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Clearing and Settlement Procedure

MICEX offers different methods of executing trades in the government-backed securities market. Traders may make the following trades:

  • with preliminary reservation of funds and securities (settlement code Т0);
  • without preliminary reservation of funds and securities (settlement code Sn).

Settlement code Т0 is used when making a trade in bonds. It means that a trade is executed on the day it is made. In this case, the sufficiency of funds or bonds for executing the trade is checked at the time it is made.

Settlement code Sn is used when making a trade in bonds. It means that a trade is executed on the n-th calendar day from the day of its registration in the Trading System. In this case, the sufficiency of funds or bonds for executing the trade is not checked at the time the trade is made (except for the MICEX commission).

The guaranteed trade execution mechanism is implemented for trades with the settlement code Т0. However, for trades with the settlement code Sn, both parties must enter additional orders for the same-day execution of the trade.

Clearing and settlements on trades in bonds have the following features:

  • trades are executed on the “delivery vs. payment” principle;
  • traders’ positions are monitored in real-time (to ensure sufficient coverage);
  • multilateral netting.

Executing trades on the “delivery vs. payment” principle means simultaneous transfer of funds and securities under the trade, which protects both parties against the risk of losing funds and securities.

For real-time monitoring of Traders’ positions, MICEX checks orders entered into the Trading System to ensure that sufficient funds or bonds are available for executing the trade.

Dealers and Investors must deposit the necessary amount of funds or bonds in the Settlement / Depository system in advance, then MICEX establishes the corresponding values of cash or deposit positions accordingly.

When a Dealer enters an order to make a trade with the settlement code Т0 or Sn, MICEX monitors the cash positions or depo positions against which that order is entered. An order will only be registered once it has been determined that the values of these positions will allow fulfillment of obligations under the trade. Upon registration of the order, MICEX increases or decreases the corresponding cash or deposit position.

Based on the results of trading, MICEX determines the obligations of each Trader by means of multilateral netting (mutual offset of obligations and claims,) which reduces the number and volume of trades and considerably reduces costs.

Clearing and settlements on direct REPOs, inter-dealer REPOs and modified REPOs are effected together with those on trades of the purchase and sale of bonds, in accordance with the procedure established for the latter.