IBERCLEAR manages the ARCO Settlement System. Its purpose is to execute transactions involving securities and cash transfer orders instructed on securities held in the IBERCLEAR register, regardless of the trading venue where they were agreed or if a clearing house took any part in them.
IBERCLEAR settles via the corresponding securities credits and debits in the accounts held in the Central Register, and participants must simultaneously make the corresponding entry in their detailed register.
According to the instructions received, transactions may be settled free or against payment. When against payment, IBERCLEAR will perform the cash transfer order via the corresponding credits and debits in the dedicated cash accounts (DCAs) nominated by participants for cash settlement.
This service is accomplished by IBERCLEAR using the T2S technical support. Settlement procedures include providing, optimizing and recycling transactions which have already been validated and matched, after which they are sent to the settlement process on the intended settlement date.
Depending on the communication, acceptance and execution of settlement instructions, IBERCLEAR offers settlement services for the following:
- Settlement of instructions coming form CCPs.
- Settlement of instructions coming from trading venues without the intervention of a CCP.
- Special Financial Intermediary settlement model.
Special and optional settlement procedure for financial intermediary and general settlement procedure
- Settlement of instructions sent by IBERCLEAR participants.
Regarding settlement, IBERCLEAR offers the following services:
The IBERCLEAR validation process aplies to Settlement Instructions (SI), Settlement Restrictions or intra-position movements (SR) and Maintenance Instructions (MI) like Amendment, Hold/Release and Cancellation instructions with the aim of verifying the information contained in them is correct, both at a logical level -format validation and instruction syntax- and also at a contents one, so as to perform the transaction they were sent for, either setlement (for SIs and SRs) or execution (for MIs).
IBERCLEAR implemented instructions prioritization, linkage, amendment, cancellation and hold & release functionalities, which allow participants to introduce in their settlement process of their Settlement Instructions (SI) or Settlement Restrictions (SR) whatever preferences or rules they may deem necessary to be processed by the settlement algorithm.
Also, pending instructions in the System can be recycled for a period of days. After this period, instructions would be cancelled at the end of the given settlement date.
In addition to instructions cancellation at the participant's request, instructions in the system may be automatically cancelled under certain circumstances, either by IBERCLEAR or by T2S.
IBERCLEAR offers a cross-checking service, available for bilateral instructions sent to IBERCLEAR by participants requesting the intervention of a CCP offering this service under the contractual agreement with IBERCLEAR.
IBERCLEAR promotes the auto-collateralisation functionality available in T2S to optimize settlement of transactions with or against payment, via the automatic provision of intraday credit or liquidity in a T2S Dedicated Cash Account (DCA) which may not contain enough funds to settle the transaction affected. This DCA is linked to a securities account in the Central Register of IBERCLEAR, specifically opened for the supply of collateral. The liquidity obtained through this process will be immediately used to settle the transaction.
This service may enable participants to delegate the processes for securities selection for elegibility and the management of the collateral securities portfolio in IBERCLEAR, having the participant provided this collateral for a given risk exposure agreed with any counterparty, both subscribing this service.
IBERCLEAR provides access and connectivity services to BME-PC, IBERCLEAR's web application for participants' and issuers' performance of activities, offering the necessary technical support for connectivity through the internet, as well as the management and control of permissions and accesses to administrators and users in the tool.
Participants indirectly connected to T2S (ICPs) will use ISO15022 standards to send instructions to IBERCLEAR, which will then transform these participants' messages into ISO20022 format, instruct T2s, and when a reply to that message is received in ISO20022, re-send it to participants having mapped the information received into ISO15022 format.
IBERCLEAR also provides its participants with information about their settlement activity via settlement and settlement status messages sent along each day, via BME-PC, and with the reconciliation messaging at close of business.