An investor intending to acquire listed financial instruments traded on, or to otherwise hold securities in the custody of the Exchange, is assigned a unique Malta Stock Exchange Account Number within the Central Securities Depository. Such account is opened by the Member acting on behalf of the investor, custodians, or as a result of participation of an investor in an initial public offering. An Account will also be opened in respect of clients requesting securities custody services. Such Account Number is unique to each investor and all holdings, transactions, transfers, etc. are reflected in this Account Number. Upon request and at least once a year, clients receive Statement of Holdings showing all the financial instruments’ balances held within their account.
The Central Securities Depository provides a number of specialized securities administration and related corporate services:
New Issue Registration Services
This service includes the collection, data input and all other processes related to the applications made by prospective investors in respect of initial public offering of instruments and assets. Since the CSD will also be acting on the instructions of the issuer in respect of the allocation of the investments in the name of investors, the provision of registrar services is a naturally integrated extension of securities issuance services. Registrar services involve the channelling and verification of applications from financial intermediaries, in a controlled and secure environment, reconciliation of the receipt of corresponding cleared funds, the vetting and processing and data input, reporting to issuer, allocation, and integration with any already existing register held on the CSD, release of funds and/or processing of any refunds due, followed by the communication and confirmation with investors by formal registration advice.
This involves the provision of securities holders’ register administration service in respect of issues of dematerialized securities by corporate (e.g., private and public companies or corporations) and non-corporate (e.g. other entities, unit trusts and mutual schemes) issuers. Registered securities administration services include the processing of all corporate actions planned by an issuer, such as the dividend / interest payments processing, power-of-attorney mandates and fixed term securities maturities and redemptions, new issues and rights and bonus issues, regulatory or other ad hoc reporting and updating of registered holdings’ details.
Clearing and Settlement Processing
Clearing and settlement of financial instruments, i.e. the verification of the transfer of financial instruments or other assets in accordance with due instructions:- typically consisting of, delivery versus payment (‘DvP’) in respect of the transfer of assets against payment, or free of payment (‘FoP’) in respect of the delivery of assets free of payment. Conventionally, securities settlement on the Maltese regulated market takes place on T+2 (T is the day of transaction) for all financial instruments. Clearing and settlement is performed by MaltaClear, the designated securities settlement system operated by the Exchange and forming part of the operations of the Central Securities Depository.
Through its custody and depository services, the CSD offers professional, customised and cost-efficient services to retail, institutional or sophisticated investors wishing to avail of the MSE’s custodial holding services, clearing and settlement of assets and the effective exercise of rights arising therefrom on their behalf. Custodial services may extend to both securities issued in Malta and overseas. Interested investors will typically appoint the MSE as their custodian and legal holder of the custody assets on their behalf and in their beneficial interest. By so doing, custody clients will in practice avail of the extensive coverage and possibility of enhanced liquidity that the MSE may extend to the international markets in respect of the custody assets, subject to the applicable terms and conditions.
The MSE CSD link with Clearstream Banking
The Malta Stock Exchange 's relationship with Clearstream Banking AG links the Maltese Depository and custodial services provider with this global Depository. In a nutshell, the link facilitates the participation of MSE customers on the international markets while affording an easy access to international investors to include securities issued in Malta within their portfolios. MSE customers without a Clearstream or other CSD account abroad may still hold internationally issued securities and assets over a secure and efficient link by appointing the MSE as their custodian. This custodial relationship will allow investors to benefit from secure and efficient clearing and settlement processing and a host of other security custody services.
Additionally, investors interested in primary market subscriptions of dematerialized securities issued in Malta, as well as those wishing to process secondary market transfers, may derive practical benefit from the MSE-Clearstream link. Investors who already hold accounts with Clearstream Banking in Frankfurt or Luxembourg, or any other securities depository linked with Clearstream, do not need to open an account with the MSE Central Securities Depository, but may use their Clearstream or other linked CSD account to connect to the local market through the link set up between Clearstream and the MSE Central Securities Depository.
The relationship between MSE and Clearstream allows Maltese financial instruments issued through the CSD to be deposited, cleared and settled in an international environment making these financial instruments much more liquid since they may be actively transferred in a secure manner anywhere in the world through Clearstream’s global reach.
The converse of the above also holds and investors wishing to invest in foreign securities and assets may do so by transacting or otherwise acquiring title over such securities and assets through authorised intermediaries or over-the-counter. Instead of maintaining an account directly with a foreign depository, or indirectly through participants in such a depository, to record the holding in these investments, the MSE Central Security Depository will hold these investments in custody on behalf of such investors through its partnership custodial relationship with Clearstream Banking.
Title over such international investments will be acknowledged on the relevant value settlement date in the client’s respective portfolio securities account held at the MSE Central Securities Depository in Valletta.
Cash corporate action payments are administered by the MSE as custodian in the client’s specified cash account. Furthermore all corporate action instructions, including the exercise of any voting rights and also any possible applicable withholding tax reclaims, will be governed by ad hoc service level undertakings forming part of the custody appointment.
The advantage of the relationship with an international partner such as Clearstream lies in extending to EU and non EU issuers easier access to the possibility of their equities or commercial paper to be issued and/or listed under the MSE brand, and through EU passporting, simultaneously or subsequently seeking a fast-track admission to trading venues beyond the Maltese shores. In this way, the MSE has a cost-effective proposition and is ideally placed to allow securities issuers to derive at the same time the maximum benefits from a safe and regulated financial services centre with an excellent reputation on one hand and enhanced liquidity of the international markets on the other hand. It also allows investors to obtain easy access to a wide range of eligible foreign assets under the security of the MSE-CSD link to the international markets.
Malta Stock Exchange plc became a Direct Member of TARGET2 on 1 January 2008, when Malta’s national currency became the euro. TARGET2 is the pan-eurozone payment system whose participants include National Central Banks, other banks and ancillary organizations such as central securities depositories and clearing and settlement systems.