Bahrain Clear Issues Consultation Paper on the Enhancement of the Delivery Versus Payment (DVP) Model Framework

Tuesday, July 23, 2019
In line with its commitment to position Bahrain’s capital market at the forefront of global financial market standards, Bahrain Clear announced on Sunday, 21st July 2019 the issuance of a consultation paper on the proposed Delivery Versus Payment (DVP) Model Framework. The proposed consultation paper was disclosed on Bahrain Bourse’s website and distributed to related parties and stakeholders to receive their views and comments prior to the implementation of the enhanced DVP Model Framework. This initiatives comes as part of Bahrain Clear’s role to enhance capital markets infrastructure, with the overall aim of protecting clients’ securities transactions.

The enhanced DVP Model will activate the custody model in the market by combining pre-settlement controls through a custodian trade confirmation/rejection practice, with an automated solution to custodian-broker settlement. Hence, the suggested framework will permit local custodians to reject buy and/or sell trades for settlement where it has not received settlement confirmation from its client or there is a mismatch in the settlement confirmation.

Shaikh Khalifa bin Ibrahim Al Khalifa, Vice Chairman and Managing Director of Bahrain Clear commented stating: “The proposed DVP model aims to enhance the capital market framework and ensures adherence to international standards recommended by IOSCO and aims to fulfill the requirements for market classification upgrade to emerging markets.”

 “The proposed DVP model enhancement aims to enhance market infrastructure and to ensure its alignment with international standards and best practices. The proposed model is a key milestone in the equity market development as it mitigates one of the main risks outlined by regional and international investors and will align Bahrain Clear with its regional peers.” Shaikh Khalifa added.

The following existing key features will remain: Settlement of securities on T+2, pre-validation of sell orders will be maintained, the existing securities and cash settlement timings will be changed to accommodate handling of rejected trades, the enhancements to the DVP model applies only to settlement of trades by Local Custodians clients and do not apply to clients settling trades through direct trading accounts.

Custodians and brokers interested in submitting their comments on the consultation paper, are requested to kindly submit their feedback on [email protected] by 8th August 2019.