1 New Global Note structure for international bearer debt securities issued through the ICSDs 1 June...
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Transcript of 1 New Global Note structure for international bearer debt securities issued through the ICSDs 1 June...
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New Global Note structurefor
international bearer debt securitiesissued through the ICSDs
1 June 2006
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• The international debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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International debt marketKey features
The international debt market features instruments that are initially issued (and subsequently traded) across borders and has the following features:
• Wide range of issuers• Different jurisdictions• Deposited with ICSDs• Multi-currency• Multi-product• Can be offered simultaneously to investors in a number of
countries
• Often stock exchange listed (although the bulk of trading is over-
the-counter)
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Data source: www.bis.org
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
US D
ollar
Billi
ons
International Debt Securities
France
Germany
Italy
International debt marketAttractiveness of international debt securities
Key features:
• Accessibility
• Price
• Liquidity
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International debt marketEurosystem collateral eligibility
• Eurosystem: the ECB and the National Central Banks of member states which have adopted the single currency
• Principal objectives of the Eurosystem are price stability and support of the general economic policies of the European Community
• Eurosystem uses monetary policy instruments to help steer interest rates and manage liquidity
• Liquidity provided to the market via monetary policy instruments usually requires the placement of “eligible collateral”
• More information on www.ecb.int
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International debt market Eurosystem collateral eligibility
Eurosystem collateral eligibility criteria (amongst other requirements):• euro-denominated• debt • issued by an EEA , G10 or supranational issuer• meets high credit standards • is listed or quoted on a regulated market or an approved non
regulated market• is settled in the Eurozone• is held with a Securities Settlement System (SSS) complying
with further Eurosystem criteria• More information on
http://www.ecb.int/pub/pdf/other/gendoc2005en.pdf
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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International securities issued in CGN form
ICSD
Clients
Issuer
Common Depositary
New Global Note Classical Global note (CGN) Structure
Euroclear
Clearstream
IssuerAgent
Issuing & PayingAgency
Agreement
Common DepositaryAgreement
Terms & Conditions / Operating
Procedures / Customer Handbook
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New Global NoteTrigger of the new structure
• Request from Eurosystem leads to the proposal of a new structure for securities to be recognised as eligible collateral
• The new structure will be mandatory for Eurosystem collateral eligible securities as of 1 January 2007
• The NGN structure can also be used at issuer’s choice for other bearer debt securities
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New Global NoteNew structure
ICSD
Clients
Issuer
CSK
Euroclear
Clearstream
IssuerAgent
Issuing & PayingAgency
Agreement
CSKAgreement
Terms & Conditions / Operating
procedures / Customer handbook
CSP
CSPAgreement
Issuer- ICSD Agreement
Issuer- ICSD Agreement
ICSD
Clients
Issuer
CSK
Euroclear
Clearstream
IssuerAgent
Issuing & PayingAgency
Agreement
CSKAgreement
Terms & Conditions / Operating
procedures / Customer handbook
CSP
CSPAgreement
Issuer- ICSD Agreement
International securities issued in NGN form
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• Bearer form securities
• New type of global certificate: New Global Note (NGN)
• Issue Outstanding Amount (IOA) = ICSDs’ records → No need for physical annotation of the Global Note
• Issuer-ICSD agreement
• Two new types of agents:– Common Safekeeper (CSK): commercial banks or ICSDs– Common Service Provider (CSP): commercial banks
New Global NoteKey features
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New Global NoteOverview of the dual structure
CGN NGN
Type of security International securities International debt securities
Legal form of security Global Bearer or Registered Global Bearer
Asset servicing CD CSP
Safekeeping CD CSK (Bank or ICSD)
Legal record keeper CD ICSDs
Date of existence Since 1986 As from 30 June 2006
Eligibility for Eurosystem monetary policy and credit operations
Yes, for securities issued before 1 January 2007
Yes, if deposited with ICSD CSK
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As from 1 January 2007 collateral eligible international debt securitiesin bearer form will have to comply with:
• The current collateral eligibility criteria, AND
• New criteria:
– NGN form– Kept in safe custody with an ICSD CSK
Grandfathering will apply for securities issued before 1 January 2007
New Global NoteCollateral eligibility
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New Global Note Collateral eligibility for securities issued through the ICSDs
As from 1 January 2007, Eurosystem collateral eligibility
= current Eurosystem criteria + NGN form + ICSD CSK
CGN
CGN
NGN + ICSD CSK
NGN + Commercial bank CSK
Potentially eligible
Not potentially eligible
Potentially eligible
Not potentially eligible
30 Jun 1 Jan
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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New or updated legal documents:
• New Global Note (NGN)
• Effectuation authorisation
• Issuer-ICSD Agreement
• Legal Opinions for four jurisdictions: England, Germany, Netherlands, New York
• Model provisions for offering documentation
• Standard clauses for Trust Deeds / Issuing and Paying Agent Agreements
Legal frameworkPrinciples
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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• New operational flows had to be designed for the NGN structure when necessary
• Changes led to optimisation of the operational flows
• Harmonisation of the current and new flows
• Standard Market Protocol to promote the changes to the market
Market ImpactsGeneric
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Market impacts Issuance process
CS358F
Common Safekeeper
LeadManager
NIAccount
Syndicate/Allottees
Positioning
Euroclear
ClearstreamCommon Service Provider
Confirm receipt and validity of the NGN
Confirm Mark Up + Instruction
to credit LM account
Mark Up Instruction
Issuer€
€ €€
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• Specific form of security (NGN) deposited with a CSK
• Updated offering documentation
• Issuer-ICSD Agreement
• Legal opinion on validity and enforceability of NGN (except in four markets covered by WG opinions)
• Effectuation authorisation
Market ImpactsImpact for issuers
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For issuer agents and lead managers: • Specific form of security NGN
• New issue documentation
• New procedure for New Issue issuance process.
For issuer agents only:
• New procedures/systems for reconciliation
• Enhanced procedures for Income and Corporate Actions processing
• New responsibilities created by the Issuer-ICSD Agreement
Market ImpactsImpact for issuer agents and lead managers
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• Eurosystem-eligibility maintained
• Communication of new criteria
• Improved asset servicing
Market ImpactsImpact for investors
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• The International debt market
• New Global Note
• Legal framework
• Market impacts
• Additional information
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Additional informationProject organisation
• Working Group
• Market Advisory Group
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Additional informationDocuments covering the NGN structure
• NGN brochure • FAQ• Legal pack including:
• NGN templates• standard provisions for agency agreements• standard provisions for offering documentation• Issuer-ICSD agreement• Effectuation authorisation • Operating & Administrative Procedures Memorandum
• NGN New Issues Procedures
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Additional informationWhere to obtain additional information
www.icma-group.org
www.euroclear.com
+ 32 2 224 4527
www.clearstream.com
+ 352 243 32119
www.capmktserv.com