TAKASBANK
settle with direct and indirect participants. In this
system settlement instructions are required to
be matched. The use of this system is not
mandatory. Custodian banks, mutual funds,
investment trusts and portfolio management
companies are indirect market participants.
With the recent change for equities trading at
the ISE, at the time of the order entry, the
investor account number is now required to be
entered by the broker. The primary benefit of
the change in trade order entry is that
customers will have more control over their
orders and can easily follow up with their orders
on trading books, price and time priority wise.
Brokerage houses are also required by the
Capital Markets Board to identify the mutual
funds and investment trusts during order entry
at the ISE. These indirect participants can reach
trade and settlement data at Takasbank relating
to their transactions by T+1.
CLEARING AND SETTLEMENT FOR THE ISE
TRADES
Matched trade details are online, transmitted to
Takasbank by the ISE, on a contract basis,
T+0. Takasbank clears the ISE trades by
multilateral netting and specifies the dues and
receivables of the direct participants for the
settlement date, by T+1.
On the settlement date, all parties fulfill their
obligations to Takasbank and get their
receivables from Takasbank. Thus, Delivery
versus Payment (DvP) is applied by Takasbank.
Although settlement is not guaranteed,
Takasbank applies a default procedure in case
of a failure of any participant. Therefore we can
say that Takasbank operationally acts as the
Central Counterparty.
There is continuous settlement on the
settlement date until the deadline (16:00 on
T+2 for equities, 16:30 on T+0 for bonds and
bills). Settlement is finalized with same day
value for cash and securities. Only 0.03% of the
total obligations have failed to be settled on the
due settlement date, so far.
All participants are online connected to the
Takasbank system, and transfers are executed
in real time. Participants fulfill their settlement
obligations by Free of Payment (FoP) transfers
when DvP is facilitated by Takasbank.
Receivables of the participants are blocked
against their obligations and only released
proportional to the fulfilled obligations. E.g. for
equities, on T+2 (settlement day), participants
fulfill their securities obligations by FoP transfers
from their accounts to the Takasbank
settlement pool. As for cash obligations, if their
account is available at Takasbank, they use this
cash; otherwise they make transfers using other
banks through the national payment system
(the EFT of the Central Bank of Turkey) to
transfer cash to the Takasbank settlement pool.
Takasbank manages the whole settlement and
transfers receivables of those participants
based on the priority set according to the time
of the fulfillment of their obligations. This
process is handled online and in real time by
the Takasbank automation system. Therefore,
final settlement of DvP transfers is permitted on
a continuous basis throughout the processing
(settlement) day.
The existing intra-day and real-time finality of
settlement increases the efficiency of settlement
for both Takasbank and active trading parties.
Intra-day finality facilitates the offsetting of
obligations in other markets (e.g. Takasbank
Money Market) and contributes to the overall
efficiency for all ISE members.
The Takasbank Money Market, Cash Loans and
Securities Lending & Borrowing Facility aim at
easing the settlement for the participants. Credit
exposures of Takasbank are managed by the
Credits Department, the financial ability of the
participants is continuously monitored and
credit lines are assigned accordingly. Extended
credits are fully guaranteed by the collaterals
taken from the participants (Bank Letters of
Credit and liquid assets on a transaction basis).
In case of the failure of a participant to fulfill its
obligation by the specified deadline, Takasbank
carries out the failure management in order to
cover settlement failures. There is a special
fund of the ISE managed and used by
Takasbank (made up of the fines collected from
participants for failed transactions) that is
intended to provide the initial liquidity to the
settlement and to cover shortfalls that may lead
to settlement failures. The financial limit of this
best effort guarantee is the prevailing value of
this fund (e.g. US$ 19.3 million as of 1 March
2004).
DEFAULT PROCEDURE FOR CLEARING AND
SETTLEMENT
In case of a default, the default penalty
payment is calculated on the prevailing market
overnight interest rate (highest of the ISE
repo/reverse repo market or the Central Bank of
Turkey). If defaulted obligations are fulfilled on
T+2 within the working hours of the Central
Bank’s national payment system (EFT), default
payment will be calculated on the prevailing
market overnight interest rate. If the failure still
exists on T+3, penalty payment is calculated as
a triple of the prevailing market overnight
interest rate applied throughout the failure
period.
OPERATIONAL RELIABILITY
Takasbank, as the system operator identifies
and manages its operational risk. The Internal
Audit Board, the Risk Management Group and
the Internal Control Group, directly reporting to
the Board Directors of Takasbank, exist as
required by the Banking Regulation and
Supervision Board. Operational risks are
continuously monitored and audited by these
groups and by the relevant operational
departments. The Capital Markets Board and
the Banking Regulation and Supervision Board
are those governmental supervisory authorities
carrying out regular audits. Takasbank is also
audited, including its IT, by an external
international auditor.
Takasbank has a Business Contingency Plan
with a complete description of procedures to
provide full recovery of essential services within
pre-designated time frames in case of disaster.
Back ups of data and programs are taken daily,
checked and verified the following day. These
back ups are stored and locked in humidity-
controlled vaults. Another computer system
exists at Takasbank premises with duplicate
data recorded real time.
Takasbank’s offsite disaster recovery center
located at the ISE has been in use since June
2001. The computer system at the disaster
recovery center is online real time updated with
both the recent data and the transaction
records. This standby facility, including an
operations center, is ready to resume business
in one hour from the time in the event of a
disaster that might impact Takasbank’s data
center and its network facilities. Procedures
ensure the preservation of all transaction data.
Database system tools have the relevant
capabilities to ensure the integrity of
transactions. Test of this center is run annually.
A second disaster recovery system is planned
to be set up in Ankara by the end of 2004.
There has been no key system failure during
recent years. Once the capacity usage reaches
70%, systems are upgraded to have the
capacity usage be less than 30%. Systems are
tested periodically to determine if they can
handle stress volume.
For fulfillment of obligations after the date of
settlement, the ISE extends an inquiry to the
member asking the reasons for the failure. If the
failure still exists on T+3, Takasbank notifies the
ISE for buy-in or sell-out, indicating the due
obligation (cash or securities) and the detailed
list of securities and cash receivables remained
under blockage at Takasbank. Blockage is set
on the receivables (of T+2) by the end of T+1
and calculated by the prevailing market value of
the original net obligations on T+1.
The payment and securities obligations arising
from the trade related with the buy-in or sell-out
process are settled on the same day (T+3).
If the receivables’ value under pledge is not
sufficient to discharge the obligations as a
whole, the member's collateral with the ISE is
used to fulfill the rest of the obligation.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES YEARBOOK 2003/2004
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