DVP/RVP

RVP/DVP Instructions

Cases

Basic Principle

Vocabulary

RVP/DVP Instructions - Vocabulary

• Sponsor Institution: in Cicada's platform, a Sponsor Institution gives access to other Institution to the platform.

• Sponsored Institution: in Cicada's platform, Institution that has access to the platform through a Sponsor Institution. It can hace Custody Capacity (CC Sponsored Institution), which means it handles its settlements, or not (NCC Sponsored Institution), which means that the Sponsor Institution manages its settlements.

• CSD: Central Security Deposit - Institution that holds and provides safekeeping of securities for institutional clients. A CSD is responsible for the ultimate settlement of cash and securities between its members. The Mexican CSD is Indeval, Europe-based global CSDs include Euroclear and Clearstream. The main US CSD is DTC.

• DVP: Delivery vs. Payment - A settlement procedure whereby securities are delivered immediately upon payment. The process is reflected by a Central Securities Depositary which credits and debits institutional accounts electronically instantaneously.

• RVP: Received vs. Payment - A settlement procedure for investment securities in which the payment must be made prior to the delivery of the securities being purchased. In other words, the delivery of the securities and delivery of the payment must happen simultaneously.

RVP/DVP Instructions - Basic principle

• The exchange of Securities vs. Cash takes place in a CSD and is possible thanks to RVP/DVP operations

• The exchange is made by institutions that have access to the CSD or their Custodian
• The exchange is made between 2 accounts, indicated in Settlement Instructions, in the CSD

• DVP operation when delivering Securities and receiving Payment
• RVP operation when receiving Securities and sending Payment

• To validate an exchange, an RVP must completely match a DVP (margin of 50MXN in Indeval)

• DVP/RVP must be simultaneous operations

CSD

BUYER Account

SELLER Account

Custodian Account at CSD

Custodian Account at CSD

In our platform The RVP/DVP matches will be a little bit more complex since there will always be one or more intermediaries between the Buyer and the Seller. In case a Sponsor Institution is a market participant, it will be considered as a not Sponsored Institutions. The first DVP/DVP match is ALWAYS on the Seller side.

Cash

RVP from Buyer

Securities

DVP from Seller

RVP/DVP Instructions - Case 1

Both Institutions are sponsored by the same Sponsor

CSD

Segment 1 Operations to perform by Sponsor's Custodian:

SPONSOR

• RVP: Securities received from Seller

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Sponsor

Segment 2 Operations to perform by Sponsor's Custodian:

• DVP: Securities delivered to the Buyer

Operations to perform by Buyer's Custodian:

BUYER

SELLER

• RVP: Securities received from Sponsor

Cash

RVP from Buyer

RVP from Sponsor

DVP/RVPs are expressed in Total Cash and Quantity

Securities

DVP from Sponsor

DVP from Seller

RVP/DVP Instructions - Case 2

Both Institutions aren't sponsored

CSD

Segment 1 Operations to perform by S3:

CICADA

• RVP: Securities received from Seller

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Cicada

Segment 2 Operations to perform by S3:

• DVP: Securities delivered to the Buyer

Operations to perform by Buyer's Custodian:

BUYER

SELLER

• RVP: Securities received from Cicada

Cash

RVP from Buyer

RVP from Cicada

Securities

DVP from Cicada

DVP from Seller

RVP/DVP Instructions - Case 3

One side is not Sponsored

CSD

Operations to perform by S3:

• RVP: Securities received from Seller

SPONSOR

CICADA

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Cicada

Operations to perform by S3:

• DVP: Securities delivered to Sponsor

Operations to perform by the Sponsor's custodian:

• RVP: Securities received from Cicada

BUYER

SELLER

Operations to perform by the Sponsor's custodian:

• DVP: Securities are delivered to the Buyer

Operations to perform by Buyer's Custodian:

• RVP: Securities received from Cicada

RVP from Sponsor

Cash

RVP from Cicada

RVP from Buyer

Securities

DVP from Sponsor

DVP from Cicada

DVP from Seller

RVP/DVP Instructions - Case 4

Both Institutions have different Sponsors

CSD

Operations to perform by Sponsor II's Custodian:

• RVP: Securities received from Seller

SPONSOR II

CICADA

SPONSOR I

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Sponsor II

Operations to perform by Sponsor II's Custodian:

• DVP: Securities delivered to Cicada

Operations to perform by S3:

• RVP: Securities received from Sponsor II

BUYER

Operations to perform by S3:

SELLER

• DVP: Securities delivered to Sponsor

Operations to perform by Sponsor I's Custodian:

• RVP: Securities received from Cicada

RVP from Sponsor I

Operations to perform by Sponsor I's Custodian:

DVP from Cicada

• DVP: Securities delivered to Buyer

RVP from Sponsor II

RVP from Buyer

Cash

RVP from Cicada

Operations to perform by Buyer's Custodian:

DVP from Seller

Securities

DVP from Sponsor I

DVP from Sponsor II

• RVP: Securities received from Sponsor I

RVP/DVP Instructions - One step forward, adding the Aggregator and Fees to the game

The Transaction Aggregator will allow bookers to perform booking for a Group of Bookable Transactions o a Single Transaction. 1 Group of Bookable Transactions gathers Transactions that match a list of criteria: - same Security - same Direction (buy or sell) - same Settlement Date Deadline - same Settlement Currency This means that a Market Participant (Buyer or Seller) will be able to generate 1 or several Allocated Funds to settle 1 or more Transactions. In our platform, performing booking will then create 1 Transaction Book (Single or Multiple, depending on the number of Transactions contained), the corresponding Allocated Fund(s), the corresponding Segment(s) and the corresponding RVP/DVP Instructions.

Segment 1

DVP

RVP

Segment 2

DVP

RVP

RVP/DVP Instructions - Prices & Fees

• Buyer Price = Execution Price + Buyer fee
• Buyer Total Fee = Buyer fee * Quantity
• Total Cash Buyer = Buyer Price * Quantity

• Seller Price = Execution Price - fee
• Seller Total Fee = Seller fee * Quantity
• Total Cash Seller = Seller Price * Quantity

• Fees are split between CIcada and the Sponsor:
• 20% for the Sponsor
• 80% for Cicada

Cicada

SPONSOR

Seller Price = 99

Buyer Price = 101

BUYER

SELLER

Execution Price = 100

Cash

Securities

RVP/DVP Instructions - Case 1

• Execution Price = EP
• Seller Price = SP
• Buyer Price = BP
• Total Cash = TC
• Quantity = Q
• Total Fee = Fee

Cicada

Seller 1 - Sponsor: Transaction Book - MultipleTransaction - Seller 1 - Buyer 1 Transaction - Seller 1 - Buyer 2

SPONSOR

Transaction Book 1:

• W.A.P1 = (Q1 * SP1 + Q2 * SP2 ) / (Q1 + Q2)
• TC1 = (Q1 + Q2) * W.A.P1
• Fee1 = (EP1 - SP1)*Q1 + (EP2 - SP2)*Q2

BUYER 1

SELLER 1

BUYER 2

Buyer 1 - Sponsor: Transaction Book - SingleTransaction - Seller 1 - Buyer 1

Transaction Book 2:

• TC2 = Q1 * BP1
• Fee2 = (EP1 - BP1)*Q1

Buyer 2 - Sponsor: Transaction Book - SingleTransaction - Seller 1 - Buyer 2

Transaction - Seller 1 - Buyer 1

Transaction Book 3:

• TC3 = Q2 * BP2
• Fee3 = (EP2 - BP2)*Q2

Transaction - Seller 1 - Buyer 2

RVP/DVP Instructions - Case 1

Seller 1 - Sponsor: Segment 1

Operations to perform by Sponsor's Custodian:

CSD

• RVP: Securities received from Seller :

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Cicada

SPONSOR

Buyer 1 - Sponsor: Segment 2

Operations to perform by Sponsor's Custodian:

• DVP: Securities delivered to Cicada

Operations to perform by Buyer 1's Custodian:

• RVP: Securities received from Seller

BUYER 1

SELLER 1

BUYER 2

Buyer 2 - Sponsor: Segment 3

Operations to perform by Sponsor's Custodian:

• DVP: Securities delivered to Cicada

Operations to perform by Buyer 2's Custodian:

• RVP: Securities received from Seller

Cash

DVP from Sponsor

RVP from Cicada

RVP from Buyer

DVP/RVPs are expressed in Total Cash and Quantity

Securities

DVP from Sponsor

DVP from Cicada

DVP from Seller

RVP/DVP Instructions - Case 1

This is the RVP/DVP balance for the Sponsor:

In this case we know that there won't be any intermediary operation between the Sponsor and Cicada because the Securities result is 0. However, we know that the Sponsor collected fees through the operacions with Buyers and the Seller so it will have to be wired to Cicada.

This is the Fee Blotter for the Sponsor:

RVP/DVP Instructions - Case 3

Seller 1 - Sponsor: Transaction Book - MultipleTransaction - Seller 1 - Buyer 1 Transaction - Seller 1 - Buyer 2

Cicada

Transaction Book 1:

• W.A.P1 = (Q1 * SP1 + Q2 * SP2 ) / (Q1 + Q2)
• TC1 = (Q1 + Q2) * W.A.P1
• Fee1 = (EP1 - SP1)*Q1 + (EP2 - SP2)*Q2

SPONSOR

CICADA

Buyer 2 - Sponsor: Transaction Book - SingleTransaction - Seller 1 - Buyer 2

Transaction Book 2:

• TC2 = Q2 * BP1

• Fee2 = (EP1 - BP1)*Q2

Buyer 2 - Sponsor: Transaction Book - SingleTransaction - Seller 2 - Buyer 1

BUYER 1

BUYER 2

SELLER 2

SELLER 1

Transaction Book 3:

• TC3 = Q3 * SP3
• Fee3 = (EP3 - SP3)*Q3

Buyer 1 - Sponsor: Transaction Book - MultipleTransaction - Seller 1 - Buyer 1 Transaction - Seller 2 - Buyer 1

Transaction Book 4:

• W.A.P2 = (Q1 * BP1 + Q3 * BP3 ) / (Q1 + Q3)
• TC4 = (Q1 + Q3) * W.A.P2
• Fee4 = (EP1 - BP1)*Q1 + (EP3 - BP3)*Q3

Transaction - Seller 1 - Buyer 1

Transaction - Seller 2 - Buyer 1

Transaction - Seller 1 - Buyer 2

RVP/DVP Instructions - Case 3

Seller 1 - Sponsor: Segment 1

Operations to perform by Sponsor's Custodian:

• RVP: Securities received from Seller

CSD

Operations to perform by Seller's Custodian:

• DVP: Securities delivered to Cicada

SPONSOR

CICADA

Buyer 2 - Sponsor: Segment 2

Operations to perform by Sponsor's Custodian:

• DVP: Securities delivered to Buyer 2

Operations to perform by Buyer 2's Custodian:

• RVP: Securities received from Sponsor

Seller 2 - Cicada: Segment 3

BUYER 1

BUYER 2

SELLER 2

SELLER 1

Operations to perform by S3:

• RVP: Securities received from Seller 2

Operations to perform by Seller 2's Custodian:

• DVP: Securities delivered to Cicada

Buyer 1 - Cicada: Segment 4

Operations to perform by 3:

Cash

RVP from Sponsor

RVP from Buyer 2

RVP from Buyer 1

RVP from Cicada

• DVP: Securities delivered to Buyer 1

DVP from Seller 1

DVP from Sponsor

DVP from Cicada

DVP from Seller 2

Securities

Operations to perform by Buyer 1's Custodian:

• RVP: Securities received from Cicada

RVP/DVP Instructions - Case 3

If the balance indicates that Securities > 0 → DVP If the balance indicates that Securities < 0 → RVP

This is the RVP/DVP balance for the Sponsor and Cicada:

• Surplus = Q1 Securities
• Need to do a DVP
• Cicada has to do an RVP

In this case we know that an exhange between the Sponsor and CIcada is necesary because the Securities results are different from 0. Hence we have to know for the Sponsor and Cicada:

• What type of instruction is needed
• What are the mounts (Cash and Securities) of these instructions

Taking advantage of this exchange, we will include Fees so the Sponsor and Cicada Cash results are equivalent to the corresponding portion of the Total Fees.

This is the Fee Blotters for the Sponsor and Cicada:

RVP/DVP Instructions - Case 3

We compute the instructions amounts:

RVP/DVP Instructions - Case 3

Cicada - Sponsor: Segment 5

CSD

Operations to perform by S3:

• RVP: Securities received from Seller

Operations to perform by Sponsor's Custodian:

SPONSOR

CICADA

• DVP: Securities delivered to Cicada

BUYER 1

BUYER 2

SELLER 2

SELLER 1

Cash

RVP from Cicada

DVP from Sponsor

Securities

RVP/DVP Instructions - Case 4

Seller 1 - Sponsor II: Transaction Book - MultipleTransaction - Seller 1 - Buyer 2 = Q1 * SP1 Transaction - Seller 1 - Buyer 1 = Q2 * SP2 Transaction - Seller 1 - Buyer 3 = Q3 * SP3

Cicada

Transaction Book 1:

• W.A.P1 = (Q1 * SP1 + Q2 * SP2 + Q3 * SP3) / (Q1 + Q2 + Q3)
• TC1 = (Q1 + Q2 + Q3) * W.A.P1
• Fee1 = ((EP1 - SP1) + (EP2 - SP2) + (EP3 - SP3))*(Q1 + Q2 + Q3)

SPONSOR II

CICADA

SPONSOR I

Seller 2 - Cicada: Transaction Book - SingleTransaction - Seller 1 - Buyer 3 = Q3 * BP3

Transaction Book 2:

• TC2 = Q3 * BP3
• Fee2 = (BP3 - EP3) * Q3

BUYER 2

BUYER 1

BUYER 3

SELLER 2

SELLER 1

Seller 2 - Cicada: Transaction Book - SingleTransaction - Seller 2 - Buyer 1 = Q4 * SP4

Transaction Book 3:

• TC3 = Q4 * SP4
• Fee3 = (EP4 - SP4) * Q4

Transaction - Seller 1 - Buyer 2

Transaction - Seller 2 - Buyer 1

Transaction - Seller 1 - Buyer 1

Transaction - Seller 1 - Buyer 3

RVP/DVP Instructions - Case 4

Buyer 1 - Cicada: Transaction Book - MultipleTransaction - Seller 2 - Buyer 1 = Q4 * BP4 Transaction - Seller 1 - Buyer 1 = Q2 * BP2

Cicada

Transaction Book 4:

• TC4 = (Q4 + Q2) * W.A.P4
• Fee4 = (BP4 - EP4) * Q4 + (BP2 - EP2) * Q2

SPONSOR II

CICADA

SPONSOR I

Buyer 2 - Sponsor I: Transaction Book - SingleTransaction - Seller 1 - Buyer 2 = Q1 * BP1

Transaction Book 5:

• TC5 = Q1 * BP1
• Fee5 = ( BP1 - EP1) * Q1

BUYER 2

BUYER 1

BUYER 3

SELLER 2

SELLER 1

Transaction - Seller 1 - Buyer 2

Transaction - Seller 2 - Buyer 1

Transaction - Seller 1 - Buyer 1

Transaction - Seller 1 - Buyer 3

RVP/DVP Instructions - Case 4

Segment 1 : Seller 1 - Sponsor II

CSD

Operations to perform by Sponsor II's Custodian:

• RVP: Securities received from Seller 1 = TC1

Operations to perform by Seller 1's Custodian:

SPONSOR II

CICADA

SPONSOR I

• DVP: Securities delivered to Sponsor II = TC1

Segment 2 : Buyer 3 - Sponsor II

Operations to perform by Sponsor II's Custodian:

• DVP: Securities delivered to Buyer 3 = TC2

Operations to perform by Seller 1's Custodian:

• RVP: Securities received from Sponsor II = TC2

BUYER 2

BUYER 1

BUYER 3

SELLER 2

Segment 3 : Seller 2 - Cicada

SELLER 1

Operations to perform by Seller 2's Custodian:

• DVP: Securities delivered to Cicada = TC3

Operations to perform by S3:

• RVP: Securities received from Seller 2 = TC3

RVP from Buyer 1

RVP from Buyer 3

DVP from Sponsor II

DVP from Cicada

Cash

RVP from Buyer 2

RVP from Sponsor II

RVP from Cicada

Securities

DVP from Seller 1

DVP from Sponsor I

DVP from Seller 2

RVP/DVP Instructions - Case 4

Segment 4: Buyer 1 - Cicada

CSD

Operations to perform by Buyer 1's Custodian:

• RVP: Securities received from Cicada = TC4

Operations to perform by Cicada's Custodian:

SPONSOR II

CICADA

SPONSOR I

• DVP: Securities delivered to Buyer 1 = TC4

Segment 5: Buyer 2 - Sponsor I

Operations to perform by Buyer 2's Custodian:

• RVP: Securities received from Sponsor I = TC5

Operations to perform by Sponsor I's Custodian:

• DVP: Securities delivered to Buyer 3 = TC5

BUYER 2

BUYER 1

BUYER 3

SELLER 2

SELLER 1

RVP from Buyer 1

RVP from Buyer 3

DVP from Sponsor II

DVP from Cicada

Cash

RVP from Buyer 2

RVP from Sponsor II

RVP from Cicada

Securities

DVP from Seller 1

DVP from Sponsor I

DVP from Seller 2

RVP/DVP Instructions - Case 4

This is the RVP/DVP balance for the Sponsors and Cicada:

This is the Fee Blotters for the Sponsors and Cicada:

RVP/DVP Instructions - Case 4

• Surplus = Q1 + Q2 Securities
• Need to do a DVP
• Cicada has to do an RVP

• Debt = Q1 Securities
• Need to do an RVP
• Cicada has to do a DVP

RVP/DVP Instructions - Case 4

Segment 6: Sponsor II - Cicada

CSD

Operations to perform by S3:

• RVP: Securities received from Sponsor II

SPONSOR II

CICADA

Operations to perform by Sponsor II's Custodian:

SPONSOR I

• DVP: Securities delivered to Cicada

Segment 7: Sponsor I - Cicada

Operations to perform by Sponsor I's Custodian:

• RVP: Securities received from Cicada

Operations to perform by S3:

• DVP: Securities delivered to Sponsor I

BUYER 2

BUYER 1

BUYER 3

SELLER 2

SELLER 1

Transaction - Seller 1 - Buyer 2

Transaction - Seller 2 - Buyer 1

Cash

Transaction - Seller 1 - Buyer 1

Securities

Transaction - Seller 1 - Buyer 3

RVP/DVP Instructions - Exercice

Do the same process for this example

Quantity | Execution Price | Buyer Price | Seller Price

RVP/DVP Instructions - Solution

RVP/DVP Instructions - Solution

1. Compute Transaction Books for all Buyers and Sellers:

RVP/DVP Instructions - Solution

2. Compute RVP/DVPs balances for Sponsors and Cicada:

3. Compute Fees:

RVP/DVP Instructions - Solution

2. Balance results