Bahrain Clear adopts delivery versus Payment (DVP) Model

TDT | Manama                                                       

The Daily Tribune – www.newsofbahrain.com

In line with its commitment to position Bahrain’s capital market at the forefront of global financial market standards, Bahrain Clear adopted the Delivery Versus Payment (DVP) Model (Framework and Procedures for Buyer Cash Compensation).

The enhanced DVP Model Framework comes after extensive consultations with market participants, global custodians, international investors and regulators. The DVP Model (Framework and Procedures for Buyer Cash Compensation) provides flexibility to the custodians to adopt procedures as per the readiness of their clients.

The 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 DVP Model 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.

Abdulla Abdin, Chief Operating Officer of Bahrain Clear commented: “The enhanced DVP Model adoption is a major milestone towards the enhancement of the post-trade infrastructure, and also comes in line with international standards and best practices.

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 DVP Model aims to mitigate one of the main risks countering regional and international investors, and will align Bahrain Clear with its regional peers,” Mr. Abdin added.

The enhanced DVP model will be effective 14th March 2024, with a permitted grace period of three months for its implementation. Prior to the effective date, Bahrain Clear shall ensure to provide custodians and relevant parties with the required documentation to allow for a seamless implementation process.

The settlement of securities will remain T+2, and pre-validation of sell orders will be maintained, while 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. It is worth noting that a consultation paper on the DVP Model was issued in September 2023, and distributed to relevant parties and stakeholders prior to its implementation.