The delivery process of Gilts through CREST
Delivery of the underlying Gilt stocks, in respect of Euronext.liffe
Long Gilt contracts, are made through CREST usually by using the
CREST book entry transfer system or possibly by using Stock
Transfer Forms (STFs) accompanied by the appropriate physical cer-
tificate(s) for private clients. Matching acceptance instructions must
be input by the Transferee via its CREST terminal. Payment for the
delivered Gilts will be made to LCH.Clearnet from the Transferee via
the CREST book entry system.
Transferors must deliver Gilts to LCH.Clearnet by the method
specified on the Seller’s Delivery Notice.
The Transferor must input the necessary confirmed inward delivery
details via their CREST terminal. Sellers must ensure that sufficient
Gilts are in their Transferor’s CREST account to meet the delivery in
full so that the delivery will not fail. Payment for delivered Gilts is
made to the Transferor through the CREST book entry system.
Not all clearing members have direct access to CREST accounts,
but often their clients will have their own accounts. If the clearing
member delegates the function and allows their clients to deliver the
Gilts directly to LCH.Clearnet’s account in CREST, then they must
ensure that the clients understand the procedures and timings
exactly. Ultimately, whatever the client does or does not do, the
responsibility always lies with the clearing member. In this situation,
the clearing member can have very little control over what happens.
Commodity futures delivery
Commodity futures will have very different processes for delivery,
depending on the type of commodity that underlies the future.
For example, the IPE Brent Crude future delivery mechanism is
shown below.
IPE Brent Crude Delivery Mechanism
Unit of trading
One or more lots of 1,000 net barrels (42,000 US gallons) of Brent
crude oil.
Specification
Current pipeline export quality Brent blend as supplied at Sullom
Voe.
68 Clearing and settlement of derivatives