KELER announced that it will begin to pre-match counterparties’ institutional trades at the central depository, replacing the current direct pre-match procedure.
Instructions can be sent to KELER seven days prior to the expected settlement date.
According to the new procedure, KELER will carry over the settlement instructions of all those transactions where the “rate” of transaction is not defined. At present, such instructions are rejected by KELER, and the next day the parties have to re-process the trade and send it to KELER.
But after May 21 KELER will keep the instructions in its system and will try to settle transactions for a period of five days, after which instructions will be automatically rejected if not settled by that time.
With the new system it will be possible to differentiate between “actual settlement date” and “requested settlement date”, a spokesman for ING Bank in Budapest says. Instructions will be accepted at KELER after the “requested settlement date” as well without modifying the instruction details of “requested settlement date”.
“The changes in KELER procedures will have no direct impact on foreigners’ transactions but the efficiency of the settlement in Hungary will increase,” says the ING spokesman.
The procedure for other trades — the majority of OTC transactions of Hungarian government bonds — will remain unchanged and counterparties will have to send KELER instructions each day if trades fail to settle on the requested settlement day.
After the May 21 changes are enacted, KELER will introduce a tolerance of HUF 5,000 (approximately 20 EUR). Previously, there were no tolerances of KELER’s instructions.
After being matched, it will not be possible to cancel only one side of the transaction; cancellation is possible only if both parties agree and send the request to the Central Depository. Single trades without pre-match can be cancelled, the ING spokesman said.
Further, KELER is required to segregate a cash account of the Hungarian brokers (proprietary/omnibus client), similar to what is used for brokers’ securities accounts.