1. Dubai Financial Market
Presentation to AMEDA:
Role of DFM CSD in Managing Corporate Actions
DFM’s Settlement Model
April 2012

2. 1 Role of DFM CSD in Managing Corporate Actions 1
Role of DFM CSD in Managing Corporate Actions
DFM operates a central securities depository for equities & listed bonds in dematerialized form
DFM is mandated by law to manage the share book of all public companies listed on the DFM exchange; DFM is not the issuer or share registrar – issuers/share registrars may request for electronic link with DFM CSD to access their respective share books
DFM is also an outsource service provider [OSP] to issuers/share registrars for management of cash-type of Corporate Action [CA]
DFM manages 2 types of CAs: Cash and Shares
Optional for issuers/registrars to appoint DFM as Outsource Service Provider [OSP] to manage cash type of CA
Non – OSP role
DFM as an OSP
Generate share book,
Generate share book, manages cash payments as follows:
Bank transfers to investor bank accounts; and/or
Cheque payment [if requested for by investor]; and/or
Direct credit to DFM i-Vestor card product Note 1
Note 1
The i-Vestor card is a DFM product in collaboration with a commercial bank to issue debit /ATM cards to all retail investors. Dividends are credited directly into the debit card thereby minimizing issues of lost/unclaimed cheques. Investors withdraw dividends via ATMs
CASH
SHARES
Role of DFM CSD:
Generate share book
Crediting CA shares directly into investor depository accounts

3. 2 DFM’s Settlement Model
DFM’s Settlement Model
DFM’s settlement model is linked to its depository account structure
How DFM settles trades with Clearing Members depends on whether Clearing member-clients are direct investors or custodian investors [ie. investors using a custodian to custodize securities & settle trades]
The following is how DFM maintains its depository account structure:
Investor X CSD
Account
DFM settles with Custodian Clearing Member
Agreement
Broker indemnity to settle rejected custodian trades
Lodge collateral with DFM
Custodian for Investor X NIN
Agent
Account
Trading/ Clearing Member Investor X Trading Account
Option 2
DFM CSD
Investor NIN
(Investor X)
Option 1
Investor X CSD
Account
DFM settles with Broker Trading Clearing Member
Agreement
Lodge collateral with DFM
Investor X
NIN
Trading/ Clearing Member Investor X
Trading Account

4. 3 DFM’s Settlement Model Key Features of DFM’s Settlement Model 3
DFM’s Settlement Model
DFM CLEARING & SETT. MODEL FOR CUSTODIAN INVESTORS
Key Features of DFM’s Settlement Model
Seller
Selling Custodian
Sell TM/CM
DFM
Buy TM/CM
Buy Custodian
Buyer T
T+1
T+2
BIS DVP Model 2 – gross securities settlement, net financial settlement
T+2 settlement cycle
All brokers & custodians are Clearing Members
DFM completes financial settlement by 10.00AM UAE time & commences securities settlement from AM UAE time to ensure that DVP between DFM and DFM Clearing Members [CM]. Securities are delivered only if full payment is made
DFM does not require a guarantee fund now because it does not face market risk; exposures are mitigated as follows:
Buy trades - full purchase values of buy trades collaterized 100% by Clearing Member via a real-time on-line collateral adequacy checking process before a buy order can becomes a valid order & DVP settlement
Sell trades - sell orders are pre-validated real- time on-line against securities availability before a sell order becomes a valid order
Trades are settled on T+2 but in order to accommodate settlement by institutional investors using services of Custodians, DFM implemented a Settlement Rejection Process for Custodian investors. This means that the broker clearing member will settle the rejected trade first until the Custodian receives matched settlement instructions from its clients to settle
3.00PM
19.00PM
9.00AM
10.00AM
10.15AM
Sell instruction
Non-Custodian investors
Settlement instruction
Y/N N
Cust. Agent account
Reject settlement?
Receive payment from DFM
Deliver securities Y
Sell Order
(Sett Cap validation)
CM has securities?
Receive payment from DFM
Deliver securities Y N
Order Matching & Execution/
Novation for settlement
1. Adjust cash obligations
2. Late confirmation
Sett Bank
Receive payts/make payts.
Settle securities
Dr. Seller’s account for securities
Cr. Buyer’s account
Trade file to all participants
Final Cash Net Obligation. Send settlent instn to sett banks
Default Action
-restrict securities delivered N
Buy Trades
(Sett cap validation)
Pay DFM?
Receive securities Y Y
Cust. Agent account
Reject settlement? N
Pay DFM
Receive securities
Non-Custodian investors
Y/N
Buy instruction
Settlement instruction

5. Settlement Rejection of Buy Trades by Custodian4
con’t. DFM’s Settlement Model
Local broker CM accepts
late confirmation
Yes No
Local broker CM holds unpaid purchased securities
Local Custodian receive Settlement Instruction
by T+1?
Local Custodian pays DFM by 10 am T+2
DFM credits the securities to the client’s account by am T+2
Local Custodian accepts purchase trade settlement obligation; DFM settles purchase trade as follows:
Local Custodian rejects the trade by 7.00 pm on T+1
T am : DFM rejects trade to Local Broker CM Client Buy Rejection House Account
T am : Local Broker CM pays for rejected trade
T am : DFM credits securities to Local Broker CM Client Buy Rejection Account
Late Confirmation by Client
A. Late confirmation by Client [between T+2 to 1.00pm T+4]
Client sends matched settlement instruction to Local Custodian
Local Custodian pays Local Broker CM
Local Broker CM request DFM to transfer purchased securities to Client Agent Account with Local Custodian [provided Local Broker CM has agreed to a late confirmation period for client]
No transfers after T+4  
Settlement Rejection of Buy Trades by Custodian
CM = Clearing Member

6. Settlement Rejection of Sell Trades by Custodian5
con’t. DFM’s Settlement Model
Settlement Rejection of Sell Trades by Custodian
Local Custodian receive Settlement Instruction
by T+1?
Local Custodian receives payment from DFM by 10 am T+2
DFM debits securities from the client’s Agent Account by am T+2
Local Custodian accepts sell trade settlement obligation; DFM settles sell trade DVP as follows:
Local Custodian rejects the trade by 7.00 pm on T+1
On T+2 DFM rejects trade to Local Broker Sell Rejection House Account
If Local Broker has securities, sell trade rejection settled.
If Local Broker has insufficient securities:
Selling client securities in Agent Account kept under Pending status – client cannot sell and not entitled to corporate actions
Sale proceeds to Local Broker CM retained by DFM until final resolution of the rejected trade
Buyer is settled
Yes No
Options available for
Local Broker CM to settle rejection:
A. Late confirmation by Client [between T+2 to 1.00pm T+4)
Client sends matched settlement instruction to Local Custodian
Local Custodian request DFM to reverse rejection [provided Local Broker has agreed to a late confirmation period for client]
DFM removes Pending status in Client Agent Account on day of rejection reversal & pays sale proceeds to Local Custodian.
B. Local Broker CM purchases securities from market on T+2
C. Buy-in Mechanism
Broker risk eliminated for settlement
Client asset released only after receipt of cash  
D. If buyin fails, mandatory Sellout by Seller [to be replaced by buyer cash compensation soon]
CM = Clearing Member