSettlementTransactionInstruction to the instructing/splitting party (for example a global custodian) which in turn send the instruction to the executing/servicing party (a CSD). The same flow takes place on the counterparty's side. The executing/servicing party may send back to the instructing party and in turn the client, a processing status and/or a settlement status referring to the state of the transaction. The same flow takes place on the counterparty's side. The instructing/splitting party sends a SecuritieSettlementConditionModificationRequest to the executing/servicing party to request the splitting of the instruction in two. This can happen when the client sends an instruction for US government bonds with a quantity greater than 50 million which is not allowed on the US market. The executing/servicing then cancels the counterparty's transaction and replaces it with two new transactions. The executing/servicing party may send back to the instructing party and in turn the client a processing status and/or a settlement/matching status referring to the state of the transaction. The same flow takes place on the counterparty's side. When the transactions settle at the executing/servicing party, this latter sends two Security SettlementTransactionConfirmation to advise the instructing party and then in turn the client that the settlement has taken place. The same flow takes place on the counterparty's side.