Market Profiles

RBC IS operates an omnibus account structure in this market.

For further information or support around accessing this market, please contact your RBC IS representative.

There are four exchanges that fall under the holding company BME:

• Madrid Stock Exchange (MSE) - main stock exchange
• Barcelona Stock Exchange
• Bilbao Stock Exchange
• Valencia Stock Exchange

The Mercado de Deuda Publica trades government debt.

The organisation and functioning of the Exchanges is the responsibility of each of the Exchanges’ governing body called "Sociedad Rectora".

Bolsas y Mercados Españoles (BME) encompasses the companies that direct and manage the securities markets and systems in Spain. It brings together, under a single activity, decision-taking and coordination unit, the Spanish equity, fixed-income and derivatives markets and their clearing and settlement systems. The BME Group is formed by the Barcelona, Bilbao, Madrid and Valencia stock exchanges, MEFF Mercados Financieros and Iberclear. 

BME is the Spanish markets' response to the new international financial setting, where investors, intermediaries and firms demand an ever-expanding range of services and products within a framework of security, transparency, flexibility and competitiveness. 

By uniting their efforts, Spanish markets have attained a top-level size within the European setting and a diversified structure that covers the entire chain of value in securities markets from trading to settlement, including the provision of information and data-processing services. This size and structure permit a more efficient use of resources, cost reduction and the streamlining of services.

Stock Exchange Interconnection System (SIBE)
SIBE is an order-driven market, with real-time information and immediate dissemination of trading data. This system allows the four Spanish stock markets to drive their orders through terminals connected to the same mainframe. These orders are assigned priority on the basis of price and time introduction. If a counterparty exists at a set price, the trade is executed automatically. If not, it remains on the order book until there is a counterparty.

SIBE operates as follows:
Continuous trading: eight and a half hours (09:00 to 17:30) for orders and trades (unless there is a volatility auction), 30 minutes for opening auction (08:30 to 09:00) and five minutes for the closing auction (17:30 to 17:35).

Auction are periods when orders are introduced but trades are not executed and the system calculates, in real time, an equilibrium price between supply and demand. All auctions end with a random closing of 30 seconds. At the end of the opening and closing auctions, the respective prices are set. Over the course of continuous trading one or more shares can have volatility auctions. The volatility auctions last 5 minutes and can be caused by static or dynamic range.

The same share price is used for all four exchanges. Trading times and operating rules ensure equal access.

There are two trading systems:

• traditional open outcry
• the electronic system.

Futures and options are traded in the futures market by MEFF (Mercado de Futuros y Opciones Financieros) in equities and fixed income. MEFF is part of the financial holding, MEFF-AIAF-SENAF, which handles futures and options and the Blind Market.

The Supervision and Control Department guarantees operators equal opportunities in access to the market.

Monday to Friday:

08:30 - 09:00 - Opening
09:00 - 17:30 – Trading
17:30 - 17:35 - Closing auction

ISIN: Yes
Other: Not applicable

Banco de España–BdE  - BoS retains legislative authority over banks and some financial intermediaries as well as regulating the fixed income market.

Comisión Nacional del Mercado de Valores (CNMV) supervises financial markets and operates as a public agency with independent legal status, accountable to a Board of Directors. The CNMV is the agency in charge of supervising and inspecting the Spanish Stock Markets and the activities of all the participants in those markets.

The purpose of the CNMV's is to ensure the transparency of the Spanish market with the correct formation of prices, and to protect investors. The CNMV promotes the disclosure of any information required to achieve these goals.

The main beneficiaries of the CNMV's work are Spanish investors, to whom adequate protection must be assured. The CNMV therefore focuses on improving the quality of information disclosure to the market, and particular efforts are made in the area of auditing and in developing new disclosure requirements relating to remuneration schemes for directors and executives that are linked to the price of the shares of the company where they work. Also, considerable efforts are made to detect and pursue illegal activities by unregistered intermediaries.

The actions of the Commission relate to companies which issue securities for public placement, to the secondary markets, and to investment services companies. The Commission also exercises prudential supervision over the secondary markets and investment service companies in order to ensure transaction security and the solvency of the system. The entities included under the Commission are:

• Collective Investment Schemes, a category which includes: investment companies (securities and real estate), investment funds (securities and real estate) and their management companies.
• Broker-Dealers and Dealers, which are entities engaging primarily in the purchase and sale of securities.
• Portfolio Management Companies, i.e. entities focusing primarily on managing individuals assets (principally securities).

Through the National Securities Numbering Agency, the CNMV also assigns internationally valid ISIN and CFI codes to all securities issued in Spain.

All listed equities on the Spanish market are dematerialised. Physical shares have almost been phased out and are only dealt with in special transactions outside the exchange. Only a very small percentage of physical securities are traded privately through off-exchange transactions done at Notary Publics or Official Brokers. Custodians may still hold physical securities in their vault on behalf of clients.

The minimum variation shall be €0.01 if the price is equal to or lower than €50 and €0.05 if the price is over €50.

IBERCLEAR/T2S settlement cycles

Equities Settlement on-exchange and OTC

Trade Date
1. Investor will contact International Broker to execute order, and if different or not a remote member of the Spanish Market, the International Broker will contact Local Broker to execute the order.
2. The Local Broker executes real-time trade order(s) in any of the four Spanish Stock Exchanges (Madrid, Bilbao, Valencia and Barcelona).
3. Communication is on line between the stock exchange and the Local Broker. Therefore confirmation of each execution in the market is send from the Exchange to the Local Broker and the Local Broker will then confirm to the International Broker and Investor.

Trade Date + 1
4. International Broker will need to communicate before 19.00cet the splits and registration names of all the executions preformed in TD to the PTI, Spanish Post trading information system
5. Local Broker will receive information for the splits and registration names and will communicate to the Stock Exchange

Trade Date + 1 and Trade Date + 2
6. Stock exchange will communicate to local CSD, IBERCLEAR, the settlement instructions and the allegements.
7. CSD will send the settlement instructions and allegements to Local Custodian. Matching begins when instructions are received.
Local Custodian, in case of discrepancy or missing instruction from the Client, will have only until T+1 to reject the settlement instructions and the allegement.
8. Local Custodian will settle the instructions and confirm to the client.
9. The Local Custodian sends the settlement confirmation to the Investor/International Broker.

Trade Date to Trade Date + 2
A. Investor/International Broker issues settlement instructions to the Local Custodian.
B. The Local Custodian delivers the instruction to the CSD or if direct participant, directly to T2S for matching with the counterparty
C. The CSD/T2S sends online confirmation or mismatch information to the Local Custodians. The Local Custodian sends the settlement confirmation or the discrepancy information to the Investor/International Broker.

Purchase and sale – Fixed Income settlement – OTC

(The numbers indicated in the tables are reflective to the flow chart numbering and timeframes represent the usual timing of the flows, but may not be limited to these specific days. All times stated are local time).

Trade Date
A. On trade date, Investors/International Broker, buyer and seller agree trade conditions, value date and repurchase date in case of repos. Entities participating in the Fixed Income Platform may execute the following transactions with other entities: straight spot sale, straight forward sale and sell/buy-back.
B. The Local Custodian delivers the instruction to the CSD or if direct participant, directly to T2S for matching with the counterparty
In each order communicated , either deliver or receipt of securities, Investors/International Broker must provide the required details in order to match in the market ( the CSD or in T2S)

Trade Date and Trade Date + 1
C. IBERCLEAR/T2S if custodian is a direct participant communicates to Investor/International Broker and counterparty the result of the matching process. In the case of paired transactions, once the first part/side has settled, IBERCLEAR/T2S will inform the two participant entities that the second part/side is on “matched” status and its transaction number.

Trade Date + 2 and Trade Date + 2
D. Transactions communicated by the entities will be settled on the SD agreed. Settlement will be done according to the settlement cycles.

Equity

Stock exchange settlements are automated (book-entry). Settlement is on a delivery versus payment (DVP) basis, with simultaneous exchange of cash and securities on T+2.
There are two forms of settlement:
· On exchange
· Transfer with or without change of registration name

EUR

Trading hours: Monday to Friday: Debt (See above)
True OTC for equities settlements does not exist in Spain as there is invariably a change in registration name and the trade needs to be crossed on the market. Stock can be delivered between banks (despacho) but the registration name cannot change, therefore as this is the determining factor of ownership in Spain, this is not usual practice.

Stock can be received by one entity from another to cover a sale that is registered in the same name as the receipt. In this same way, one entity can deliver to another entity a stock that originates from a purchase registered in the same name as the corresponding delivery. 

Article 9 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR) establishes that OTC derivatives' counterparties shall ensure that the details of the contract they have concluded and any modification or termination of the contract are reported to a trade repository registered by the European Securities and Markets Authority (ESMA).

According to the Communication of CNMV dated November 15, 2013, the reporting obligation entered into force the February 12, 2014.

The registered trade repository operated by Iberclear and Clearstream is Regis-TR.

In order to fulfill the reporting obligation, the counterparties have to request a Legal Entity Identifier (LEI code), issued by a Local Operating Unit (LOU).

According to the joint Declaration of Ministry of Economy and Competitiveness, Bank of Spain, CNMV and Ministry of Justice dated 25 November 2013, the Company Registration (Registro Mercantil) has been appointed as Spanish LOU.

Book-Entry: Once transactions have been contracted on the market, the Stock Exchanges inform Iberclear on the same trade day, of the volume of securities and cash at their various prices which have been traded at the aggregate level by each of the market members. Volume reporting is also allowed on the day following trade date, exclusively for special operations effected after market hours.

The trading that has been reported in the first instance at aggregate level must be broken down into itemised transactions that specify ownership (registration details) and the market participant who is settling the individual transactions. 

The Stock Exchanges communicate the breakdowns to Iberclear (SCLV) at the same time that they receive them from the brokers. This information is in turn placed at the disposal of the participants appointed for settlement, in order that the settlement participants have until the close of the next communications period to accept or reject the operation. The breakdowns received in Iberclear (SCLV) on the morning of T must be accepted or rejected until the afternoon of T with the ones being received in the afternoon of T having until T+1 in the morning, and so on. The period set for confirmation of the breakdowns runs from T to the morning of T+2. 

The process of confirming the breakdowns is effected by the participant, either expressly by accepting or rejecting the settlement of the operations, or tacitly, by taking as confirmed those operations that have not been rejected by the participant at the end of the aforesaid period. Rejected operations will be reported on the same day to market members for them to rectify their breakdown if there is still time to do so. 

Once the set period for making and confirming the breakdown is over, transactions that have been rejected by participants will be allocated for settlement to the market member who had been their broker on the morning of T+2. This allocation procedure is also completed with the trading volumes still pending breakdowns at the end of T+1.

Each specific purchase resulting from the breakdown is given a Register Reference (RR) which is communicated to the settlement participant with the breakdown. These RRs are deemed as provisional, their final registration being conditional on final settlement of trades, in such a way that should the participant fail to settle the purchase, the securities would be retained by Iberclear. In spite of this, the RR can be used by the participant in further transactions before settlement of the purchase, either to cover a sale (justify a sale in the terminology of the Spanish market) or to transfer the securities to another participant. In either case, final execution of subsequent transactions will depend on the definitive settlement of the previous purchase, without which the aforementioned are cancelled.

Coverage (Justification) of the sales traded on Day T by means of the presentation of the securities' RR numbers may be made by the participants until 15:00 on the settlement day (T+2). Likewise participants may report the cancellation of a justification already made, provided the corresponding set period has not expired. 

Those sales transactions that have not been justified within the established time-frame will be deemed as failed and will be granted an extra period of one more working day for justification before automatically buying-in the securities.

As opposed to other types of securities, the subscription rights' balances of participants are not broken down into RR numbers, so that in these cases, sales are automatically covered in the afternoon of the corresponding T+2 against the global balance position held by the participant at Iberclear, as a preliminary step towards settlement on T+2.

The settlement of purchase and sale trades made on the market takes place three working days after the negotiation date. 

In order to facilitate the participants' compliance with settlements, the system holds transitory cash accounts for each of them with regard to each future settlement date. The debits associated with purchases are entered into these accounts following the final assigning of the trade to the participant, and the credits from sales are made as soon as their justification is effected, thereby netting in advance debits and credits in these accounts. 

The balances and entries in these accounts are transmitted daily to the participants holding them, who can check the provisional position of their accounts daily up to the very day of settlement.

Mismatching - 22F Field Requirement

Please note that instructing YBEN/NBEN (or equivalent) only applies in the scenario where a trade is mismatching in the market as a result of a registration name discrepancy. Please also note the following:

• If a client instructs YBEN (or equivalent) and there is a registration name discrepancy against the counterparty, Citibank is authorized to re-register and match the counterparty details. For those ISIN codes subject to Financial Transaction Tax (FTT), the tax will be submitted by Citibank and debited to the client’s account at month-end.
• If a client instructs YBEN (or equivalent) but there is no mismatch scenario in the market, and the initial trade instruction matches against the counterparty with no discrepancy, then Citibank will take no action.
• If a client instructs NBEN (or equivalent) in the trade instruction and there is a mismatch due to a registration name discrepancy with the counterparty, then Citibank will not proceed with any change of registration name in order to match the counterparty details.

Clearing Procedures

Spain's stock exchange markets are organised around three infrastructures: the trading platform (SIBE), the Central Counterparty (BME Clearing), and the central securities depository (IBERCLEAR).

The CCP will act as central counterparty, interposing itself for its own account in the obligations arising from the transactions and becoming, through novation, the buyer in every sale transaction and the seller in every purchase transaction. After clearing, the reciprocal obligations between the CCP and each account-holder will be replaced by the obligations resulting from aggregation into a net position. The resulting obligations, which will give rise to settlement instructions following interposition of the CCP and its clearing function, will be different from those initially registered with the CCP.

The CCP will generate the settlement instructions and send them to IBERCLEAR, after clearing the trades before the first settlement cycle on the day on which settlement is due.

If the trades in a CCP account are cleared, one net settlement instruction is generated per account, for the difference in cash and securities between the purchases and sales of a given ISIN, trade date, settlement date and clearing account. If the trades in an account are not to be cleared because it is a gross account, the CCP will generate one DVP settlement instruction for the aggregated purchases and another for the aggregate sales of a given ISIN, trade date, settlement date and clearing account.

As a result of the CCP interposing itself, the settlement instructions will be generated between securities and cash accounts arranged for this purpose by the CCP at the CSD and by the TARGET2 payments module, and the accounts designated by the Members for settlement purposes..

Interposition of the CCP in the instructions will mean that, in the settlement process, the CCP securities account will receive the securities under each ISIN from the accounts with selling obligations, and will distribute those securities to the accounts with purchase obligations, in accordance with the settlement instructions that were generated by the CCP.

Consequently, the CCP's account at the CSD is just another account in the settlement process. In this process, the instructions from the CCP and other trades not involving the CCP will be settled simultaneously. Where the balance of any account is insufficient, the CCP's instructions will take priority over other transactions.

Hold and Release Functionality:

The purpose of this functionality to ensure that a selling client without a sufficient balance does not use the security balance of others with which it shares a client account at the CSD.

This process will take place prior to generating Settlement Instructions. CSD Participants may perform this function by placing on hold sale transactions.

The purpose of placing on hold sales that form part of the net selling balances of the accounts is to avoid settlement of those sale trades in the next cycle. Hold and release of sales will have different effects depending on whether it is applied to net or gross settlement accounts.

Where sales are placed on hold by participants in case of gross accounts, the CCP calculates a Settlement Instruction for the aggregate amount of purchases and another for the aggregate amount of sales that have not been retained.

Where sales are placed on hold in net accounts, retained sales will be deducted from the net selling settlement instruction generated by the CCP.

The hold and release functionality will be only available for IBERCLEAR participants,  who will be able to manage trades in the settlement accounts subject to obtaining prior authorisation from the Clearing Members.

Settlement Procedures

Stock exchange settlements are automated (book-entry). Settlement is on a delivery versus payment (DVP) basis, with

simultaneous exchange of cash and securities on T+2.

There are two forms of settlement:

• On exchange
• “transfer with or without change of registration name ”

Fixed Income

Under the arrangements of the Investment Services Directive 93/22/EEC, it is possible for any EU-domiciled bank and broker to offer their services within other EU countries without the requirement to be locally domiciled.

The Bank of Spain regulates entities that want to become Market Makers, after getting the approval of the Ministry of Treasury.

Other entities that deal only in OTC, settle through their clearing agent in their third party safekeeping account at Bank of Spain.

The trading of The Kingdom of Spain public debt is distinguished in the following ways:

• Primary Market: In February 1999, rules were revised regulating the role of market making in The Kingdom of Spain government debt. Through an order of the Ministry of Economy, the role of the public debt Market Maker was created, with the principal function of promoting liquidity in the Spanish public debt market. The Primary Market is conducted via a series of auctions each month for Letras del Tesoro (short-term notes), Bonos del Estado (government bonds) and Obligaciones. On average there are four auctions per month, two for Letras, and one each for Bonos and Obligaciones.

• Secondary (“Blind”) Market: Available to market dealers, which include Market Makers, this is conducted by screen trading on the MTS and LCH SA or Annotated Public Debt Traders’ Network via SENAF. The term “blind” denotes the fact that the name of the actual counterparty is never known. SENAF is a member of the “MEFF-AIAF-SENAF Holding de Mercados Financieros, S.A.”

• OTC (Over-the-counter) Settlement through approved clearing agents and the Bank of Spain.

Corporate debt lists and settles through the SENAF’s (Blind Market) electronic system called SENAF.SON.

Withholding tax is to be retained on interest payments as per rate agreed in specific Tax Treaties signed between Spain and other countries, which is generally ten per cent. If the holder is a resident of a tax haven, the full 19 per cent withholding tax rate is to be applied.

Derivatives

The Central Counterparty (CCP) for derivatives in Spain is MEFF. The following is a list of the services and processes of the derivative market in Spain:

• Clearing of transactions traded through others exchange members.
• Settlement of gains and losses resulting from the daily clearing of trades or from cash settlements at contract’s maturity of underlying securities at expiry for those contracts, subject to physical delivery.
• Posting of daily margins. MEFF executes a continuous what-if analysis of each portfolio based on last-traded price. MEFF calculates the margin requirement at a client level.

Target2- Securities (T2S), European Market Infrastructure Regulation (EMIR) and the Central Securities Depositories Regulation (CSDR).

Key aspects of the reform:

• Introduction of a Central Counterparty (CCP), for cash equities, for the first time.
• Registration will remain in place. However, the Registration Reference (RR) was replaced with another reference allowing Regulators to trace trades. The Spanish Regulators (CNMV) insisted that a robust monitoring system remains in place post-reform.
• Change in the rules for finality of settlement. This was at the time of execution. It has now changed to the time of settlement.
• Equity settlement cycle moved from T+3 to T+2 3 October 2016.
• Asset servicing changes bringing Spain in line with Corporate Actions Joint Working Group’s international standards. This includes changing to Record Date driven entitlements and all trade types being eligible for market claims.

CSDR fees on late matching and settlement

BME Clearing will inform market participants on a monthly basis on the total to be credited/debited for Onex late matching and late settlement trades. However daily reporting on fails will be informed and monitored by clearing house together with bilateral trades.

Naked short selling is not permitted. If done, penalties are applied. Regular short selling is allowed as long as disclosure requirements are meet.

Market participants who are in the last positions reported are above the threshold of 0.2 per cent of the issuer's capital that submit an update of their position, which will be treated in accordance with the new communication thresholds, the CNMV (0.2 per cent) and publication to the market (0.5 per cent).

Under article 15 of Regulation (EU) no 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps, which came into force on 1 November 2012, where shares cannot be delivered for settlement within four business days after the day on which settlement is due, the CCP will immediately commence buy-in procedures. Where buy- in is not possible, cash compensation is paid to the buyer based on the market value of the shares plus an amount for losses incurred as a result of the settlement failure. Under that regulation, the CCP will impose penalties for every day that elapses between the date on which settlement is due and the actual settlement date (whether because the seller delivered, or buy-in was resorted to, or because the buyer was compensated in cash). Such penalties must be sufficiently dissuasive. The penalties should distinguish between delays due to non-delivery caused by an insufficient balance and those arising from demonstrable computer or operational error, in which case the penalty should be smaller.

Without prejudice to the foregoing, a Securities Loan will be the first obligatory mechanism to be used in handling settlement incidents. The three steps in the general process are described below:

1. Securities loan

In the last settlement cycle, if securities delivered by the sellers to the CCP prove insufficient, the CCP will borrow securities for the account of the seller that does not have securities and will deliver them to the buyers.
The CCP will interpose itself in the securities borrowing process in its own name; the loan may not exceed the maximum period for buy-ins established by European legislation. If the loan is not repaid on that deadline, the CCP will buy in the securities and return them to the lender. The loan will be arranged automatically, without requiring prior consent of the lenders. The creation of a pool of lenders and a pre-set queue of lenders will enable this process to be automated.

Once the securities have been received from the lender, they will be delivered to the buyer in the last settlement cycle., thereby settling all obligations.

2. Buy-ins

Where a securities loan cannot be arranged, it will be necessary to isolate the buy and sell positions that cannot be settled, and a buy-in will be arranged if delivery has not taken place within 4 days. Once this situation arises, a buy-in will be initiated on behalf of the failed seller. The securities received by the CCP from the new seller will be delivered to settle outstanding purchases. Buy-in will also commence if the loan arranged as the initial incident management process is not repaid by the deadline. In this case, the bought-in securities will be returned to the lender.

3. Settlement in cash

In case of highly illiquid securities where a buy-in proves impossible
for the entire failed selling position, settlement in cash will take place 5 days after the date on which settlement was due. In operational terms, the net outstanding purchase and sale obligations are eliminated from the system and a cash transfer is made for the amount of the penalty imposed on the failed seller. The compensation for the buyer will be established as a percentage of the last session's closing price, having regard also to the price of the original trade.

Short Selling Penalties

1. Penalty for Settlement fails due to a lack of cash

Daily penalty is applied to the buyer with cash delivery obligations, when a settlement incidence arises due to a lack of cash, for each day a position is failed. Penalty will be a percentage rate applied daily to the cash amount of the fail. Cash will be calculated with the closing price of the security multiplied by the number of securities, during the days which elapse between the intended settlement date and the resolution of the settlement incidence.

Daily penalty = (closing price of the Security * number of Securities) * rate of penalty due to a lack of cash * 1/360

The rate of penalty due to a lack of cash will be Eonia + 200 basis points.

2. 
   Penalty for Settlement fails due to a lack of Securities

2.1 Daily penalty

Daily penalty is applied to the failed seller for each business day a position is failed or to the borrower for each business day that the loan is outstanding. Penalty will be a percentage rate applied daily to the cash amount of the fail (or of the loan, where appropriate). Cash amount will be calculated with the closing price of the security multiplied by the number of securities, during the business days which elapse between the intended settlement date and the effective settlement date of the fail or of the loan.

Daily penalty for the failed seller will be equal to the gross loan remuneration, and for the borrower it will be the same but adjusted by the rate applicable to the collateral. Gross loan remuneration will be the remuneration to the lenders, as regulated in the “Fails management procedure” Circular.

Formula for the calculation of the daily penalty for a failed seller and for a borrower are respectively as follows:

Daily gross remuneration for the loan = (Closing price of the security * number of Securities) * loan gross rate * 1/252

Daily net remuneration for the loan = (Closing price of the security * number of Securities) * (loan gross rate – EONIA collateral rate)* 1/252

The loan gross rate will be determined for each ISIN by the pool of lenders and announced via a BME CLEARING Instruction.

Accordingly, the failed positions will be subject to an equivalent daily penalty regardless of whether it has been possible to arrange a Loan of Last Resort or otherwise.

- In the event a loan has been arranged, the penalty will be transferred to the Lender.

- In the event it was not possible to arrange the loan, the penalty will be credited to BME CLEARING.

2.2. Penalty for the Buy-in or cash settlement

In the event of the Buy-in of a failed position, the failed seller (or the Borrower, where appropriate) will have to assume a penalty for the administrative cost to execute the Buy-in.

This cost will be €1,000 per Settlement Instruction, plus a variable cost of 10 b.p. on the Trade's cash amount, and this cash is calculated as the closing price of the Security multiplied by the number of Securities.

This penalty will also be applied for the Buy-ins of sell trades that were placed on hold.

This cost will also be applied in the following cases:

- To the failed seller when the instruction is settled in cash once it has been attempted to perform the Buy-in without success.

- To the Borrower when the Loan has been settled in cash in the same circumstances in which it is impossible to perform the Buy-in.

3. 
   Additional amounts to be paid by the seller or failed Borrower

The following amounts will be paid according to the “Fails management procedure” Circular, without them being considered to be a penalty in favor of BME CLEARING:

- In the event of a Buy-in, the failed seller will pay the cash difference between the failed instruction and the cash amount of the Buy-in. Likewise, if the Last Resort Security Loan is repaid via a Buy-in, the Borrower will pay the cash amount of the loan Buy-in.

- The failed seller or borrower, in case of cash settlement, will pay the replacement compensation in cash of the settlement of the securities. This Compensation will be calculated with the applicable reference price and will be transferred to the buyer or lender by BME CLEARING.

Turnaround trading on the stock exchange is possible if both the purchase and the sale are settled at IBERCLEAR using the rapport method with the same IBERCLEAR participant. For foreign investors, this means that the local subcustodian acts as settlement Bank for both legs of the turnaround trade.

The following link provides further links to all the Spanish exchanges, central depositories and specialised markets: www.bolsasymercados.es.

IBERCLEAR - is the clearing agent in Spain, previously known as SCLV (Servicio de Compensación y Liquidación de Valores). 

IBERCLEAR is the Spanish Central Securities Depository which is in charge of both the Register of Securities, held in book-entry form, and the Clearing & Settlement of all trades from the Spanish Stock Exchanges, the Public Debt Market, the AIAF Fixed Income Market, and Latibex - the Latin American stock exchange denominated in Euros. To achieve this, IBERCLEAR uses ARCO as a Technical platform

Central Counterparty – Equity

BME Clearing, ECCP and LCH for equities

Central Counterparty – Fixed Income

Not available.

Central Counterparty - Derivatives

MEFF is an official secondary market regulated by Spanish laws and under the supervision of the Spanish National Securities Market Commission. MEFF offers trading and central counterparty services for futures and options on IBEX-35 and on stocks.

Likewise, MEFF offers central counterparty services for repos on Spanish Public Debt. Since March 2011 a new group of energy derivatives was launched in MEFF’s central counterparty. Additionally, MEFF renders other services related to its main activity to different types of entities through its subsidiary companies.

Principle Functions and Responsibilities:

• Tomaintain the Securities Registry by means of book-entry form of all eligible securities listed on the Spanish Stock Exchanges and the Public Debt Market, as well as the securities listed on other secondary markets when requested by the appropriate Governing Bodies.
• To manage the settlement, and when appropriate, the clearing of securities and money resulting from those trades settled on the Stock Exchanges, Public Debt Market and, when appropriate, the secondary markets.
• Provide technical and operational services directly related to the Registering, Clearing & Settlement of securities which allows IBERCLEAR to collaborate in, or, coordinate with, other services related to the registering, clearing & settlement of securities as well as allowing it to participate in them.
• Anything else that the Government entrusts to IBERCLEAR provided permission has first been sought from the market supervisory bodies, either the CNMV or the Banco de España.

ARCO, a result of the merger of the S.C.L.V. (equities) and CADE (fixed income) depositories became, the Central Depository with responsibility for registration, compensation and settlement.

Settlement is based on true delivery vs. payments with simultaneous exchange of cash and securities, objective settlement dates and guaranteed delivery. Participation is mandatory for all entities that have clearing and settlement activities on the Spanish stock exchanges.

Managed by ARCO, the exchange, clearing and settlement of Spanish government debt, and corporate debt, depending on the issue, is done through the “Central de Anotaciones” CADE (book-entry office). The CADE is dependent upon the Bank of Spain and is responsible for the public debt market.

Spanish Capital Markets Law includes provisions that include a right of lien and right of sale in favour of securities settlement systems/CSDs, on client assets held in participants’ client accounts/ third party client accounts (Cuenta de Terceros) with the Spanish Central Securities Depositories, in case a participant does not meet the relevant cash payment obligations arising from settlement of trades.

N/A

The Spanish settlement system requires the provision of registration details on a trade by trade basis, irrespective of the kind of shares involved (bearer or registered shares) For each trade executed, the spanish broker must provide the registration name for the stock traded. This name is indicated to the local broker by the party instructing the trade. The local broker must lodge the registration name details with the PTI by 19:00 on TD+1.

There is not a central registrar for equities in the market therefore it is the responsibility of the participants to ensure the stock is bound to the registration details given upon purchase, to ensure that no change of ownership of the securities can be effected without the concurrence of the market or Iberclear. Additionally, some issuing companies (mainly banks) keep track of all trades involving their stock and automatically record in their shareholders’ book the registration name given to the Stock Exchange by the broker. The latter are the so called “registered” securities as opposed to “bearer” securities which, nevertheless, must be safe-kept as well by the Spanish custodian strictly linked to the registration name given at the time of the purchase.

To be able to deposit securities in an account under a given name they have to be purchased in this name. In cases where the securities to be deposited are registered in another name, a re-registration by means of a “put-through” in the market is required to re-register the stock.  Alternately re-registration may be carried out through OTCS (over-the-counter) type of trades, where buyer and seller agree to transfer stock and re-register at the same time.

This must be completed through the Stock Exchange by effecting a re-registration process (put-through), which involves a simultaneous sale (selling off the old registration) and purchase (buying back the new one under the correct holder), incurring costs. The sale and the purchase are made simultaneously, therefore the price of both will be the same.

Most usually re-registrations are due to, new business from a change in global custodian or interfund trading with the same beneficial owner but different subcustodians.

Re-registration fees apply to each leg, purchase and sell of the re-registration process: Re-registration fees = 0.03% + EUR 9 + Market and Iberclear Fees

i.e., Brokerage Fees (0.015%) + Settlement Fees (0.015%) + EUR 9 + Market and Iberclear Fees (it depends on the gross of the trade which can be within EUR 1.20 and maximum of EUR 16.90 per execution).

Physical: Very restricted and usually only applies to stock that has been suspended from negotiation.

Companies listing with registered shares will need to appoint an entity to manage the registry book of shareholders. These services are offered by local banks as well as the stock exchange. The responsibility of maintaining shares under their correct registration name is responsibility of all members of Iberclear holding assets under custody.

Registration is part of the settlement process and has different procedures depending of type of trades.

Market Trades under normal procedure: registration is done by the Broker, reporting registration details to PTI, deadline TD + 2

Market Trades under optional Financial Intermediary Special Individual Accounts procedure: registration is done by the client’s custodian on settlement date of the trade

Other Settlements: For OTC, Stock Lending, etc, registration details are provided to PTI by custodians involved in trade matching on settlement date.

Optional  Financial Intermediary Special Individual Accounts procedure

In addition to the general procedure, there is a procedure for settling orders from financial intermediaries that they may use, optionally, when at the time of trading they do not know how the purchases and sales will be distributed among the final holders to whom they provide brokerage services; in this case, the intermediary makes such allocations by means of ancillary transactions (OAUX) before the process of settling the trades concludes.

For these purposes, financial intermediaries will be understood to mean investment firms and credit institutions that are officially authorised to transmit orders for the account of third parties, regardless of whether they are trading members, participants in a trading platform, or clients of either of the two.

The requirements for this optional process are as follows:

• The financial intermediary must have chosen this approach beforehand, on the basis of a contract with the participants of the post-trade infrastructure.
• The financial intermediary must open at least one special individual account in the CCP and in the IBERCLEAR central register, which will be linked to each other.
• The financial intermediary must identify an account in its name at the participant with which it has a relationship (an individual account in the Central Registry), which will be used by IBERCLEAR to assign OAUX transactions in the event of incidents in matching or settling the OAUX transactions by the established deadlines.

The OAUX transactions allowing for allocation, on the settlement date, of the securities positions between the financial intermediary's individual account and the accounts of the end holders in the participant's detailed register must be performed before settlement concludes. For all purposes, the trade and settlement date of the OAUX transactions will be one stated in the trade instructions received from the CCP.

At the end of the settlement date, the individual account held by the financial intermediary through its IBERCLEAR participant will have a balance of zero.

In the event of incidents that prevent communication or matching or the settlement of the OAUX transactions on a timely basis, IBERCLEAR will assign these transactions to the proprietary account designated by the financial intermediary for this purpose.

Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when such shareholdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the time-frame required. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Failure to comply with the reporting requirements in this market may lead to penalties and / or other sanctions.

Investors acquiring 3%or moreinterest in a company's capital must disclose this information to the Spanish authorities, CMNV (COMISION NACIONAL DEL MERCADO DE VALORES). Acquisitions of shares in banking corporations reaching or exceeding the 3% limit are reportable to the CNMV within five working days of the acquisition Investors are responsible to report this directly to the Spanish regulator, CNMV (Comision Nacional del Mercado de Valores). The consequence for non-compliance may vary but in addition to potential costs, it carries a franchise risk for the investor.

In the Spanish market, in case of settlement failure, a buy-in will take place. A buy-in is the justification of a short-sale by the CSD (Iberclear). Buy-ins are mandatory and they take place at TD+4 at 16:00. They can be avoided by justifying the short-sale with Registration References of either securities purchased by the date of the sale or securities loaned up to T+2.

Buy-in on unsettled sales: An RP is created by the custodian for the failed seller with securities ‘0’ and cash only for the cost of the buy-in (difference between the cash of the initial fail and the cash of the buy in, only if the latter is greater). This instruction is settled on ISD+5.

· Buy-in on hold sales: Transactions on hold will be considered failed if they have not been released and settled by the last settlement cycle of their ISD. The CCP will send to IBERCLEAR as many PREA instructions as there are sales on hold at the CCP. On ISD+4 the CCP will replace each of the transactions on hold by as many instruction for cash for Buy-in as there are transactions on hold in the account, and for the difference between the Buy-in price and the price of the sale on hold. RPs with ‘0’ securities are settled on ISD+5.
· Buy-in on Purchase: A new instruction will be generated for the affected purchaser covered by the Buy-in securities. This instruction will have the same transaction number of the CCP, but the transaction reference assigned by IBERCLEAR will be different as a new message is sent.

Costs involved in short sales:

• Financing Costs: 0.1% on the net amount of the short sale per day difference between the date of the RR's used to justify the sale and the date of the sale. If the sale is not justified at all, then Iberclear will make the buy-in and will apply:
• Buy-In on failing sale Penalty: EUR 1000 + 0.1% of the price of the failed sale
• Cash adjustment : an instruction created for the failed seller with securities ‘0’ and cash only, whereby the cash amount is calculated as follows: buy-in cash value minus market value of failing sale. The buy-in cash value is the buy-in price multiplied by the nominal. If the difference is negative, i.e. if the buy-in value is lower than the market value of the failing sale, then Iberclear will confiscate the profit and pass a cash adjustment of 0 securities versus 0.01 EUR
• Additional Penalties: Percentage published monthly by Bank of Spain applicable to sales not broken-down before T+3 at 10:00. If stock is received from a loan on the morning of TD+3 and the sale is settled within the time limits for same day value (15.00) then no penalty is applied.

N/A

The guarantee funds in place cover failed payments up to a maximum of EUR 100,000 per account holder and entity. This measure is applicable to deposits of cash or securities in credit entities and investment services firms authorised to operate in Spain.

Spanish Regulations concerning the prevention of money laundering come from the 91/308/CEE , 2001/97/EC and 2005/60 EC Directives, therefore, it is similar to those that apply in the different jurisdictions of the European Union. It sets standards, among others, that require institutions to identify customers and non-customers by applying due diligence processes, to monitor and report transactions in a systematic way, attending to their own nature and on a voluntary basis whenever they appear to be related to money laundering , training to staff and record keeping clients and transaction documentation.

None

N/A

Revenue proceeds from sales and capital can be repatriated freely.

N/A

The Banco de España Settlement Service (SLBE)
The SLBE is the Spanish real-time gross settlement system for large-value payments in euro, which is managed and oversight by the Banco de España and is a component of the EU Trans-European payment transfer system (TARGET). It settles domestic and cross-border transfers, secondary markets transactions (interbank deposits and public debt registered in IBERCLEAR), multilateral net systems and monetary policy operations. Besides, cheques and credit transfers that are communicated to the SNCE with values above €50,000 are transmitted to the SLBE and settled in gross terms and real time in this latter system. The SLBE also settles the net balances that arise from the clearing of the operations carried out with payment cards; these net balances are calculated and communicated to the Banco de España by the three card networks. Finally, the SLBE offers additional services such as the matching, registering and procurement of transactions statistics.

Through the SLBE, the participating institutions can manage the liquidity of their accounts held at the different branches of the Banco de España. 

The SLBE is supported by the Settlement Finality Law, thus having a sound legal regime which guarantees, inter alia, settlement finality and irrevocable payment orders.

The Spanish Electronic Clearing System (SNCE)
The SNCE is the Spanish retail payment system based on paperless communication networks. It is managed by the Spanish Society of Payment Systems (Iberpay) and Banco de España has the authority to approve the rules of the system and carry out its oversight.

Organised as a decentralised clearing house, the SNCE operating scheme relies onseveral clearing sub-systems each of which specialises, in a single instrument allowing to process swiftly a wide range of payment instruments currently subdivided as follows:cheques, credit transfers, direct debits, bills of exchange and other operations (non-truncated documents, commissions and fees from credits and/or documentary remittances, foreign currency exchange, etc).

The system provides each associated participant with an infrastructure through which all the relevant payment data are bilaterally exchanged between the interested parties. Later on, transactions are cleared and, once the net amount has been confirmed, the settlement takes place at the Banco de España. Nevertheless, credit transfers and cheques over €50,000 are settled individually in the SLBE since June 2005 and, therefore, they do not take part in the clearing process.

Single European Payment Area (SEPA)
The SEPA (Single Euro Payments Area) is the area in which consumers, companies, government and public administrations will be able to make payments in euros, without using cash, from one account located anywhere in the area, using a single set of payment instruments as easy, efficiently and safe as they do now on the national level. 

It is a project laid down in the Lisbon Agenda signed in 2000 by all EU governments. SEPA has the promotion and support of the European Commission, the European Central Bank and the European banking industry through the EPC (European Payments Council).

In the SEPA, providers and users are involved. As providers, the European banking industry and the ACH (Automated Clearing House) sector, make SEPA products available to users. End users, governments and public administrations, companies and consumers, have the advantages of a single currency in a single payment market.

In the SEPA, providers and users are involved. As providers, the European banking industry and the ACH (Automated Clearing House) sector, make SEPA products available to users. End users, governments and public administrations, companies and consumers, will finally have the advantages of a single currency in a single payment market.

The SEPA components can be grouped in three big blocks:

• Common payment instructions and infrastructures
• Harmonised standards
• Harmonised legal basis

Given the scope of SEPA, only electronic payments, the EPC has developed schemes for SEPA credit transfers and SEPA direct de-bits, and a SEPA framework for cards. It has also developed a framework for infrastructures (agents involved in the clearing and settlement of payment instruments), as well as the implementation guidelines and standards applicable to the SEPA instruments. The legal framework was established in April 2007 with the publication by the European Commission of the Payment Services Directive (PSD). This directive is applicable not only to the SEPA instruments, but also to the national payment instruments. 

The SEPA Regulation (EC 260/2012) finally adopted in 2012, aims to create the reality of a European Single Market for retail payments. According to the SEPA Regulation, since 1 February 2014, all credit transfers and direct debits in euro are made under the same format:  SEPA Credit Transfers and SEPA Direct Debits.

SEPA Credit Transfers Scheme
The SEPA Credit Transfer Scheme defines common rules and standards for credit transfers in euros between banks. It allows service providers to offer, from January 2008, a basic credit transfer service throughout the SEPA for individual payments as well as for periodic or bulk payments, with full amount credited, fees charged separately, maximum settlement time of 3 business days (*), IBAN and BIC used as account identifiers and with the possibility of incorporating additional information, structured or not, depending on the nature of the payment.

(*) As from January 2012 a payment must be credited to the beneficiary at the latest by the end of the next business day (D +1).

SEPA Direct Debits Schemes
On a similar way, payment services providers are able to offer a basic direct debit, for one-off or recurrent payments for final consumers (Core) or between corporates (B2B). The scheme foresees the creation of a standing mandate/order, and defines the presentation and clearing cycles, refund cycles and other features which allow the straight through processing (STP) of the direct debits. SEPA direct debits are available as from November, 2009.

According to SEPA Regulation, the SEPA Credit Transfers and SEPA Direct Debits entered into force the 1 February 2014. Nevertheless, an amendment to the SEPA Regulation (EC 248/2014) introduced a transition period of six months – until 1 August 2014 – to ensure minimal disruption for consumers and businesses. During this period, banks and payment institutions are still able to process payments that differ from the SEPA standard.

Further information concerning the Single European Payment Area can be found at the websites: www.bde.es, www.iberpay.es and www.sepaesp.es/sepa/es/

The Spanish market allows overdraft facilities on cash accounts.

Dividends and interest are received net from the issuer. Entitlements are calculated based on settled positions on record date that must be at least  a settlement circle before ex date date.  . Iberclear will adjust all cum dividend transactions until 20 days after record date . Thereafter, it is up to final beneficiaries to adjust between themselves in cash.

Varies, although often semi-annually in January and June. Banks usually pay quarterly.

Depending on the prospectus of the issue.

Government bonds: Actual/actual basis
Corporate bonds: Actual/actual basis
Treasury bills: Actual/365 day basis or 30/360 day basis.

N/A

The entitlement is based on record date. Iberclear automatically adjusts dividend entitlements on “rapport” trades with trade date before exdate not settled in record date, or those trades with trade date after ex date but settled before record date.. There is no adjustment for loan transactions. Claims must be handled bilaterally between the parties or their local custodians.

For rights issue, the payment date is usually four weeks after ex-date. Rights are allotted on ex-date +3 on a 1:1 basis and are exercised at ratio. Entitlement rules are the same as for dividend entitlement.

Unrestricted voting rights.

No

Annual general meetings (AGMs) and extraordinary general meetings (EGMs) must be announced at least 30 days in advance. EGMs can be convened by any shareholder owning at least 5% of the company's share capital.

Available upon request and subject to availability.

Available upon request and subject to availability.

Only required for personal assistance.

Voting entitlements are determined based on the position reflected in the share register on books closing date, generally five days prior the meeting.

Some companies offer a cash premium as an incentive to attend annual meetings. This payment is treated as a dividend for tax purposes.

19% general withholding for residents and non-resident investors although residents in DTT countries are eligible to reclaim the excess tax.

Foreign investors are exempt from the 19% withholding tax on interest income derived from public debt and corporate debt. However, foreign investors with residency in a tax haven country are exempted from public debt but non exempt from private debt.

Capital Gains are produced on sales of shares, and the taxation rate is 19%, calculated as the difference between the acquisition and the sale prices, for:

• final investors resident in a Tax Haven country
• final investors operating through a Tax Haven country
• final investors resident in a country that has no signed a Double Taxation Treaty with Spain.

No withholding tax applies on Capital Gains, the obligation and responsibility to declare the gains obtained by their sales falls entirely on the final investor.

Double taxation agreements signed by Spain: https://sede.agenciatributaria.gob.es/Sede/en_gb/normativa-criterios-interpretativos/fiscalidad-internacional/convenios-doble-imposicion-firmados-espana.html 

None

Tax on Financial Transactions

The Law of Tax on Financial Transactions (ITF) enters into force on January 15, 2021. The main points of the legislation are as follows:

• A tax of 0.2% on purchases of shares representing the capital stock of Spanish registered companies, will be acquired on the regulated markets when certain stock market capitalisation and trading conditions are met. An exemption regime is also defined.
• The accrual of tax will be associated with the registration of the acquisition.
• The tax base will established as the amount of the consideration, not including the elements of associated expenses.
• The purchaser of the securities will be established as the taxable person for the purposes of the ITF, while the designated financial intermediary who receives the order directly from the purchaser will be considered to be responsible for payment of the tax (the Tax Settler).
• The first submission to Tax Authorities was in June 2021. Tax is applied to reception of shares, charging 0.2 per cent of total amount. Only some type of transactions are in scope, i.e. On-exchange purchase. The tax is only applicable to a list of ISIN codes, corresponding to Spanish traded entities with capitalization above 1.000 MM Euros.

Spain Holiday Calendar

• Madrid Stock Exchangebolsamadrid.es
• Barcelona Stock Exchangeborsabcn.es
• Valencia Stock Exchangebolsavalencia.es
• Banco de España bde.es
• Iberpayiberpay.es
• Comisión Nacional del Mercado de Valorescnmv.es
• Spanish Central Securities Depositoryiberclear.es
• Bolsas y Mercados www.bolsasymercados.es