NSE Indices Limited a subsidiary of the National Stock Exchange of India (NSE) has launched a new index – follows a target maturity structure with a maturity date of April 30^th, 2027. The index portfolio has 50 percent allocation to AAA rated bonds issued by Government of India owned entities and the other 50 percent includes State Development Loans (SDLs) as on the base date of the index. All constituent bonds in the index mature during the six-month period ending April 30^th, 2027.

The Nifty PSU Bond Plus SDL Apr 2027 50:50 Index has a base date of September 20^th, 2021 and a base value of 1000. The index will be reviewed at the end of every calendar quarter. The index is expected to appeal to investors looking to invest in debt portfolios with the target maturity theme. It is expected to act as a benchmark for asset managers and be a reference index tracked by passive funds in form of Exchange Traded Funds (ETFs), index funds and structured product

Click on the above link for further information

INDIA: NSE Indices Launches New Index
Trevor Dempster

On 28^th September 2021, Turquoise, LSEG’s (London Stock Exchange Group) global securities trading platform, has announced an expansion of its service with a newly enlarged US segment, with US shares now settling into DTC. This expansion will allow global investors to trade in a greater number of US stocks through one connection, alongside UK, Swiss and European securities.

Turquoise enables trading to take place during regular London trading hours, overlapping with Asian and US time zones, and making it easier for investors around the world to access a wider range of securities at a time that suits them. The platform will also offer an expanded universe of nearly 4,300 international securities, including 223 US blue chips, US ETFs and ADRs. Trading fees for US securities are being waived for members through the end of 2021.

The new offering improves access for investors in Asia and other geographies around the globe. Brokers will be able to send client orders in US equities from 15:00 in key Asia time zones for matching on Turquoise with fungible settlement in DTC via electronic STP.

Trades can take place between 08:00 and 16:30 UK time providing greater overlap with Asian and US trading hours. The securities are available on the Turquoise Lit Order Book (TRQX). Market, Limit, Iceberg and Hidden order types are supported.  Traded US securities are cleared via LCH Limited’s Equity Clear, with fungible settlement into Depository Trust Company ‘DTC’ (the US Central Securities Depository CSD), which means investors can trade and manage their positions in one location.

Access to the new trading functionality is available to existing members of Turquoise by requesting access to US Market on their existing dashboard and is available from 5^th October 2021. Non-members wishing to use this service can become a direct member of Turquoise with clearing and settlement arrangements in place or go through brokers with access to Turquoise. To support the trading of US securities, Turquoise expects liquidity providers to join the service in the coming months.

Securities of countries other than US that trade on Turquoise’s new expanded service also benefits from straight through processing to their respective settlement depository. For example, Swiss blue chips that trade on Turquoise will settle in SIX SIS, the national Central Securities Depository (CSD) of the Swiss financial market. International Order Book GDRs like Reliance Group of India and Samsung Securities of South Korea settle directly into Euroclear Bank. Turquoise offers investors the efficiency through a single connection access to a full value chain to trade a wide range of securities that seamlessly settle into the right destination among 21 country and international central securities depositories.

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UNITED KINGDOM: Turquoise Expands Offering and Provide Investors to Access US Trade Shares
Trevor Dempster

On 27^th September 2021, Eurex Exchange announced that its pioneering role in both the Fixed Income and ESG spaces, becoming the first exchange to offer a standardized, listed and centrally cleared way to trade derivatives on fixed income indices that embed ESG criteria.

Eurex offers members and market participants the possibility to trade futures on two Bloomberg MSCI indices:

• Bloomberg MSCI Euro Corporate SRI index
• Bloomberg MSCI Global Green Bond index

Click on the above link for further information

GERMANY: EUREX Launches Futures on Bloomberg MSCI Fixed Income Indexes
Trevor Dempster

The Stock Exchange of Hong Kong Limited (HKEX) announced that the successful completion of a series of market rehearsals to ascertain Exchange Participants’ (EPs) readiness, Orion Central Gateway –Securities Market (OCG-C), previously known as Cash Market Gateway (CMG), rolled out on 27^th September 2021.

To ensure a smooth rollout of OCG-C and system stability, all EPs are required to take note of the following arrangements and act accordingly:

Phase 2 of OCG-C

Following the rollout of OCG-C, phase 2 implementation will commence. The technical specifications for new and enhanced features are already available at the dedicated OCG-C project corner.

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HONG KONG: HKEX Announces Rollout of Orion Central Gateway
Trevor Dempster

Montreal Exchange (MX) announced amendments to the Rules of the Bourse to modify the minimum price fluctuation of the Three-Month CORRA Futures (CRA).

Comments on the proposed amendments must be submitted at the latest on October 21^st, 2021.

Click on the above link for further information

CANADA: MX Announces Amendments to Minimum Price Fluctuation
Trevor Dempster

On 24^th September 2021, Moscow Exchange (MOEX) announced that it will admit 80 foreign stocks to trading on 1^st October 2021

As a result, the number of shares and depositary receipts of foreign issuers available for trading on Moscow Exchange will reach 361. MOEX plans to make more international securities available for trading in future based on demand from banks, brokers, asset managers and their clients.

Moscow Exchange launched trading in international equities on 24^th August 2020. The securities are traded in the main and after-hours trading sessions. Trades are settled in RUB using MOEX’s robust infrastructure, which includes a qualified central counterparty and record-keeping with the central securities depository (NSD). Dividends will be set in the currency of the issuer, i.e., in USD for American securities.

Individual investors can submit Form W-8 to establish eligibility for reduction or exemption of tax on dividend income from U.S. securities.

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RUSSIA: MOEX to Add New International Stocks for Trading
Trevor Dempster

The Central Bank UCITS Regulations provide that the investments of a UCITS shall comprise inter alia transferable securities and money market instruments admitted to official listing on a stock exchange in a third country or dealt in on another regulated market in a third country which operates regularly and is recognised and open to the public provided that the choice of stock exchange or market is provided for in the fund rules or the instruments of incorporation of the investment company.

Regulation 28 of the Central Bank UCITS Regulations requires a responsible person to include a list of the stock exchanges, markets and regulated derivatives markets in which the UCITS may invest in the constitutional document of the UCITS.

UCITS Permitted Markets

Under the Central Bank of Ireland UCITS Regulation 2019, a responsible person shall regularly review the list of stock exchanges and regulated markets that are specified in the prospectus of the relevant UCITS. This must be done to ensure that those stock exchanges and regulated markets continue to meet with the regulatory criteria.

Additionally, a responsible person shall consult with the depositary to ensure that adequate custody arrangements are in place before including additional stock exchanges or markets in the prospectus.

In respect of a relevant market, the regulatory criteria to which the responsible person shall have regard includes a general overview of the market, having regard to issues which would be relevant to the operation of the market and investments therein; and whether the relevant market displays any or each of the following characteristics:

Regulated

The market must be regulated – this means that the market must be subject to supervision by an authority or authorities, duly appointed or recognised by the state in which it is located.

The authority(ies) should generally have the power to:

• Impose capital adequacy rules,
• To supervise directly members of the market,
• To impose listing standards,
• To ensure transparency in dealings and to impose penalties where breaches of rules or standards occur.

Additionally, the clearance and settlement system for transactions should also be regulated and should have acceptable settlement periods.

Recognised

The market must also be recognised or registered by an authority or authorities, duly appointed or recognised by the state in which it is located.

Investment in the market by locally based retail investment funds should be permitted by the relevant authorities.

Operating Regularly

The market must also operate regulatory. When accessing this requirement, a responsible person must ensure that

• Trading takes place with reasonable frequency; and
• The market should have regular trading hours.

Additionally, the assessment must have regard to:

• The liquidity in the market, including the number of members/participants, and
• The ability of the market to provide fair prices on an on-going basis.

Custody arrangements should also be satisfactory, i.e. a depositary must be satisfied that it can provide for the safe-keeping of the assets of an authorised UCITS in accordance with the conditions set down in the UCITS Regulations.

Open to the Public

The market must be open to the public. In order to meet this requirement, the public should have direct or indirect access to the securities traded on the market.

Furthermore, the degree to which overseas investors are permitted to invest and any rules which may impede the repatriation of capital or profits must be taken into account.

Authorisation Process

As part of the authorisation process for a UCITS, a responsible person should confirm to the Central Bank, in writing, that each stock exchange and market listed in the prospectus, or which will be listed in the prospectus in the future, is regulated, operates regularly, is recognised and open to the public.

How we can help!

Our Global Regulators service provides the answers to the key questions required to conduct UCITS eligible market due diligence. Our online portal provides comprehensive market reviews which take into full consideration the UCITS Directive Requirements.

Key Features include:

• Comprehensive review with annotated backup and hyperlinks
• Full consideration of all UCITS Directive Requirements
• Key risks summaries
• Daily email bulletin
• Market Comparisons
• Monthly bulletins containing a list of new and updated markets
• All information consolidated and accessed through www.global-regulators.org website

Central Bank of Ireland UCITS Permitted Markets
Trevor Dempster

COLL 5.2.10 provides that a market is eligible if it is:

• A regulated market;
• Amarket in the United Kingdom or an EEA State which is regulated, operates regularly and is open to the public.

Additionally, if a market does not fall withing either of the above, it can be established as eligible if the authorised fund manager, after consultation with and notification to the depositary (and in the case of an ICVC, any other directors), decides that market is appropriate for investment of, or dealing in, the scheme property;

• The market is included in a list in the prospectus; and
• The depositary has taken reasonable care to determine that:
  o adequate custody arrangements can be provided for the investment dealt in on that market; and
  o all reasonable steps have been taken by the authorised fund manager in deciding whether that market is eligible.

Furthermore, a market must not be considered appropriate unless it:

• Is regulated;
• Operates regularly;
• Is recognised as a market or exchange or as a self-regulating organisation by an overseas regulator;
• Is open to the public;
• Is adequately liquid; and
• Has adequate arrangements for unimpeded transmission of income and capital to or to the order of investors.

Key Questions

When considering these factors and in turn whether a market meets the UCITS eligible requirements, operators should consider the following:

Regulated

In terms of whether the market is regulated, this is a wide-spanning area and should look at the whole lifecycle of a trade and how the different entities involved are regulated.

This includes:

• Is the market subject to supervision by an authority or authorities, duly appointed or recognised by the state in which it is located?
• Does the authority(ies) have the power to:
  o impose capital adequacy rules;
  o supervise directly members of the market;
  o impose listing standards;
  o ensure transparency in dealings;
  o impose penalties where breaches of rules or standards occur.

Clearing and settlement is a huge factor in the lifecycle of a trade. The clearing and settlement system should be regulated and should have acceptable settlement periods which will also impact the liquidity assessment. Due diligence should consider:

• All entities involved in clearing and settlement (e.g. Clearing House, CCP, CSD)
  o Settlement cycles – (e.g. T+2, T+3, T+5)
  o Settlement methods (e.g. Delivery versus Payment (DVP), Free of Payment (FOP))
• Due diligence should also assess the risks of loss in the event of insolvency of a member of exchange? Are there Guarantee Funds in place?

Operates Regularly

When reviewing whether a market operates regularly, due diligence should consider:

• If trading takes place with reasonable frequency and whether the market has regular trading hours – what are the trading hours?
• Trading halts caused by technology issues.

The assessment must have regard to liquidity in the market, including the number of members/participants, and the ability of the market to provide fair prices on an ongoing basis. As discussed above, due diligence should also be conducted on the clearing and settlement and trading systems.

Custody arrangements should also be satisfactory.

Recognised

The market must be recognised or registered by an authority or authorities, duly appointed or recognised by the state in which it is located.

Open to the Public

The market must be open to the public. In order to establish this, consideration should include whether the public have direct or indirect access to the securities traded on the market.

Additionally, the degree to which overseas investors are permitted to invest should be considered.

Liquidity and Repatriation of income and Capital

To determine if the market is sufficiently liquid, again, the whole lifecycle of the trade needs to be considered:

• Can the securities be bought and sold in a reasonable time, at best execution and in adequate amounts?
• Are adequate arrangements in place for unimpeded transmission of income and capital to or to the order of investors?

In our market due diligence reviews we consider a number of liquidity data factors, for example market capitalisation and share turnover velocity.

How we can help!

The above considerations are only a fragment of what UCITS should be considering when establishing if a market is UCITS eligible or not. Due to regulators not providing a definitive answer as to which markets are UCITS eligible, our Global Regulators service provides the answers to the key questions required to conduct UCITS eligible market due diligence. Our online portal provides comprehensive market reviews which take into full consideration the UCITS Directive Requirements.

Key Features include:

• Comprehensive review with annotated backup and hyperlinks
• Full consideration of all UCITS Directive Requirements
• Key risks summaries
• Daily email bulletin
• Monthly bulletins containing a list of new and updated markets
• All information consolidated and accessed through www.global-regulators.org website

Contact us today for a free trial of Global Regulators!

COLL 5.2.10 Eligible Markets
Trevor Dempster

Chapter VI of Board Notice 90 of 2012 provides that when considering if a foreign security is appropriate for inclusion in a portfolio in accordance with section 45 of the Collective Investment Schemes Control Act, a manager must conduct a due diligence investigation into the Exchange the security is listed and traded on.

What factors must be considered to establish the eligibility of the exchange?

Liquidity and repatriation of funds

In considering a foreign exchange, the following must be taken into account:

• The overall liquidity of the exchange;
• Whether securities or derivatives can be bought and sold in a reasonable time, at best execution and in adequate amounts; and
• The procedures and restrictions, if any, on the repatriation of funds to the Republic.

Regulation

The exchange must be subject to supervision by an authority, which must be a statutory body, an agency of a national Government, state department of such Government or another body designated for that purpose by one of said authorities.

In establishing the if the market is appropriately regulated, the following must be considered:

• How are members supervised?
• What are the capital adequacy requirements by members?
• Is there involvement from a central securities depository and what level of immobilisation or dematerialisation is in place?
• Is there the existence of a form of contract guarantee (e.g buying-in obligations)?
• What are the powers of the exchange to intervene in the event of misconduct?
• What are the listing standards? Is there a required to publish prospectuses and audited annual financial statements?
• The Availability of current information about the securities (e.g transactions, prices and spreads).
• Are there requirements for the issue of contract notes or their equivalents?
• Are trade reporting requirements in place?
• Are clearing and settlement arrangements prompt and secure?
• What is the risk of loss in the event of insolvency of a member of the exchange?
• How does the exchange investigate and deal with complaints?
• What type of guarantee fund is maintained to protect investors in respect of liabilities arising prior to the default of a member?

Regular Operation

The exchange must have regular trading hours during which the listed foreign equity and non-equity securities may be traded.

The following additional considerations must be taken into account:

• The availability and timing of price and volume information and the manner in which it is distributed;
• The speed at which companies must release price sensitive information, and the medium through which that information is distributed.

Recognised Exchange

The exchange must be recognised or registered as a market or exchange or self-regulatory organisation by an authority which must be a statutory body.

Open to the Public

Investments listed or admitted to dealing on the exchange must be freely available for trading by the public directly, or through members of the exchange, during normal trading hours.

The extent to which overseas investors are permitted to hold securities listed and traded on the exchange must be taken into account.

How we can help!

Our Global Regulators service provides the answers to the key questions required to conduct UCITS eligible market due diligence. Our online portal provides comprehensive market reviews which take into full consideration the UCITS Directive Requirements.

Key Features include:

• Comprehensive review with annotated backup and hyperlinks
• Full consideration of all UCITS Directive Requirements
• Key risks summaries
• Daily email bulletin
• Market Comparisons
• Monthly bulletins containing a list of new and updated markets
• All information consolidated and accessed through www.global-regulators.org website

Collective Investment Schemes Control Act
Trevor Dempster

Custody of investment company assets with a foreign securities depository

Rule 17f-7 requires US mutual fund managers, whenever they make an investment decision, to take into consideration the local market depositories and the safety of underlying assets during the settlement process and in ongoing safe custody.

Eligible Securities Depository

Under the rule, funds and their custodians may maintain their assets with a foreign securities depository only if it is an “Eligible Securities Depository.”

An eligible securities depository must act as or operate a system for the central handling of securities that is regulated by a foreign financial regulatory authority.

An eligible securities depository must:

• Acts as or operates a system for the central handling of securities or equivalent book-entries in the country where it is incorporated, or a transnational system for the central handling of securities or equivalent book-entries;
• Regulated by a foreign financial regulatory authority
• Holds assets for the custodian that participates in the system on behalf of the Fund under safekeeping conditions no less favourable than the conditions that apply to other participants;
• Maintains records that identify the assets of each participant and segregate the system’s own assets from the assets of participants;
• Provides periodic reports to its participants with respect to its safekeeping of assets, including notices of transfers to or from any participant’s account; and
• Is subject to periodic examination by regulatory authorities or independent accountants.

Risk Analysis

Rule 17f-7 requires that a fund’s primary custodian furnish the fund or its investment adviser an analysis of the custody risks of using an eligible securities depository before the fund places its assets with the depository.

Although Rule 17f-7 does not prescribe specific factors to assess risk, the adopting release provides that, generally, this analysis should cover:

• A depository’s expertise and market reputation;
• The quality of its services;
• Its financial strength;
• Any insurance or indemnification arrangements;
• The extent and quality of regulation, and independent examination of the depository, its standing in published ratings, its internal controls, and other procedures for safeguarding investments; and
• Any related legal protections

How we can help!

Our Global Regulators service provides the answers to the key questions required to conduct UCITS eligible market due diligence. Our online portal provides comprehensive market reviews which take into full consideration the UCITS Directive Requirements.

Key Features include:

• Comprehensive review with annotated backup and hyperlinks
• Full consideration of all UCITS Directive Requirements
• Key risks summaries
• Daily email bulletin
• Market Comparisons
• Monthly bulletins containing a list of new and updated markets
• All information consolidated and accessed through www.global-regulators.org website

U.S. SEC Investment Company Act Rule 17f-7
Trevor Dempster