QE said after extensive consultations with market participants, global custodians, international investors and regulators, it has now issued the new rules and operational procedures for its upcoming DVP implementation.
The new rules will be effective from 11 April 2011.
According to QE, the process is designed in a way that allows flexibility to the custodians to adopt procedures as per the readiness of their clients. After the implementation of the new rules, the custodians should be able to participate in the cash settlement cycle.
At the same time, custodians will have the ability to confirm or reject trades for settlement, whereby cash and securities settlement obligations for rejected trades will remain with the broker for settlement. This ensures that custodians have full control of securities thus making it optional to operate dual accounts.
Rejected trades will be settled by the broker. The broker may use the newly introduced buy-in facility until T+6 to buy any shares required to settle the trade.
Failing a successful buy-in process, a cash closeout will conclude the trade. Upon implementation these changes ensure DVP settlement.
By adopting the DVP rules, there is no longer a requirement to maintain dual accounts.
QE CEO Andre Went said this is only the first step towards the enhancement of the post trade infrastructure. They also plan to implement a central counterparty at a later stage as part of their strategy.