Clearing and settlement of trades
In general, in NASDAQ OMX Helsinki a Broker has two alternatives to have the trades settled in the clearing and settlement system of the Euroclear Finland Ltd.A broker using the services of an existing clearing party
Firstly, a broker may agree to let one of the existing clearing parties of the Euroclear Finland Ltd handle the settlement of the trades executed by the broker. In this case, the clearing party shall carry out the settlement of the trades of the broker as well as of its own trades in its own name and at its own risk. In order to segregate the trades of the broker from the trades of the clearing party for statistical purposes or the purposes of the clearing party, the Euroclear Finland shall, at the request of the party, assign a new clearing-party code to the clearing party for the trades of the broker. This code shall correspond to the trading code of the broker in the Helsinki Stock Exchange's trading system. In order to obtain the code, the clearing party shall notify that it will undertake, as a clearing party, liability in accordance with the law and the Rules of the Euroclear Finland for all the trades to be cleared and settled with the assigned code as well as for other related obligations such as collateral and payment transactions.
The clearing party shall submit the agreement on clearing services concluded between the broker and the clearing party to the Euroclear Finland for assessment and deliver thereto the power of authority, which the broker has given to the clearing party for the clearing and settlement of trades. The broker need not apply for the rights of a clearing party from the Euroclear Finland if the broker refers the clearing of its trades to be handled by a third party. The clearing and settlement of the trades of the broker may commence as soon as the broker has concluded an agreement on clearing services with the clearing party and as soon as the Euroclear Finland has assigned a clearing-party code to the clearing party for the trades of the broker.
The clearing party referred to above is the broker's so-called default clearing party to which the trades of the broker are directed in the NASDAQ OMX Helsinki trade and settlement system. In addition, the broker may agree with another clearing party and a Customer on the operation of the said clearing party as a contract clearing party (the so-called give-up clearing party), to which the broker may transfer a trade executed for clearing. The Euroclear Finland shall, on application, grant the contract clearing party a broker-specific clearing-party code for operating as the contract clearing party of the broker.
A broker to act as a clearing party and an account operator or an agent
The broker may apply from the Euroclear Finland the rights of a clearing party as well as of an account operator or an agent of an account operator. The broker shall fulfil the requirements set in the Securities Markets Act and the Rules of the Euroclear Finland relating to a clearing party as well as to an account operator or an agent of an account operator as well as submit the necessary information specified below. The broker who has been granted the rights of a clearing party shall, in accordance with the Act and the Rules, be directly responsible to the Euroclear Finland and the other clearing parties for the settlement of the trades and other transactions which have been or are registered in the clearing and settlement system with the clearing-party code granted to the clearing party. The clearing party shall commit itself to the Rules of the Euroclear Finland and to decisions issued thereunder.
The clearing party shall always act also as an account operator or its agent. ( cf. Euroclear Finland's Rules paragraph 1.5.10, subsection 3). A party applying for the rights of a clearing party shall simultaneously also apply for the rights of an account operator or its agent in the OM system.
The clearing party shall be able to make and receive both payments and deliveries of book-entry securities. If the clearing party does not carry out these tasks itself, it shall refer them to be taken care of another clearing party. The alternatives of the clearing party are thus: (a) The clearing party shall be responsible for the registration of the trades and other transactions in the clearing and settlement system, the monitoring of the clearing and settlement process for its part as well as for fulfilling the obligations arising therefrom. (b) The clearing party may acquire services relating to practical measures from another clearing party who is willing to provide these services. In this arrangement, the liability of the clearing party for the trades and other transactions shall remain unchanged but the personnel of the clearing party providing the clearing services shall be responsible for the practical measures relating to the clearing process.
The account operator or its agent shall be able to take care of the transactions relating to keeping book-entry accounts of its customers or its own. The account operator must maintain the data of its book-entry accounts in Euroclear Finland's book-entry registers to the extent it provides services for its customers. It shall be able to communicate with Euroclear Finland's book-entry register in machine language form according to the Rules of Euroclear Finland. The account operator shall be able e.g.
- to establish and maintain customers and book-entry accounts in Euroclear Finland's book-entry register
- to send messages of book-entry transfers, subscriptions, restrictions, and rights holders to Euroclear Finland´s book-entry register
- to receive application messages and manual applications for making transactions in Euroclear Finland's book-entry register
- to receive notifications messages from Euroclear Finland on transactions made by Euroclear Finland's book-entry register
- to reconciliate its own records on book-entry accounts with book-entry accounts in Euroclear Finland's register
- to take care of dividend, interest, and redemption payments and their corrections according to Finnish law, orders of Finnish tax authorities, and Euroclear Finland's Rules
A precondition for granting the right to act as an account operator is that the account operator shall have an account operator system in use. The account operator system must be able to handle communication with Euroclear Finland and the tasks required from an account operator by Finnish law and Euroclear Finland's Rules. It is possible that the account operator does not take care of all of the above-mentioned daily routines by itself. It is allowed to buy services from an existing account operator for all or some of the practical measures needed in the account operator's tasks. In this kind of arrangement the responsibilities will be unchanged and the liability remains with the account operator buying services from another account operator. An account operator intending to use the services of another account operator must conclude an agreement with the service provider and submit it for assessment to the Euroclear Finland and the Finnish Financial Authority.
Granting the right to act as an agent of an account operator requires that the agent and the account operator in question have concluded an agreement thereon and that the agreement has been submitted to Euroclear Finland for assessment.
