Deferred Settlement Service SRD: definition
How it works?
Rules
Which securities are eligible to the Deferred Settlement Service?
Trading rules on the centralised Borrowing and Lending market
«easy-to-borrow» and «long-only» status
The advantages of the Deferred Settlement Service 
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Deferred Settlement Service SRD: definition
The deferred settlement service is a mechanism which enables investors to initiate a long position (buyer) or a short position (seller) on a list of eligible securities only putting a portion of the value of the position forward. The financial intermediary is then responsible of financing the position in securities or funds until the end of the month.
The investor has to label his buy or sell order « with Deferred Settlement Service » when passing his order to his financial intermediary.

On the sell side:
A private investor passes a sell order to his broker on T. The broker routes the order to the regulated market where the securities are sold and have to be found and delivered by the broker on T+3, at that time the broker is immediately paid by the buyer of the securities. Teh private investor only delivers the securities and is paid for the sale only at month end.
The broker « carries » the investor’s postion from T (date of the transfer of ownership) to the last trading day of hte month.

This service is charged by the intermediary. Commissions are fixed freely by the brokers.

The rules for the collateral are set by the AMF; however each financial intermediary if free to request higher minimum collateral rates.

Instruction N°2007-04 of May 15th 2007 sets the client collateral parameters applicable to SRD flow. This instruction is set forth in the AMF rule book article 516-4 the percentages are as follows:

20% collateral for cash and French government bonds and monetary funds: 1/5 leverage

25% collateral for bonds (traded on any EU regulated market, other European government bonds and bond funds): 1/4 leverage

40% collateral for stocks (traded on any EU regulate market), European equity funds: 1/2.5 leverage

• The broker can refuse a Deferred Settlement order, on the buy or the sell side.
• The private investor receives the securities or the payment the last trading day of the month.
• In the course of the same month, the private investor can execute several purchases and sales with
• Deferred Settlement on the same securities. The balance of the transactions will be delivered and paid at the end of the month.
• The transfer of ownership for the private investor occurs on the settlement date, in other words the last trading day of the month.
• The private investor may request the rolling over of his position from one month to the next, providing the broker has given his agreement. The rolling over of a position is considered a sale and is taken into account as such. In case of unfavourable market movement, the difference between the initial position and the rolled over position will result in a debit on the client account.
• In case of take over or exchange corporate events it is not possible to pass Deferred Settlement orders.
• A roll over request can be requested up to the 5th day before the end of the calendar month.

MCPE segment is accessible through a regular membership to NYSE Euronext and supported by our UTP technology. All trades are guaranteed by LCH.Cleanet, CCP, and settled in T+2 on Euroclear to match the SRD short trade.

No ETF is currently eligible to MCPE. However, ETFs will be eligible whenever a borrowing and lending Liquidity Provider is identified.

For each eligible security, a correspondent Monthly ISIN is created on MCPE, 10 business days before the beginning of the relevant month and removed from the segment 3 days before the end of the relevant month.

Trading takes place by three auctions at 10:30, 11:00 and 11:30 CET, trading thresholds widen for each auction.

Traded price is set in % and defined as the loan rate. The tick size is 0.001%, i.e. 1/10th of a basis point. Corporate actions are managed, like any other exchange trade.

LCH Clearnet creates a return trade at the end of the month with a price equal to SP+SP* (CR – LR)* d/3600 where:
- SP is the settlement price on T-1 (where T is the borrowing and lending trade date)
- CR is Euribor 1 month provided by Euronext to LCH
- LR is the traded price (in %) which corresponds to the loan rate
- d is the number of days between T+2 and the last settlement date month

New eligibility criterion for ETFs

• «long-only »: the securities are not tradable on the centralised borrowing and lending market of NYSE Euronext
• « easy-to-borrow»: the securities benefit from the presence of a liquidity provider on the centralised borrowing and lending makret of NYSE Euronext
• All other securities are tradable on the centralised borrowing and lending market of NYSE Euronext however they do not necessarily benefit from the presence of a liquidity provider.