Book entri system
The Book-Entry System managed by the Bank of Spain is responsible for the clearance and settlement of Public Debt market operations. Each market member holds an account in the Book-Entry System, where transactions in its securities are recorded.
The procedure used is one of cash on delivery. During each session, Account Holders notify the Book-Entry System of transactions channelled through the Bank of Spain Settlement Service, specifying the following:
- 1. type of operation
- 2. the reference transacted
- 3. the nominal amount
- 4. the price
- 5. the counterparty
- 6. the record date agreed
The Book-Entry System records all this information and, on the established record date, debits or credits the securities accounts against the corresponding cash accounts held by Account Holders at the Bank of Spain. The record date most commonly used in Bonos and Obligaciones del Estado operations is T+3, i.e. 3 business days after the transaction. In the case of Letras del Tesoro, value and transaction dates tend to coincide.
Individuals or institutions who are not members of the Public Debt market -i.e. who do not hold accounts in the Book-Entry System- have to channel transactions through a Management Institution (for Direct Account holders, the Bank of Spain itself acts in this capacity). The Management Institution can be that in which the securities are registered or any other. It must notify transactions to the Book-Entry System on the business day prior to the record date established, except where the unit value of the transaction exceeds 500,000 euros, in which case it may notify on the record date itself.
Transactions may also be settled against payment on third parties' behalf through the Bank of Spain Settlement Service.
Non-resident investors can also clear and settle their transactions through Euroclear and Cedel, international clearing and settlement systems linked to Spain's Book-Entry System through the third-party accounts of two Management Institutions, acting as their depositories. .
Transactions between Euroclear or Cedel clients are cleared and settled internally, without notification to or intervention by the Spanish Book-Entry System.
When the transaction is between one Euroclear and one Cedel client, clearing and settlement is again internal, although in this case the third-party accounts held at each system's depository will reflect the corresponding change in their respective balances on the record date established.
When transactions are between a Euroclear or Cedel client and a non-depository individual or institution, two alternatives can arise
- 1. if the intervention of the Euroclear or Cedel depository is restricted to informing the Bank of Spain Settlement Service of the securities transfer, the settlement will be processed by Euroclear or Cedel;
- 2. if the depository is linked to the transaction, it will use the clearing and settlement services of the Book-Entry System in the form described above.