ISMAG

The International Securities Operational Market Practice Book (MPB) is issued by the two ICSDs, to describe best practices for operational processes related to new issues, corporate actions and income. It focuses on timeliness, coverage and quality of information provision and processing for international securities.

It also helps clients improve their understanding of the entire 'behind the scenes' process involved in servicing their securities.

It was created in conjunction with a wide variety of market practitioners in the international securities industry, and under the auspices of ISMAG.

The MPB covers end-to-end roles and responsibilities of intermediaries, both at issuance and during a securities’ lifecycle: Who needs to do What, with Whom, and by When.

Since early 2011 the focus of the International Securities Market Advisory Group (ISMAG) has been to promote the implementation of the ISMAG change programme, and it’s published best practices, within the ISMAG member’s organisation and to the wider market agents and participants.

The Senior Advisory Group will, during the implementation phase:

• ensure the accuracy of ISMAG standards
• promote and monitor the timely implementation of ISMAG standards in the market (across locations and issuance mix)
• ensure adequate communication of ISMAG standards to market participants and trade associations
• monitor and/or address relevant regulatory and/or market policy developments and integrate, where relevant, such recommendations

The Implementation Monitoring Group (IMG), established under the auspices of the ISMAG, is responsible for monitoring and measuring the implementation of the ISMAG change programme. The IMG will:

• monitor Key performance indicators results, globally and/or within each members own firm
• promote ISMAG recommendations and share implementation best practices (hints & tips) with their peers, with other business/reporting lines within their organisations, and up/ downstream counterparts, as applicable
• develop and deploy an implementation plan within each member’s firm
• work on any additional objectives mandated by the Senior Advisory Group

The Programme Management Office (PMO) remains responsible for the follow-up deliverables, planning, and administrative support to the Senior Advisory Group and the Monitoring Group meetings.

Issuers and their agents have the opportunity to voluntarily acknowledge their adherence to the MPB recommendations by providing the respective Letter of Representation (LoR) to both ICSDs.

Effective adherence and compliance to MPB recommendations is monitored by a set of Key Performance Indicators (KPIs) against pre-defined benchmarks.

For Issuers

Issuers have the opportunity to market their engagement to follow the recommendations, by providing the Issuer LoR (pdf-118KB) to both ICSDs, either on a blanket level, for all their future new issuances, or on a programme level, for all their future drawdowns.

An ISMAG Adherent label will be assigned to their relevant securities issued as from the defined effective date (closing date) and the ICSDs will publish the names of Adherent issuers on their website.

An Exception Processing Notification (pdf-37KB) is available to exclude, at security (ISIN) or Programme level, securities structured in a manner that may prevent calculation Agents to provide information as per the defined benchmarks.

These labels will bring transparency:

to investors on their securities portfolio and related expected service levels, i.e. inline with ISMAG recommendations
to Issuers on their securities’ compliance vs. the recommendations.

For all Issuers’ Agents

In any agency role as Lead Manager, Arranger, Dealer, Principal Paying Agent, Issuing & Paying Agent, Calculation Agent, Determination Agent, Corporate Action Agent, Fiscal Agent.

The Issuers’ Agents have the possibility to acknowledge their adherence to the best practices by providing an Issuer Agent LoR (pdf-37KB).

Once such letter is received by both ICSDs, the Issuer’s Agent name will appear on their respective websites as 'ISMAG Adherent' as Issuer’s Agent.

Both Issuers and Issuers’ Agents

You have the possibility to cease complying with the MPB, either in whole or in part, by sending a Notice of Revocation of ISMAG Adherence (pdf-38KB) to both ICSDs.

To ensure adequate implementation of the recommendations and their benchmarked Key Performance Indicators (KPIs), the ICSDs will monitor those adherent Issuers and the Issuers’ agents. These will be based on market-adopted KPIs on the items listed in the appendices attached to the Issuer and Agent LoRs.

For the reference benchmarks, please refer to the table in section 1.1.2 of the MPB (pdf-38KB).

Compliance level results will not be published but will be shared with Issuers and their Agents in multilateral discussions, for the basis of improving the global performance of their issues.

In case the results are systematically below the yearly pre-defined benchmark per KPI, i.e. for more than 3 quarters (9 months), and no clear action plan is shared by the Issuer and/or their Agents to improve performance, the following measures might be taken by the ICSDs:

• Issuers/Agents names removed from the published list of ISMAG adherent parties
• Removal of ISMAG Adherent label on each security, or replacement of ISMAG Adherent label with non-compliant label

The taxonomy was developed by end-to-end market experts. This lists and defines all critical information required for high quality asset servicing to investors. Essentially the taxonomy is a dataset of information requirements for a security’s life cycle, detailing the asset servicing needs for the most frequent events.

Usage of the taxonomy by Issuers, Issuer’s internal/external Legal Counsels and Issuer’s Agents, will increase operational efficiency by reducing processing turnaround times and the financial risks linked to the misinterpretation of issue or event documentation.

The taxonomy may be used as:

• checklists, when drafting security or event documentation to clarify the drafting of some critical components and when notifying various securities’ events, ensuring completeness of information
• a data dictionary, when drafting security or event documentation, to ensure common understanding
• templates, using Excel files, relevant details to be inserted and to be sent to the appropriate recipients, to facilitate transmission of data
  Additionally, specific recommendations are included to clarify the drafting of critical components within issue or event documentation.

ISIN Allocation and Eligibility in the ICSDs – security draft documentation requirements

ISIN Allocation and Eligibility in the ICSDs – security draft documentation requirements
To have a security accepted and eligible for issuance and settlement in the ICSDs, some specific securities information is required in draft documentation to reduce acceptance and eligibility review times.

• The Stand Alone Acceptance and Eligibility Checklist (pdf-46KB), to be used by Lead Managers, contains the minimum information requirements for ISIN allocation and eligibility review for securities to be issued in the ICSDs.
• The Programme Acceptance Checklist (pdf-43KB), to be used by Issuers/ Legal Counsels/ Arrangers, contains the minimum information requirements for a programme number allocation and eligibility review in the ICSDs.
• For issuances under programme, please refer to the facilities under the European Pre-Issuance Messaging (EPIM) .

Asset Servicing – security final documentation requirements

To ensure adequate asset servicing, some specific securities information is required per event in the issue final documentation, ensuring completeness of data and alleviating interpretation risks.

The ISMAG Asset Servicing 'Checklist A' (pdf-1.2MB) – Final Documentation Items, is to be used by Issuers/ Legal Counsels/ Arrangers; contains information requirements, for each event that will/could happen during the life of a security, i.e. the ‘predictable events’ such as put and call options, coupons, conversions, redemptions, etc.

Additionally specific recommendations are defined for:

To ensure adequate asset servicing, some specific securities information is required per event during a security’s lifecycle:

• The ISMAG Asset Servicing 'Checklist B' (pdf-919KB) – Notification for Predictable Events – to be used by the Issuer/Calculation Agent/ Determination Agent/Warrant Agent/ Conversion Agent/etc., to facilitate data notification to the relevant Agents and Common Depositories, for predictable events such as, income/redemption rate fixing notifications, partial redemptions with pool factor, call options, etc. Timely, accurate and complete notifications will reduce the negative impacts on end investors, such as payment reversals.
  
  
• The ISMAG Asset Servicing 'Checklist C' (pdf-1.1MB)  – Notification for Unpredictable Events – to be used by Issuer/Legal Counsels/ Corporate Action Agents/Determination Agents/Conversion Agents; to notify an event not foreseen in the security Terms & Conditions, i.e. the unpredictable events. These events, such as meetings, exchanges, tender offers, etc., usually have separate governing event documents. Additional templates are contained in this file which cover the Event Lifecycle Notification, Event Outcome or Event Change Value Notification.

Checklists content

Each list is organised around 6 different axes:

• family/Grouping structures the different information items identified for an eventfField Name refers to the information required, to facilitate common understanding/language
• value details the format for a particular item, avoiding ambiguity
• application Method refers to specific conditions or recommendations to consider, and if met, these details are required
• definition describes the ‘field name’, to ensure a common understanding and language
• priority identifies whether information is Mandatory, Conditional – see ‘Application Method’ - or Optional for a given event

Naming convention for sending documents to ICSDs

Aimed at increasing document flow efficiency, the Naming Convention for Final Document (pdf-46KB) describes how to structure your email subject and attachment name(s), some general e-mail guidelines, and includes the relevant contact details at the ICSDs. This convention is to be used when sending final new issues documentation to the ICSDs by email.

The benefits of using the naming convention are:

• the creation of a standard reference to prevent lost or misplaced documentation
• the easy identification of documentation content and purpose
• the ability to automate document management