Clearing and Settlement

In each market there is one central depository responsible for the accounting and safe custody of public securities registered in the respective market, and providing delivery-versus-payment (DVP) services for all trades executed on the market’s stock exchange. It is mandatory for intermediaries and custodians to keep proprietary investments on separate accounts from their clients’ investments. This eliminates securities risk in case of default of a bank or a brokerage company.
 
  • Estonian trades concluded on the Nasdaq Tallinn are cleared and settled by the Estonian Central Securities Depository.
  • Latvian trades concluded on the Nasdaq Riga are cleared and settled by the Latvian Central Depository.
  • Lithuanian trades concluded on the Nasdaq Vilnius are cleared and settled by the Central Securities Depository of Lithuania.
Automatically matched trades are always settled on the second day after the trade (T+2), where T is the day of conclusion of the transaction. The ownership right to securities is transferred on the settlement day.
 
The default settlement day for negotiated deals is also T+2. Negotiated deals in Nasdaq Tallinn and Nasdaq Vilnius may also have a settlement day between T+1 and T+6 if agreed so separately. In Nasdaq Riga negotiated deals may have a settlement day between T+0 (inclusive for local members, exclusive for cross-members) and T+40 (inclusive).
 
Settlement of the trades in the case of a public sale of shares, a tender offer or a public offering of a share issue is made on the second working day (T+2) after the conclusion of the trade through the clearing bank.
 

Baltic Exchanges have a Guarantee Fund built from the contributions of stock exchange members who have rights to trade on the exchange. 

 

Clearing and Settlement Links

To facilitate pan-Baltic cross-border trading, the Estonian, Latvian and Lithuanian central securities depositories have established a pan-Baltic free-of-payment (FOP) link for cross-border deliveries and a delivery-versus-payment (DVP) settlement link for stock exchange transactions. Members of the Baltic stock exchanges and their customers do not need to open securities and cash accounts in each and every Baltic country to settle local stock exchange transactions. All they need is a single securities and cash account in one Baltic country to settle cross-border securities transactions between Estonia, Latvia and Lithuania. In practice, this means that members can trade and settle securities listed in one of the Baltic countries via their own securities and cash account opened in another of the Baltic countries. Payment is made in local currency via commercial banks or, in the case of Lithuania, also via non-banking brokerage companies, in the national central bank.
 

In the process of harmonizing post-trading rules and practices, the Baltic central depositories and stock exchanges introduced a common clearing and settlement time schedule for stock exchange transactions effective April 2006. From that day, the cut-off and confirmation times for stock exchange trades are the same in all Baltic markets.

 

Clearing and Settlement Documents

Market Practice Guide for Securities Settlement