SFTR Corporate Actions Working Group #4 27 th June 2019 James - PowerPoint PPT Presentation

SFTR Corporate Actions Working Group #4 27 th June 2019 James Langlois

SFTR Corporate Actions Q2 2019 Meetings Date Name Agenda 23/04/2019 1# Corporate Actions WG General discussion and identification of SFTR CA issues 16/05/2019 13# SteerCo. SFTR CA Update 23/05/2019 2# Corporate Actions WG Determine Corporate Actions Universe (closed session) 30/05/2019 14# SteerCo. SFTR CA Update 05/06/2019 3# Corporate Actions WG Agree Corporate Actions Clusters and Booking Activities 10/06/2019 15# SteerCo. SFTR CA Update 27/06/2019 4# Corporate Actions WG Finalise Corporate Actions Clusters and Booking Activities 02/07/2019 17# SteerCo. SFTR CA Update 10/07/19 5# Corporate Actions WG Determine Best practice for CA Clusters 2

SFTR Corporate Actions: Overall Plan & Scope 1- Define Corporate Actions Universe (Q2 2019) • Form a distinct list of all CAs Align with the ISO 15022 (SWIFT) and 20022 (STP) standards • Determine attributes and effects of each CA on SFTs • 2- Stratify the CAs into Clusters by their effects on SFTs & booking models (Q2 2019) Review groups of CAs which can be processed similarly • Confirm CAs which have no material effect on SFTs • Confirm booking models for clusters • • Define the SFTR reports each Cluster of CAs affects 3- Agree an SFTR related Best Practice for each CA Cluster (Q2 2019) • Reach agreement on specific booking models which enable SFTR compliant reporting Determine universal procedures for processing and communicating CAs on SFTs • 4- Connect the SFTR CA WG’s output with the wider industry discussion (Q3 2019) Contribute to the Securities Lending industry’s general policy (outside of SFTR) • 3

SFTR Corporate Actions: Working Group #3 - REVIEW Stratify the CAs into Clusters by their effects on SFTs & booking models Review groups of CAs which can be processed similarly • Review CA Clusters as proposed in SFTR CA WG 2 • Discuss impact of CA types in the CA Cluster to the SFT • • Review Booking Activities Discussed CAs which have no material effect on SFTs • Information Only/ Non-Economic CAs • Cash/ Economics outside of the SFT • Discussed CAs which cause direct downstream effects on SFTR reports and must therefore • be aligned by best practice: Cluster # CAs Additional Securities on Loan 14 Full Return 4 Partial Return 2 Full or Partial Return 4 Return and New Trade 14 38 4

SFTR Corporate Actions: Approach for this Working Group 1- Progress Update 2- Present Results of the Firm Questionnaire 3- Examination of the Cash/ Economics Outside of the SFT Cluster 4- Review differences between Firm Response for: • Cash Movements SFT Bookings • Scope Justification • EQ/FI • 5- Open Discussion (time allowing) 6- Next Steps 5

SFTR CA Firm Questionnaire Response - Results 1- Response was received from 13 member Firms, as presented in the accompanying .xlx file, which has been anonymised. 2- Number of corporate actions agreed (signed off) across all firms vs open issues to discuss, by CA Cluster (expounded on later slides) : Cluster Y N Non-Economic or Information 22 3 Economic outside of the trade 6 8 Additional Securities on Loan 1 13 Full or Partial Return 1 3 Full Return 1 3 Partial Return - 2 Return and New Trade 8 6 Total 39 38 3- Firm’s submission for booking processes for SFT amends was varied and revealed many differences – collection of data must be improved (expounded on later slides). 6

SFTR CA Firm Questionnaire Response - Results All of the following Non-Economic or Information Only CAs have been agreed across all (13) responders: Cash SFT ISO ISO Distinction ISO Name Movement EQ FI Booking Scope Justification Code (reviewed) (Y/N) (Y/N) ACCU Accumulation Information N N Non-Economic or Information Y Y ACTV Active Trading Status Information N N Non-Economic or Information Y Y BMET Bond Holder Meeting Information N N Non-Economic or Information N Y BRUP Bankruptcy Information N N Non-Economic or Information Y Y CERT Non USTEFRAD Certification Information N N Non-Economic or Information N Y CLSA Class Action Proposed Settlement Information N N Non-Economic or Information Y Y CMET Court Meeting Information N N Non-Economic or Information Y Y CREV Credit Event Information N N Non-Economic or Information Y Y DLST Trading Status Delisted Information N N Non-Economic or Information Y Y DSCL Disclosure Information N N Non-Economic or Information Y Y EXTM Maturity Extension Information N N Non-Economic or Information N Y MEET General Meeting Information N N Non-Economic or Information Y Y MTNG Securities Holders Meeting Information N N Non-Economic or Information Y Y OMET Ordinary General Meeting Information N N Non-Economic or Information Y Y REDO Redenomination Information N N Non-Economic or Information y y REMK Remarketing Agreement Information N N Non-Economic or Information Y Y SMAL Smallest Negotiable Unit Information N N Non-Economic or Information Y Y SUSP Trading Status Suspended Information N N Non-Economic or Information Y Y TNDP Tax On Non-Distributed Proceeds Information N N Non-Economic or Information Y Y TREC Tax Reclaim Information N N Non-Economic or Information Y Y WTRC Withholding Tax Relief Certification Information N N Non-Economic or Information Y Y XMET Extraordinary or Special General Meeting Information N N Non-Economic or Information Y Y 7

SFTR CA Firm Questionnaire Response - Results All of the following CAs for Economic Outside of the Trade, Full Return, Full or Partial Return, Additional Securities on Loan, Return and New Trade, have been agreed across all (13) responders: SFT Cash ISO ISO Distinction ISO Name Movement Booking Scope Justification EQ FI Code (reviewed) (Y/N) (Y/N) CAPD Capital Distribution Mandatory Cash Distribution Y N Economic outside of the trade Y Y CAPG Capital Gains Distribution Mandatory Cash Distribution Y N Economic outside of the trade Y Y DECR Decrease In Value Mandatory Cash Distribution Y N Economic outside of the trade Y Y DVCA Cash Dividend Mandatory Cash Distribution Y N Economic outside of the trade Y N INTR Interest Payment Mandatory Cash Distribution Y N Economic outside of the trade Y Y PRII Interest Payment With Principal Mandatory Cash Distribution Y N Economic outside of the trade Y Y WRTH Worthless Mandatory Reorganisation N Y Full Return Y Y TEND2 Takeover for shares Mandatory Reorganisation Y Y Full or Partial Return Y Y PRIO Priority Issue Voluntary Reorganisation Y Y Additional Securities on Loan Y Y CONV1 Conversion Mandatory Reorganisation N Y Return and New Trade Y Y PARI Pari Passu Mandatory Reorganisation N Y Return and New Trade Y Y SPLF Stock Split Mandatory Reorganisation N Y Return and New Trade Y Y SPLR Reverse Stock Split Mandatory Reorganisation N Y Return and New Trade Y Y EXWA Warrant Exercise Mandatory Reorganisation with Options Y Y Return and New Trade Y Y MRGR Merger Mandatory Reorganisation with Options Y Y Return and New Trade Y Y CONV2 Conversion Option Voluntary Reorganisation N Y Return and New Trade Y Y EXOF2 Exchange (Voluntary) Voluntary Reorganisation Y Y Return and New Trade Y Y 8

SFTR CA Firm Questionnaire Response - Results Feedback pertaining to the booking methodologies and timings: Trade date of SFT booking • Settlement date of SFT booking • New SFT Booking Type: 1- New separate trade in addition 2- Modification to existing booking 3- Something else • This feedback was of varied quality across the firm response and varied greatly – see sample below: New SFT booking: Non-Cash Collateral Non-Cash Collateral Cash Collateral Cash Collateral ISO Firm Firm Entirely 1 - New separate trade in addition Firm's Comments Trade Date Settlement Date Trade Date Settlement Date Code No. Agreed? 2 - Modi to the existing booking (Ex/ Pay/ Other) (Ex/ Pay/ Other) (Ex/ Pay/ Other) (Ex/ Pay/ Other) 3 - Something else DFLT 1 Y - Pay Date Pay Date Pay Date Pay Date N/A DFLT 2 Y - N/A pay pay pay 2 DFLT 3 Y - N/A pay pay pay 2 LOANS WILL BE CLOSED OUT WHEN DFLT 4 Y - - - - 2 SHARES ARE REMOVED BY OUR DFLT 5 Y Pay Pay Pay Pay N/A - DFLT 6 Y - - - - - N/A DFLT 7 Y - PAY PAY PAY PAY N/A Debit date announced by Debit date announced by Debit date announced by Debit date announced by DFLT 8 Y - N/A market market market market DFLT 9 Y Other Other Other Other N/A - We have never come across these DFLT 10 N - - N/A N/A N/A events in the past DFLT 11 Y - EX Date Pay Date EX Date Pay Date - DFLT 12 Y No Additional Comments Value Date Value Date - - N/A Why Is cash movement 'N'? / DFLT 13 N - - - - Full Return Lending positions closed upon confirmation of no future payments 9