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KELER settlement of cash transactions concluded on MTS Hungary
Pursuant to the decision of the State Debt Management Agency from 02 January, 2012 secondary trading in government securities (government bonds and 12-month discount treasuries) and market making are managed on the MTS Hungary platform operated by EuroMTS. Deals made on MTS Hungary are cash transactions with multinet settlement guaranteed by KELER CCP.
Receipt of trade
KELER accepts transactions in line with the provisions of the trilateral cooperation agreement concluded by EuroMTS, KELER and KELER CCP. KELER takes receipt of information related to transactions in the format of SWIFT MT518 messages once deals are concluded.
The data of transactions transmitted cannot be modified subsequently by the clearing member, KELER accepts a request on the modification of data on trading from MTS Hungary only. The MTS Hungary member can cancel deals submitted on the trading platform until the close of market on trade day. KELER receives the cancellation as a new deal in the opposite direction, as a result the balance of the two transactions will be 0. Therefore the cancelled transaction will impact neither the multinet financial position, nor the obligation to provide collateral.
Transactions concluded on MTS Hungary are received at the gross price.
In line with the provisions of the Act on the capital market own securities and funds and client securities and funds are to be managed in a segregated manner in the clearing house, therefore KELER maintains dedicated accounts for securities and cash performance.
Cash transactions with multinet settlement are confirmed at own, non-clearing member and consolidated client level.
Currently only transactions for own account can be concluded at MTS Hungary.
Netting and confirmation of transactions
KELER completes multilateral netting by clearing member, by securities with a segregated breakdown, showing the segregated sell or buy positions of the clearing member consolidated by securities and calculated for Day T.
Furthermore KELER completes the segregated financial netting by clearing members of transactions for Day T, showing by settlement currencies the segregated sell or buy position of the clearing member calculated for Day T. KELER informs the clearing member until 7:30 hrs on T+1 Day on the financial and securities netting in the electronic customer relationship system KID or in the form of SWIFT messages through RCMS.
Principles of multinet settlement
Multinet settlement in case of cash transactions concluded at MTS Hungary is as follows:
• rolling settlement (settlement is completed every day and not only at a given date, e.g. at month end)
• with T+2 settlement cycle,
• with multilateral netting (each clearing member will have a net buy and a net sell position by securities and by currencies) (T refers to trade day, days are business days).
Settlement is based on the DVP (delivery versus payment) principle, accordingly financial and securities settlement are interdependent, if either is not performed, the other will not be performed, either.
Multinet settlement is completed on the consolidated client and own accounts of the clearing member, on the accounts opened by the clearing member for non-clearing members and on the accounts of settlement agent clearing members and accounts opened for non-clearing members.
KELER CCP Ltd. is acting as the central counterparty. The essence of CCP is that the central counterparty guarantees transaction performance and in case of eventual default it acts as seller toward the buyer and as buyer towards the seller (this process is called novation), thus guaranteeing the transactions it accepted, therefore the central counterparty is liable for performance as a contractual counterparty. If either party fails to meet obligations, the central counterparty is obliged to honor obligations resulting from the transactions even with the use of its capital.
Multinet cash transactions concluded at MTS Hungary are considered transactions concluded at a regulated market guaranteed by KELER CCP.
In cash transactions with multinet settlement (with T+2 settlement) KELER CCP guarantees performance after multilateral netting.
Order of settlement
The net securities seller on Day T is obliged to make sure that at the latest until 14:00 hrs on SD the securities required for the performance of transactions on Day T are available on the segregated stock exchange securities settlement sub accounts.
The net securities buyer on Day T is obliged to make sure that at the latest until 14:00 hrs on SD the HUF and foreign currency cover required for the performance of transactions to be settled on SD is available in a segregated manner at its bank accounts.
From the start of the real time processing of SD KELER takes the securities required for the SD settlement as an item with distinguished priority from the stock exchange securities settlement sub accounts of the clearing member and the stock exchange settlement sub accounts opened by non-clearing members and credits the securities on the technical settlement account of KELER CCP that is used for settlement.
Simultaneously KELER makes an entry with distinguished priority to debit the funds required for SD settlement to the segregated bank accounts of the clearing member or if the HUF bank account of the clearing member is kept by the NBH from the bank account kept by the NBH and credits the amount to the technical bank account of KELER CCP.
KELER continuously verifies cover for the debit entries initiated and if sufficient cover is available on the accounts of the clearing member, the entry is made immediately. If the bank account is kept by the NBH, KELER inputs a debit order in VIBER to the NBH, and the NBH verifies cover and makes the entry to the account. In this case based on the advice of the NBH KELER credits the technical bank account.
The clearing member / settlement agent receives information on obligations related to multinet settlement from the call sent by KELER or from the settlement.
Having regard to the DVP principle applied for settlements clearing members involved can access securities or amounts due to them if the other side of the transaction (financial or securities performance) is completed. In the system of KELER the balances of central securities and cash accounts supporting regulated market settlement are checked to verify that the other side of the transaction was performed. As soon as the securities of net sellers and the funds due to net buyers are fully credited to the central account, KELER immediately makes securities and financial credit entries against the central account to transfer securities to the buyers and funds to the sellers. Performance on the securities and cash side is final and irrevocable.
Consequently the final deadline of multinet settlement is 14:00 hrs, however if the necessary securities and/or funds are available on the technical accounts of each member prior to the final deadline, settlement can take place earlier.
In case of multinet settlement performed after 14:00 hrs (default) KELER is entitled to invoice late fees and collect default fees and default surcharge as defined in the Fee Schedules of KELER and KELER CCP respectively.
Provision of collateral
In the period from trade date of cash transactions with multinet settlement (Day T) until settlement date (SD, that is the second settlement day after trade day in MTS Hungary: T+2) clearing members are obliged to provide collateral. KELER CCP publishes the extent of this obligation in an Announcement.
More details are available at: