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Amendments to the ICMA Rule Book are separately and individually notified to ICMA members and subscribers and are incorporated into the ICMA Rule Book from time to time.
ICMA’s rules and recommendations for the secondary market apply to transactions in international securities – an international security is defined as a security intended to be traded on an international, cross-border basis (i.e. between parties in different countries) and capable of settlement through an international central securities depository or equivalent.
All transactions between members of the Association involving international securities (as defined within the rules) are subject to the Association’s rules and recommendations, unless specifically agreed otherwise by the parties at the time of concluding a transaction. Unless otherwise stated, the rules and recommendations do not apply to the syndication and allotment process or to repurchase and to other transactions entered into under the GMRA or similar master agreements.
ICMA supports members with advice and guidance on the application of the rules and recommendations through its Legal & Regulatory Helpdesk.
Reviewing & Revising the Rule Book
ICMA, through its Secondary Market Practices Committee (SMPC), seeks continuously to review and, where appropriate, update the Secondary Market Rules and Recommendations (SMR&Rs) to ensure relevance and consistency with market best practice and market regulation, in light of evolving debt capital market structure and practice, as well as the ongoing implementation of regulation.
CSDR Settlement Discipline
ICMA is in the process of reviewing and revising its Buy-in and Sell-out Rules to help support implementation of the CSDR mandatory buy-in (MBI) provisions, The Rules are intended to provide a contractual framework and best practice aligned with the regulatory requirements for in-scope transactions. This work is being coordinated through the ICMA CSDR-SD Working Group and the ICMA CSDR Legal Workstream. MBIs are expected to come into force from February 2021.
Previous revisions and consultations
Special Situations (March 2018)
Members are asked for their thoughts and possible recommendations with respect to ‘Special Situations’. In particular, the event of a corporate action, restructuring, or bail-in that occurs after the trade but before settlement of the securities.
By way of the example, we provide the following scenarios for your consideration:
- Issuer default or bail-in post trade date, but before intended settlement date
A purchaser and a seller enter into a transaction. After the trade is agreed, but before the intended settlement date, the securities are subject to a bail-in and are written down. Settlement cannot take place since the securities no longer exist.
How should the seller and buyer settle the transaction?
- Issuer default or bail-in post intended settlement date
A purchaser and a seller enter into a transaction. The trade does not settle on the intended settlement date. The securities subsequently are subject to a bail-in and are written down after the intended settlement date, but before physical settlement. Settlement cannot take place since the securities no longer exist.
How should the seller and buyer settle the transaction?
- Corporate action post intended settlement date
A purchaser and a seller enter into a transaction. The trade does not settle on the intended settlement date. The securities subsequently are subject to a corporate action, such as an exchange offer, while the trade is still failing.
What should be the obligations of the failing counterparty to the purchaser in this scenario?
Are there any other scenarios or special situations that may occur between trade date and settlement (including delayed settlement) that you anticipate?
Members are asked to provide feedback either by email or in person. Based on responses, we may look to table a discussion on this at the next meeting of the SMPC (scheduled for 3 May 2018).
Consultation on Rule 407
On 21 February 2018, the SMPC published a Consultation Paper seeking member feedback with regard to the appropriateness and application of Rule 407 (‘Claim against the seller’), which relates to negative interest rate claims against defaulting sellers in the event of settlement fails.
The consultation asked affected members to respond to the following questions:
Q1. Do you think that Rule 407 is still appropriate?
Q2: If you think that Rule 407 is still appropriate
(i) are you happy with its current wording?
(ii) if not, what changes do you suggest and what is your reasoning for such changes?
Q3. Do you have any other suggestions or considerations with respect to Rule 407 or interest claims in general?
The consultation closed on 23 March 2018. The results will be shared with members and discussed at the next meeting of the SMPC (scheduled for 3 May 2018).
ICMA announces an update of its Buy-in Rules
1 March 2017 In response to requests from ICMA’s members, ICMA’s Secondary Market Practices Committee (SMPC) proposed a review of the Buy-in and Sell-out Procedures with a view to improving their efficiency and practicability, particularly in light of more challenging market conditions. Following a lengthy consultation process with member firms, the ICMA executive committee, in close consultation and agreement with the SMPC, unanimously resolved to amend the Buy-in and Sell-out Procedures.
Most significantly, the revised rules remove the requirement to appoint a buy-in (or sell-out) agent, and provide for the party initiating a buy-in/sell-out to execute the procedure themselves (subject to certain limitations). The new rules also allow for greater flexibility for the initiating party in determining the timing of the execution of the buy-in/sell-out.
The changes to the rules come into effect from April 3 2017.
The circular announcing and outlining the changes can be found here.
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