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Extended balance check for transactions and sweeping
VPS offers a service to help ensure that settlement can be carried out as intended. If validation identifies that the securities required for settlement of a sale are not available on the investment firm’s account, extended balance checking can be used to identify securities held on another account owned by the investment firm.
Investment firms using this service must identify which other accounts should be checked for cover. This may for example be a managed account or an account used for own holdings of securities.
Extended balance checking
- Checking of cover for an investment firm’s broker account and nominee account will be carried out separately using the normal checking rules without taking into account any securities borrowing or lending. This means that in the case of a nominee account, sales for delivery on S will take priority over any transfers to the broker account.
- If there is insufficient cover for one or more trades carried out by an investment firm, the first attempt to cover the net shortfall will be from the nominee account. This requirement will apply similarly if the investment firm participates in the securities borrowing and lending program and is required to make return delivery of securities.
- If the investment firm does have cover on its nominee account, VPS will create a FHFO transaction for each ISIN per net holding to transfer securities to the broker account in order that the maximum number of trades can be carried out.
- If the nominee account can provide only part of the cover that is needed, the investment firm can then borrow the remainder of the shortfall from the securities borrowing and lending program.
- A nominee account that is a lending account or borrowing account in the normal securities borrowing and lending program cannot be included in extended cover checking.
- There must be a 1:1 correspondence between the accounts, meaning that the broker account must only be associated with a specific nominee account and vice versa.
- If the nominee account lends securities to the broker account, the investment firm is responsible for the return delivery of the shares lent to the nominee account.
- If Norges Bank rejects the settlement payment and VPS is required to reverse the transaction, the transactions generated as the result of extended cover checking will also be cancelled.
- Transactions carried out in connection with extended cover checking will be reported on the transaction lists together with other FHFO transactions.
Sweeping
Sweeping is available to all investment firms that participate in VPO. Sweeping provides for any residual holdings on a settlement account be transferred to another of the customer’s accounts after each settlement cycle. Sweeping takes place after cover checking has been carried out.