Bucharest Stock Exchange And Depozitarul Central: A New Step Towards Flexibility Of Market Mechanisms

Bucharest Stock Exchange (BVB) and Depozitarul Central increase flexibility of the regulated market for equities, as of July 10, offering investors the possibility to settle deal trades also on gross basis, with a T+0, T+1 or T+2 settlement cycles. It complements the net settlement mechanism with the T+2 cycle.

“For larger trades, as the deals, it may be important for the buyer to get in the possession of his shares faster and for the seller to get the corresponding cash. They will need this to increase the efficiency of their trading and the management of their portfolio, by having the possibility to benefit of market momentum for reinvesting in the market. It also creates new opportunities when taking and settling the short positions, to benefit from the volatility of the market. In this way Romania joins the club of markets giving investors the most developed and convenient tools at trading and settlement, within the ‘delivery versus payment' environment.” said Ludwik Sobolewski, CEO of Bucharest Stock Exchange.

The gross settlement brings increased flexibility and efficiency of trading and post-trading mechanisms. A reduced settlement cycle also contributes to reduced post-trade risks, as a result of reducing counterparty risk and increasing the rate of capital reinvestment. The gross settlement is available for deal trades with shares listed on the BVB regulated market.

Silvia Buicanescu, CEO of Depozitarul Central, stated: “We are constantly concerned with the improvement of settlement services offered to our participants, in order to align the local settlement processes with the European best practices.We are glad to provide the necessary support for the gross settlement of deal trades concluded at BVB to become operational starting with July 10. Depozitarul Central and BVB had worked very closely on this new project and we are proud to meet all the needs and expectations of the market participants, including by lowering the fees applicable for this service, at the level of Depozitarul Central.”

In the last months, BVB and Depozitarul Central took significant steps in developing the market infrastructure, as part of a reform meant to reclassify Romania as an emerging market by global indices providers. On October 6, 2014, the two major infrastructure projects of the Romanian capital market, namely the segregation of the trading and post-trading systems, and the migration to T+2 settlement cycle, were successfully implemented.

The segregation of trading and post-trading systems facilitates the efficient trading activity of market participants, the use of global accounts in the same way as in the most developed European markets and the automation of post-trade operations. The operational risks of custodian agents  are  significantly reduced by replacing the transmission of settlement confirmations by facsimile with electronic settlement instructions, in ISO 15022 standard format, also through the SWIFT network. In this way, the premises for the full automation of the settlement confirmation process of clients’ transactions through the entire custody chain are created, with direct effects in increasing efficiency and reducing costs.