Deutsche Bank

Central Securities Depository Regulation Alignment of T+2 Settlement Period in Relation to Convertible Bonds

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15/09/2014 12:23:55

Deutsche Bank

Central Securities Depository Regulation Overview The Central Securities Depository Regulation (CSDR) will harmonise settlement periods across the European Economic Area (EEA) plus Switzerland, aligning the settlement cycle for transactions in transferable securities executed on trading venues, i.e. Regulated Markets (RM), Multilateral Trading Facilities (MTFs) and Organised Trading Facilities (OTFs) to T+2. This document provides an update on CSDR developments pertaining to convertible bonds, and should be read in conjunction with the previous CSDR newsletters issued by Deutsche Bank, available here: https://www.db.com/en/content/Central-Securities-Depository-Regulation.htm.

Markets within the EEA and Switzerland, that have announced their intention to change their settlement cycle to T+2, effective trade date 6 October 2014, are listed below. Already T+2:

Bulgaria

Germany (Equities)

Slovenia

6 Oct 2014:

Austria

Belgium

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany (Fixed Inc)

Greece

Hungary

Iceland

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Norway

Portugal

Poland

Romania

Slovakia

Spain (Fixed Income)

Sweden

Switzerland

United Kingdom (excl. Gilts)

Q4 2015:

Spain (Equities)

Additional Updates in relation to Convertible Bonds Although not explicitly required by the regulation, Deutsche Bank will ensure uniformity in its settlement of OTC convertible bond transactions, where the underlying is an in scope instrument. To this end, the settlement cycle for OTC transactions will match that of those traded on trading venues. Table 1.1 below identifies a list of countries where the underlying is in scope of the CSD regulation and effective trade date 6th October settlement will occur on T+2. In line with anticipated market standards Deutsche Bank will default the settlement of all convertible bonds, where the underlying is an in-scope security, to T+2 from trade date 6th October 2014. Furthermore, ISIN codes prefixed with XS, which are not country specific will settle on a T+2 cycle effective trade date 6th October if the reference security is in scope of the regulation.

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Deutsche Bank

For convertible bonds traded OTC Deutsche Bank will implement the following changes: 1. Spain Convertible bonds traded on Spanish regulated markets or MTFs are in scope of the CSD regulation and will therefore settle on a T+2 cycle from trade date 6th October 2014. Spanish shares will not migrate to T+2 settlement cycle until Q4 2015 (expected). For example, the convertible bond Sol Melia 4.5% 2018, ISIN - XS0909782921 – will settle on T+2 effective trade date 6th October. The Spanish listed equity underlying, MEL SM EQUITY – Melia Hotels International, ISIN - ES0176252718, will remain at T+3 per the existing settlement cycle, until Q4 2015 (expected). 2. South Africa Shares in South African securities are not impacted by the CSD Regulation and will continue to settle on T+5 basis. Convertible bonds, prefixed XS, which reference a South African underlying will continue to settle T+3. For example, the convertible bond Steinhoff 6.375% 2017, ISIN - XS0834606104 - will remain on the existing T+3 settlement cycle. The South African listed equity underlying, SHF SJ – Steinhoff International Holdings, ISIN - ZAE000016176, will remain at T+5 per the existing settlement cycle. 3. US Shares in US securities are not impacted by the CSD Regulation and will continue to settle on T+3 basis. Convertible bonds, prefixed XS, which reference a US underlying will continue to settle T+3. Where the convertible bond references an out of scope security but has an in scope European ISIN, for example Golar 3.75% 2017 NO0010637846, the convertible bond will be settled T+2 effective trade date 6th October. 4. Asia Shares in Asian securities are not impacted by the CSD Regulation and will continue to settle in line with the current settlement rules. Convertible bonds, prefixed XS, which reference an Asian underlying will continue to settle T+3. Where the convertible bond references an out of scope security but has an XS ISIN, for example China Unicom 0.75% 2015 the convertible bond will be settle T+3 effective trade date 6th October although the underlying, HK0000049939 will continue to settle in line with current Hong Kong rules on T+2.

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Deutsche Bank

TABLE 1.1 below is a list where the underlying security will be in scope for amendment to T+2 Event Country / Region Austria

ISIN Prefix

Country/ Region

ISIN Prefix

Country/ Region

ISIN Prefix

AT

Germany

DE

Norway

NO

Belgium

BE

Greece

GR

Poland

PL

Bulgaria

BG

Hungary

HU

Portugal

PT

Croatia

HR

Iceland

IS

Romania

RO

Cyprus

CY

Ireland

IE

Slovakia

SK

Czech Republic

CZ

Italy

IT

Slovenia

SI

Denmark

DK

Latvia

LV

Spain (Eq Q4 2015)

ES

Estonia

EE

Lithuania

LT

Sweden

SE

European Union

EU

Luxembourg

LU

Switzerland

CH

Finland

FI

Malta

MT

United Kingdom

GB

France

FR

Netherlands

NL

Not country specific

XS

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Deutsche Bank

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