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Securities Registration System

The securities book-entry system in Spain is set up on a two-level registration system. Keeping the Central Registry corresponds to IBERCLEAR, and the detailed (or second-level) Registry is carried out by its Participants.

Securities are registered in balances, recording either the nominal amount or the number of securities, depending on the type of security being registered. Generally, equity book-entries are made on the number of securities and fixed income securities are recorded on the nominal value.

The proof of ownership is determined by the book-entry in the account, either in the accounts kept by IBERCLEAR or in the detailed (second-level) accounts within the Participants' account structure.

Central Registry 

In the Central Registry kept by IBERCLEAR, the following accounts are to be used:

a. One or more proprietary accounts reflecting balances held by the Participants' own holdings and, at least, one blocked proprietary account reflecting the balance of securities the Participant holds blocked because of them being affected by Royal rights or any other encumbrance or for which any proper certificates have been issued.

b. One or more general third-party accounts reflecting the overall balances the Participant holds for other entities.

c. Individual public entities accounts which show balances of securities owned by a very limited number of public institutions.

d. Individual third-party accounts opened in the name of a single holder, either an individual or a legal entity. 

 As a special subtype of proprietary accounts or third-party accounts, special individual financial intermediaries accounts may be opened. It is mandatory that financial intermediaries using the optional orders clearance procedure maintain at least an individual account in the Central Registry whose sole purpose is performing this procedure. The keeping of this account is always indirect.

In addition, exceptionally, IBERCLEAR can perform direct keeping in its central books of all accounts and balances of all holders of a given security recorded in the system, taking into account the special circumstances of the issuance of securities encoded under that security code or listed entity.

IBERCLEAR has established a coding compatible with T2S accounts. Participants are identified by their BIC code (11 positions), and accounts related with that BIC code are identified by an alphanumeric code (35 positions) which directly identifies what type of account it is and to which Participant it belongs to.

Except for the case of blocked accounts, the total balance in each account in the Central Registry for each security can be broken down into several balances to mark the situation of the securities held in the account:

1. Balance available: Balance of recorded or settled securities.

2. Balance not available: At the Participants' request, IBERCLEAR will record the securities on the balance not available, so that they cannot be used for settlement.

3. Balance held: Balance of securities held by IBERCLEAR during the settlement process, in  order to check there is enough balance available. Once the instructions duly settle or, if not, are rejected because of lack of cash, the held balance will be zero.

Participants' blocked accounts can only show one balance, reflecting the total blocked securities included.

IBERCLEAR will periodically inform Participants of their positions and movements made in their securities accounts and the outstanding or pending to settle transactions in the Central Registry.

Detailed Registry

Participants responsible for second-level or detailed registry are also entitled to carry out the accounting of the accounts for each holder, with reference to each type of security, showing at all times the securities balance owned in those accounts.

These accounts are identified by the Securities Account Code (CCV), a 20-position numerical identification whose structure identifies each detailed (or second-level) registry account in a unique and universal way.

Participants must keep the detailed (or second-level) records continuously updated, including each and every operation performed by them with third parties or following their orders and which may affect the ownership or availability of the securities, including securities balances being blocked by Royal rights or any other encumbrances.

 

ENTRIES IN THE REGISTRY

Coupon stripping and reconstitution

Spanish Government bonds or debentures can be strippable securities. A strippable security includes the possibility of separating the coupons of the debt principal to be able to trade them separately from the security, through the so-called strips (Separate Trading of Registered Interest and Principal).

From a legal standpoint, such securities are based on the separation of the income (coupons) and the bare ownership (principal).

The remaining characteristics of the strippable bonds and debentures (issue periods, coupon frequency, issue method, etc.) are identical to the non-strippable bonds and debentures.

The stripping of a security is defined as a trade in which an explicit interest strippable bond/debenture is de-listed from the book-entry register, posting in its place new securities with implicit interest (zero coupon bonds), representing the cash flows corresponding to the principal of this bond and its coupons, the maturity date and redemption date of which coincide with those of the principal and coupons of the original asset.

Reconstitution is deemed to be the inverse of stripping, whereby all securities required with implicit outstanding interest arising from one of the cash flows from a strippable bond are de-listed in the corresponding proportion in the book-entry register, with the aforementioned bond being booked as the balancing entry.

The stripping or reconstitution of coupons can be carried out by the Market Makers authorised by the securities issuer. All participants, including those directly connected to T2S must perform all the information exchanges envisaged in this procedure through the communication/connection systems established with IBERCLEAR.

Immobilization of securities in the register

Securities affected by limited rights in rem or any other form of lien or about which certificates have been issued will be immobilized in the register and therefore will blocked in the book-entry register.

In the case of securities included in a Proprietary account or Individual account opened in the Central Register, IBERCLEAR will perform the aforementioned block by transferring the corresponding securities to a blocked proprietary or individual account opened for this purpose.

The securities included in the blocked account will remain blocked and they will not take into account the booking/settlement processes performed, except the movements to/from a Proprietary account or Individual account. Accordingly, the position of the Blocked proprietary accounts or Blocked individual accounts will only be modified when securities are transferred to or from a Proprietary account or Individual account.

In the case of Third-party general accounts, the block will be performed by the participants in their Second-tier Register.

All participants, including those directly connected to T2S, must perform all the information exchanges envisaged in this procedure through the communication/connection systems established with IBERCLEAR. After making the necessary checks, IBERCLEAR will send the settlement instructions (SI) to T2S.

This procedure will not be applicable to securities represented by physical certificates.

 

 

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