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Enclosure 23(E23)- Completion of Transactions with Securities through Gross Settlement System in Real Time  
     
 

This procedure specifies the technology of processing and completion of transactions with securities. Subject of Regulation:

1. Subject of this procedure is as follows: All transactions with securities concluded on the regulated securities markets; Transactions registered with Central Depository AD with an order for monetary settlement on them; Transfer of securities as a result of initial offering or buy-back of securities; Buy-back and offering of securities by investment companies – open type; Orders for transfer of funds between settlement and non-settlement accounts of investment intermediaries; Other transactions which require transfers of funds. Main principles of processing of transactions with securities:

2. The transactions with Central Depository AD shall be finalized on day Т + 2 / the second day / following day Т.

3. The transactions with Central Depository AD shall be finalized on net basis in respect of cash receivables and obligations thereon. The net position of each member of Central Depository AD shall be calculated on basis of the transactions under item 1 performed during the day as well as those not finalized from the previous days.

4. The investment intermediaries shall be obliged to open at least one account (settlement account) under special management condition with any commercial bank, operating with RINGS for finalizing transactions with securities, according to Procedure of payments under transactions with dematerialized securities /PP/. The investment intermediaries have no right to debit these accounts in other way except by an order to Central Depository AD.

5. Central Depository AD shall be notified at least twice daily by the banks under item 8 about the funds available on the settlement accounts of the investment intermediaries. In case Central Depository AD is not notified about a settlement account of an investment intermediary, it shall accept that there are no funds available on this account.

6. The banks, members of the Depository declare before Central Depository AD a limit of cash funds intended for completion of transactions with securities /personal or administrated by their clients/.

7. Settlement account shall be debited by a holder – investment intermediary only for finalizing transactions with securities or pursuant to an order of transferring cash funds to other non-settlement account.

8. After calculation of the net positions of the investment intermediaries, the new debit net positions shall be compared to the data submitted by the commercial banks about the funds available on the settlement accounts of the investment intermediaries under item 9. In case of insufficiency the net position of the investment intermediary shall be corrected to a net position which is lower or equal to the funds available on all its settlement accounts. The correction shall be carried out in delay of finalizing a sufficient number of buy transactions of the respective investment intermediary under the present procedure.

9. After calculation of the net positions of the investment intermediaries, the new debit net positions shall be compared to the data submitted by the commercial banks about the funds available on the settlement accounts of the investment intermediaries under item 9. In case of insufficiency the net position of the investment intermediary shall be corrected to a net position which is lower or equal to the funds available on all its settlement accounts. The correction shall be carried out by later finalization of sufficient number of buy transactions of the respective investment intermediary under the present procedure. 9. When the net positions are calculated the following priorities listed from the highest to the lowest, shall be observed: Priority by type of market and market segments: Transactions concluded on regulated markets; Buy-back, commercial offering and other transactions under specific conditions for securities registered on regulated markets; Initial public offering; Transaction concluded on unregulated markets; Orders by investment intermediaries for transfer of funds to non settlement accounts. Priority by type of transaction: Transactions in which the parties – investment intermediaries trade at the expense of their clients; Transactions in which one of the parties - investment intermediaries trade at the expense of its clients; Transactions in which the parties – investment intermediaries trade at their own expense. Priority by time of conclusion of the transactions: Transactions received in the system earlier or concluded earlier on the regulated market are of higher priority in case of equal priorities under p. 13.1 and p. 13.2.

10. Transfer of cash funds from a settlement account to non-settlement account shall be performed through Central Depository AD. The investment intermediaries may order these transfers in writing or in electronic format as specified by the depository. The orders are entered to the current settlement cycle if received until 13.30 h. Otherwise they shall be accepted for completion in the next settlement cycle. Technology of finalizing the transactions:

1. Central Depository considers the day marked as day Т as follows:

· For transactions concluded on the Bulgarian Stock Exchange – this is the day of receiving the transactions data. In case of delay by the Bulgarian Stock Exchange in submitting the data of the transactions, the Central Depository shall try to compensate the delay according to the day of conclusion;

· For OTC transactions – this is the day of finalizing the process of comparison and establishment the uniformity of the requisites (matching) of messages for the transactions.

2. Until the end of day Т – 18.00 h. sufficient data for conclusion of the transaction should be submitted to Central Depository AD by the parties of the transaction – investment intermediaries.

3. The transaction data shall be reviewed until 19.00 h. and notice shall be submitted back to the investment intermediaries – parties of the transaction about eventual mistakes or discrepancies as well as about the stage of processing of the transaction. In case within the term under p. 12 insufficient data for conclusion of the transaction are submitted in Central Depository system, the check shall be performed after receipt of the data.

4. On day Т + 1 until 17.00 h. the investment intermediaries may correct the mistakes, correction of the transaction data.

5. On day Т + 2 until 9.00 h. the commercial banks shall submit information about the funds available on the settlement accounts of the investment intermediaries to Central Depository AD.

6. On day Т + 2 at 9.00 h. Central Depository AD shall list all the transactions with correctly received data by priorities as specified under p. 9.

6.1. Central Depository AD shall check the availability of the securities on the accounts of the holders – sellers of the transaction. In case of insufficiency of securities, the respective transaction shall not be processed under the general procedure and shall be marked “lack of securities”. The check on securities availability shall include the amount to be acquired from executable „buy transaction” of the respective securities, the same holder and which shall be finalized within the same settlement period.

6.2. For all the transactions, the securities shall be blocked on the account on which they are available. Central Depository shall consider that the moment of blocking of the securities under this procedure is the moment within the meaning of Art. 109c of Public Offering of Securities Act, after which no participant with the system or third party may cancel or repeal an order accepted by Central Depository system, or the fulfillment of this order to be frustrated in any other way. After that moment Central Depository does not execute a distraint or orders of establishing other encumbrances on the securities, being subject of the respective transaction.

6.3. Upon initiating the settlement of all the transactions at the expense of the clients where more than one client participates, the securities shall be transferred to intermediate account (under p.6.7. of Enclosure 7/E07), from which they shall be allocated according to the orders for transfers thereafter.

7. On the basis of all successively checked transactions, the net position of the respective investment intermediary shall be calculated by summarizing the amounts of all the orders by which the investment intermediary with receive funds and deducting the amounts of orders by which the investment intermediary is obliged to pay. The net position as calculated is debit, credit or zero.

8. Debit positions of each investment intermediary shall be compared to the amount of the funds available on its settlement accounts. In case of insufficiency of funds, the respective transaction shall not be processed under the general procedure by its priority and is marked “lack of funds”. The transactions shall be extracted one after another whereas new net positions of all investment intermediaries shall be calculated.

9. The steps under p.17 and p.18 shall be repeated until all net debit positions are lower or equal to the total summarized funds available on the settlement accounts of the investment intermediary.

10. Central Depository AD following completion of processing shall inform the investment intermediaries about the status of the deals.

11. From 10.30 to 13.00 h. the investment intermediaries may correct the funds available on the settlement accounts with the commercial banks. 12. On day T+2 until 13:00 h. the commercial banks shall submit the final data in respect of the funds available on the settlement accounts of the investment intermediaries to the Central Depository AD.

13. Central Depository AD shall perform the operations as specified from p.16 to p.20 considering the new availabilities ordered by the commercial banks on the settlement accounts of the investment intermediaries. In case a bank does not submit any data under item 28, Central Depository AD shall consider the data received under p.15 to be true. In case no data are received during the respective settlement period, Central Depository AD shall consider these accounts to have zero balance. The operations from p.16 to p.20 shall be performed on every round hour from 8:00 to 13:00 h.

14. On the basis of the received net positions of the investment intermediaries under p.18 and considering the burden of allocating the funds available on the settlement accounts of the investment intermediaries among the respective commercial banks as well as the positions of the banks themselves as a result of their transactions with securities, the net position of each commercial bank is found toward RINGS. For this purpose, all credit positions shall be summarized and all debit positions on the settlement accounts of the investment intermediaries - clients of the bank shall be deducted, as well as its own positions as a result of transactions with securities. The calculated net position is debit, credit or zero.

15. Central Depository AD on the basis of the calculations under p. 24, at 15.00 h. shall prepare and submit a message “Net Settlement Order “to RINGS, according to PP.

16. Until 17.00 h. Central Depository AD shall receive from RINGS a feedback for successful or unsuccessful processed message “Net Settlement Order”.

17. In case of unsuccessfully processed message under p.26, all transactions shall be transferred for the next settlement period, whereas during the calculation, the net positions of the commercial banks under p.24 for which information “Insufficient cash funds” is received, shall be deducted”.

18. In case of successfully processed message “Net Settlement Order“, the securities are transferred to the accounts of the holders. In case of transactions where the sellers and/or buyers are more than one, the securities shall be transferred by the respective transfer accounts (under p.6.7 of Enclosure 7/E07) of the investment intermediaries, being parties of the transaction.

19. In case of successfully processed message “Net Settlement Order“, Central Depository AD shall prepare a message to the commercial banks for the net positions on each settlement account with them as a result of the settlement performed on transactions with securities. The reference number of the transaction with the securities with Central Depository AD shall be specified as reason for the operations performed.

20. Central Depository AD shall notify the investment intermediaries for the finalized transactions.

21. The transactions marked as “waiting securities “ or “waiting cash funds“ shall be included in every settlement period to follow until they are successfully finalized but not later than day Т+7 inclusive. After that period they shall be marked “Not executable” and the respective parties and officials shall be advised thereafter. After expiration of this period the transaction shall be kept registered with Central Depository AD system and may be processed on the ground of further written information received by the regulated market or the parties of the transaction.