1. This Procedure regulates the principles, organization and technology for effecting payments for deals with dematerialized securities, performed through the system of CD through RINGS.
2. The procedure is in compliance to the requirements of Ordinance № 3 of the Bulgarian National Bank on Funds Transfers and Payment systems; Regulations and Procedures for Work of RINGS and other regulations of the activities of CD.
3.1. Bank shall be a local bank or a branch of foreign bank that has received license for performance of banking activities at the territory of the Republic of Bulgaria through a branch.
3.2. Bank account of a member of Central Depository shall be a current account within the meaning of Art. 2, Para. 3, item 1 of Ordinance № 3 of the Bulgarian National Bank on Funds Transfers and Payment systems. The additional requirements for administration of the funds on these accounts shall be set forth in this procedure.
3.3. Order for settlement shall be a payment instruction submitted to RINGS by a system operator of payments according to a format determined in advance.
3.4. Request for a transfer shall be a declaration of intention made in writing or electronically by a member of the Central Depository submitted to the Central Depository. The request shall contain instruction for effecting a transfer from the bank account of the member of the Central Depository and shall have contents and essential and obligatory elements as set forth in the Rules and Regulations of the Central Depository.
3.5. Balance on the bank account shall be the disposable amount on a bank account for effecting a payment for deals with dematerialized securities.
3.6. Balance on an account with dematerialized securities is the number of free for transfer dematerialized securities on this account.
3.7. Dematerialized transfer is transfer of funds effected through debiting and crediting of bank accounts.
3.8. Calculated cash net liabilities are amounts received following the netting of the receivables and obligations arising following the conclusion and registration of deals with dematerialized securities by the members of Central Depository.
3.9. Settlement at the Bulgarian National Bank (BNB) shall be a transfer of funds between settlement accounts kept with the BNB of the participants in the settlement.
3.10. System for investment intermediaries (SII) shall be a system of instructions about the types of messages for transfer of dematerialized securities delivered electronically or otherwise between the Central Depository and its members.
3.11. Settlement account shall be an account of a participant in the settlement kept with the BNB.
3.12. Message of SII shall be a sequence of symbols according to the standard ASCII (American Standard Code for Information Interchange) with length and syntax, as described in the standards of ISO (International Standard Organization) - ISO 15022 format and specified in SII.
3.13. RINGS (Real-time Interbank Gross Settlement system) is a system for online gross settlement at the BNB, where settlement of payments in the national currency at the territory of the country is performed immediately and individually for every order of a transfer in compliance to operational rules and procedures prepared at the BNB.
4. General principles for payments for deals with dematerialized securities.
4.1. Participants in the payment process are as follows:
4.1.1. Member of Central Depository;
4.1.2. Bank with which a currency account of a member of the Central Depository is opened when this member is not a bank;
4.1.3. Central Depository;
4.1.4. Bulgarian National Bank – as an agent for settlement.
4.2. Settlement of dematerialized securities.
Settlement of dematerialized securities shall be effected according to the procedure described in Enclosure 23 Section 3.
4.3. Reason for payment.
The reasons for payment for deals with dematerialized securities shall be registered deals with dematerialized securities at the Central Depository with agreed delivery against payment based on which currency net exposures are calculated of the members of the Central Depository.
4.4. Preliminary consent for disposition with currency in cash on bank account of a member of the Central Depository.
4.4.1. For performance of payments for deals with dematerialized securities investment intermediaries other than banks shall open current accounts with a bank selected by them, which shall be used only for servicing of payments related to their activities as investment intermediaries. In the contract for account opening between the servicing bank and the investment intermediary, the account holder shall consent in advance that the accounts shall be debited solely by Central Depository on behalf of and at the expense of the investment intermediary in the following cases:
· The cases as per item 4.3;
· At the request of the account holder submitted to Central Depository according to the Rules and Regulations of Central Depository.
4.4.2. Every member of Central Depository shall consent in writing that Central Depository shall organize and perform all actions with regard to completion of deals with agreed delivery against payment and servicing of payments for bond issues. The member of Central Depository shall be obliged to fulfill all instructions of Central Depository, arising out of this consent. The member of Central Depository shall submit at the servicing bank “Consent for direct debit” – Enclosure № 7 to Art. 21, Para. 2 of Ordinance № 3 of the Bulgarian National Bank on Funds Transfers and Payment systems.
4.5. Cancellation of preliminary consent pursuant to item 4.4.2
Cancellation of preliminary consent for disposition with currency in cash by a member of the Central Depository other than a bank shall be possible only with the express consent of Central Depository following a written demand..
4.6. Conditions for effecting a payment.
Payment shall be effected under the following conditions:
4.6.1. The member of Central Depository shall have submitted to the servicing bank Consent for Direct Debit from the member’s bank account at the request of Central Depository, and shall declare this account at the Central Depository.
4.6.2. Members of Central Depository which are banks shall use in the cases pursuant to 4.6.1. their settlement accounts at the BNB without submitting Consent for Direct Debit.
4.6.3. In the bank account or the settlement account of the member of Central Depository there shall be sufficient funds.
4.6.4. The member of Central Depository shall have submitted in the due term the set of instructions for performance of transactions in compliance to the SII requirements.
4.7. Net exposures of the members of Central Depository
4.7.1. Central Depository shall calculate on a multilateral base the net exposures of the mutual currency obligations of the members arising as a result of the registered but unfinished deals with dematerialized securities as of the current moment and in compliance to the schedule of the system day of RINGS.
4.7.2. The calculation of the net exposures shall be performed simultaneously for the investment intermediaries and for the banks which participated in deals with dematerialized securities in accordance to Enclosure 23.
4.8. Aggregate net exposure of a bank
4.8.1. Central Depository shall calculate the aggregate net exposures of banks participating in payments for deals with dematerialized securities in RINGS, by summing up the net exposures of the members of Central Depository, clients of the respective banks, separately for every bank.
4.8.2. When the bank is a party in deals with dematerialized securities its net exposure shall also participate in the formation of the aggregate net exposure of the bank.
4.9. The advance notification of the banks about the net exposures with respect to deals with dematerialized securities
The amount for payment to the respective bank shall be equal to its aggregate net exposure. Central Depository shall notify in advance the bank about the net exposures for deals with dematerialized securities in compliance to the schedule of the system day of RINGS and the Rules and Regulations of Central Depository.
4.10. Notification about balances on bank accounts
By the provided Preliminary Consent for disposition with the bank account for deals with dematerialized securities, the member of Central Depository other than a bank shall agree that the bank through its Head Office shall inform on a daily basis Central Depository on the balance on the bank account.
Bank-member of Central Depository shall inform the Central Depository also about the funds intended for the deals of the bank itself and bank’s clients in the bank’s capacity of investment intermediary.
In case that a bank shall not fulfill its obligation pursuant to this item, it shall be deemed that all accounts of clients of Central Depository with this bank, including the bank’s own funds with reference to payments with dematerialized securities, shall be of zero balance.
4.11. Identification of the possible payments on bank accounts for concluded deals with dematerialized securities
Based on the information about the balances on bank accounts Central Depository shall identify the concluding net exposures of its members and shall initiate a settlement order in RINGS. The deals for which there shall not be sufficient funds on bank accounts shall be included in the settlement order, which shall be submitted on the next system day of RINGS. Central Depository shall notify the parties in unfinished deals for the reasons for delay of the deals.
4.12. Settlement of payments for deals with dematerialized securities in RINGS
4.12.1. Based on identified aggregate net exposures pursuant to item 4.8. Central Depository shall form a settlement instruction on a multilateral base and shall submit it to RINGS.
4.12.2. The settlement of payments with settlement instruction for RINGS shall be performed in compliance to „Rules and Procedures for Work of Real-time Gross Settlement System (RINGS)” in accordance to the schedule of the system day of RINGS. Central Depository shall receive a confirmation by RINGS for performed or non-performed settlement.
4.12.3. In case of insufficiency of funds on a settlement account of one or more bank-payers, the settlement instructions submitted by Central Depository shall remain in a waiting mode in RINGS and be performed when the required amounts are provided.
4.12.4. On receipt by RINGS of an answer “rejected instruction” with information about the banks with insufficiency of funds on the settlement accounts, Central Depository shall perform the following procedures:
-It shall exclude the banks indicated from the scheme for calculation of aggregate net exposures;
-It shall calculate again the aggregate net exposures for the remaining banks generate and submit to RINGS a new settlement instruction/order.
4.12.5. Central Depository shall not maintain a queue of waiting instructions to RINGS for the next working day. For the non-performed instructions Central Depository shall create and send to the bank notifications for rejected deals.
4.12.6. At the end of the system day of RINGS Central Depository shall send to the BNB information about all deals rejected according to the terms of the preceding item.
4.12.7. Deals, for which no settlement has been performed as per item 4.12.2., shall be kept separate and shall be processed on the following system day.
4.12.8. The communication between Central Depository and RINGS shall be carried out through standard notifications as identified in „ Rules and Procedures for Work of Real-time Gross Settlement System (RINGS)”.
4.13. Confirmation of performed payment by Central Depository
Central Depository shall notify the banks about the successfully performed settlement in RINGS. The notification shall contain the necessary and sufficient information for performance of all accounting entries related to the deals with dematerialized securities.
5. Communication between Central Depository and a bank
5.1. Central Depository shall exchange the information as set forth in this procedure with the banks through notifications from and to their head offices.
5.2. The communication between Central Depository and the banks shall be performed according to the order and procedures set forth in the Rules and Regulations of Central Depository.
5.3. The format of notifications shall be ISO 15022.
5.4. When informing Central Depository about balances on accounts as per item 4.10. banks shall use notification МТ 293 - ISO 15022.
5.5. When informing banks, Central Depository shall use notification МТ 298 SMT 201- ISO 15022, following a successfully processed instruction by RINGS.