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1 New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006.

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Presentation on theme: "1 New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006."— Presentation transcript:

1 1 New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006

2 2 The international debt market New Global Note Legal framework Market impacts Additional information

3 3 International debt market Key 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 )

4 4 Data source: International debt market Attractiveness of international debt securities Key features: Accessibility Price Liquidity

5 5 International debt market Eurosystem 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

6 6 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

7 7 The International debt market New Global Note Legal framework Market impacts Additional information

8 8 International securities issued in CGN form ICSDClientsICSDClients IssuerIssuer Common Depositary New Global Note Classical Global note (CGN) Structure Euroclear Clearstream Issuer Agent Issuing & Paying Agency Agreement Common Depositary Agreement Terms & Conditions / Operating Procedures / Customer Handbook

9 9 New Global Note Trigger 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

10 10 New Global Note New structure I C S D C l i e n t s I s s u e r CSK Euroclear Clearstream Issuer Agent Issuing & Paying Agency Agreement CSK Agreement Terms & Conditions / Operating procedures / Customer handbook CSP Agreement Issuer-ICSD Agreement Issuer-ICSD Agreement I C S D C l i e n t s I s s u e r CSK Euroclear Clearstream Issuer Agent Issuing & Paying Agency Agreement CSK Agreement Terms & Conditions / Operating procedures / Customer handbook CSP Agreement Issuer-ICSD Agreement International securities issued in NGN form

11 11 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 Note Key features

12 12 New Global Note Overview of the dual structure CGNNGN Type of securityInternational securitiesInternational debt securities Legal form of securityGlobal Bearer or RegisteredGlobal Bearer Asset servicingCDCSP SafekeepingCDCSK (Bank or ICSD) Legal record keeperCDICSDs Date of existenceSince 1986As 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

13 13 As from 1 January 2007 collateral eligible international debt securities in 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 Note Collateral eligibility

14 14 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 NGN + ICSD CSK NGN + Commercial bank CSK Potentially eligible Not potentially eligible Potentially eligible Not potentially eligible 30 Jun1 Jan

15 15 The International debt market New Global Note Legal framework Market impacts Additional information

16 16 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 framework Principles

17 17 The International debt market New Global Note Legal framework Market impacts Additional information

18 18 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 Impacts Generic

19 19 Market impacts Issuance process CS358F Common Safekeeper Lead Manager NI Account Syndicate/ Allottees Positioning Euroclear Clearstream Common Service Provider Confirm receipt and validity of the NGN Confirm Mark Up + Instruction to credit LM account Mark Up Instruction Issuer €€€€

20 20 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 Impacts Impact for issuers

21 21 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 Impacts Impact for issuer agents and lead managers

22 22 Eurosystem-eligibility maintained Communication of new criteria Improved asset servicing Market Impacts Impact for investors

23 23 The International debt market New Global Note Legal framework Market impacts Additional information

24 24 Additional information Project organisation Working Group Market Advisory Group

25 25 Additional information Documents 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

26 26 Additional information Where to obtain additional information


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