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Clearing and Settlement
Post-trade activities, under the guaranteed scheme are carried out in conjunction with LCH.Clearnet SA for clearing and with Euroclear Bank for settlement. The new pass-through model is provided by BFF Bank SpA for the creation of settlement instructions that can be dispatched to the ICSDs (Euroclear Bank and to the Clearstream Banking Luxembourg) for settlement. Under the bilateral settlement scheme, other Central Securities Depositories (CSDs)/International Central Securities Depositories (ICSDs) may be accepted.
Summary
Trade processing
Each security can only be traded in one channel at a time - bilateral, pass-through or guaranteed - according to its trading classification. However, we may move a security from ‘pass-through’ to ‘guaranteed’ classification if its liquidity changes or on a market-maker’s request.
Non-liquid shares and bonds, however, eligible with the bridge solution of Euroclear Bank and Clearstream Banking Luxembourg
UCITS, warrants and all non-eligible financial instruments
- Guaranteed (full CCP)
- Pass-through
Non-liquid shares and bonds, however, eligible with the bridge solution of Euroclear Bank and Clearstream Banking Luxembourg
- Bilateral
UCITS, warrants and all non-eligible financial instruments
Trading manual - appendix
How it works?
What does LCH.Clearnet SA do?
LCH.Clearnet SA operates as a central counterparty (CCP) and so ensures that trades are cleared quickly and cost-effectively. The novation process – the interposition of the CCP between buyers and sellers – allows members to profit from post-trade anonymity, netting and counterparty risk protection, leading to an improved liquidity and price formation.
LCH.Clearnet SA carries out its activities via indirect and direct relationships with members of LuxSE:
LCH.Clearnet SA carries out its activities via indirect and direct relationships with members of LuxSE:
- Indirect relationship: Members of LuxSE may choose to operate as Non-Clearing Members (NCM) of LCH.Clearnet SA. The agreement is signed with a General Clearing Member firm (GCM) who clears trades on their behalf.
- Direct relationship: Another option is to operate via a direct relationship with LCH.Clearnet SA. LuxSE members can opt to become either a General Clearing Member (GCM) or an Individual Clearing Member (ICM); the difference being, GCMs may clear their own trades and trades executed by NCMs, while ICMs can only clear their own trades.
What does BFF Bank do?
The main responsibility of BFF Bank is the transformation of the trades received by LuxSE into settlement instructions messages bearing the characteristics envisaged by the technical specifications required by the ICSD. For each trading day and in compliance with the cut-offs envisaged and disclosed by the ICSD, the service also enables the sending of settlement instructions to LuxSE trading members' settlement or settlement agents' accounts on ICSD.
Advantages of the CCP system
| Bilateral | Non-guaranteed (Pass through) | Guaranteed (Central counterparty) | |
| Delivery versus Payment |  |
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| Settlement destination | CSDs ICSDs |
Euroclear Bank Clearstream Banking Luxembourg |
Euroclear Bank |
| STP settlement | |
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| Anonymity of transactions | |
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| Novation | |
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| Netting | |
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| Clearing membership requirement | |
Trading manual
Trading manual
