ISITC ISSUES MARKET PRACTICES FOR SETTLEMENT AND CONFIRMATION OF REPOS, FX ORDERS

Posted April 7, 2009

BOSTON – ISITC (International Securities Association for Institutional Trade Communication), the industry trade group focused on standards in transaction processing and related communications, says that its Settlements Working Group has developed three new Market Practices for implementation, focusing on settlement instructions and confirmation messages for repos and reverse repos, FX [foreign exchange] order confirmation, and factored securities.

“As the repo, FX, and factored securities markets grow, industry participants must focus on implementing settlement standards in order to address some of the most pressing issues,” says Genevy Dimitrion, Chair of ISITC. “The Settlements Working Group has been working toward developing what we believe are a set of very important Market Practices.”

The three Settlements Market Practices are:

• US Repo Market Practice: This updated best practice for repos provides more clarity on the instruction and confirmation of repos and reverse repos for single or multiple pieces of collateral. The updated document provides a more detailed explanation of the business process and data requirements for repurchase agreements.

• US Market Practice for FX Exchange Order Confirmations: This provides clarification on the correct message usage for confirmation of FX transactions executed at the sub-custodian on behalf of the global custodian. The document also highlights usage clarification for the MT300 confirmation message, which is intended to be sent to confirm FX trades executed at the request of the asset manager within the treasury department of a custodian bank, as well as for the MT900/910 confirmation, which is intended to confirm the individual cash movements associated with an MT304 third-party FX trade instruction.

• US Market Practice for Factored Securities: This applies to the instruction of all applicable factored securities types and provides clarification of business and data element usage through field recommendations and sample messages. The market practice has identified the list of applicable factored security types to include: asset-backed, mortgage-backed, collateralized mortgage obligations, corporate bonds with sinking fund provisions, and inflation-protected securities such as TIPs or Linkers.