International Bonds and ETFs

Settlement of International Bonds and ETF transactions have a number of possible scenarios, which are dependant on the parties involved in the transaction. The following sections describe the processing scenarios for locked-in trades.

• In-house: SIS member to SIS member
  The in-house scenario applies when both parties to a trade keep their inventories with SIS. Basically, this scenario reflects the automated clearing of a CHF transaction with the difference that, in the case of International Bonds and ETFs, transactions are carried out in the appropriate foreign currency. The parties to the transaction have the option of opening an appropriate cash account in the relevant foreign currency at SIS or EuroSIC.
• Cross-border: SIS member / routing member
  The cross-border scenario applies when one of the two parties to the transaction keeps its inventory of International Bonds and ETFs with Clearstream Luxembourg or Euroclear.
• Routing: routing member / routing member
  The routing scenario applies when both parties to the transaction keep their inventories of International Bonds and ETFs with Clearstream Luxembourg or Euroclear. In this scenario, SIS is only involved as a routing agent and not in actual settlement.

What happens on the transaction day?

A trade occurs when two orders are matched on the SWX Platform. Virtually simultaneously to execution a locked-in trade is automatically transmitted for settlement.

For locked-in trades the settlement amount (including accrued interest) is calculated automatically. The holidays for the relevant clearing organisations and for the various currencies are taken into account when determining the value date. These data sets enrich the instruction sent to the CSD.

Locked-in trades and settlement routing

The great advantage of the locked-in trade procedure is that settlement is fully automated and that errors from the re-entry of data can be avoided completely. This is because no extra matching is necessary for settlement as all necessary information is already available when the trade is executed.

To facilitate locked-in settlement a Power of Attorney (POA) is required. For SIS a power of attorney is included within the general conditions. To enable SWX to arrange settlement in Euroclear and Cleastream Luxembourg members must complete the applicable POA's. Depending on the location of settlement of the counterparties, orders may or may not be routed to Euroclear and Clearstream Luxembourg. If required the bridge is automatically used to facilitate settlement across locations. In general the settlement instruction is routed automatically if both market participants have safekeeping accounts with Euroclear and Clearstream Luxembourg. If not the settlement instructions at Euroclear and Clearstream Luxembourg are given in the early evening the day before value date in order to prevent the blocking of positions at SIS. This process is fully automated.

It is not necessary to know where the counterparty's securities are located. Each market participant can freely choose the place of settlement. It is even possible to choose flexibly from among various safekeeping accounts.

Straight Through Processing

STP is facilitated by the use of routing information maintained by the exchange and our service partners. The following information allows members to link transactions to their back-office platforms. The SWX provides the following information, which is transmitted along with the settlement information:

• Trade ID:
  a sequence of 16 characters that uniquely identifies each transaction.
• Bank Internal Reference:
  another character sequence that the market participant can voluntarily add to each transaction and that can be used by back-office systems to link settlements with transactions fully automatically.

What happens on the value date?

On the value date actual settlement takes place at the relevant ICSD. In the case of cross-border transactions involving SIS and either Euroclear or Clearstream Luxembourg the transfer of securities and cash between the organisations is completely transparent.

Is the procedure costly?

The main purpose of the structure of the SWX Platform is to reduce costs and improve efficiency for the benefit of market participants. This also applies to the settlement routing procedure to Euroclear and Clearstream Luxembourg described above. There are no additional costs for market participants. The SWX Bonds exchange fee covers settlement routing.