Issuers with Euro or Global Medium-Term Note Programmes will be familiar with the concept of Final Terms which, for each trade under the Programme, specifies key pricing terms and which terms and conditions set out in the underlying prospectus are applicable. Pro forma Final Terms are rarely negotiated as they are essentially mechanical, however, there is currently some debate as to whether or not a placeholder for a trade date should be included.   

The EU Central Securities Depositary Regulation requires Euroclear and Clearstream (the ICSDs) to obtain trade date information in the context of a trade. From 8 February 2021, trade date became a mandatory field in the ICSDs primary market settlement instructions. If the trade date is not included in the settlement instructions, there is a risk that the relevant trade may fail to settle. 

Since February 2021, different views have emerged as to how trade dates should be confirmed to agents, so that they may confirm the trade date to the ICSDs in the context of a bond issue. 

The source of the debate is that, in order to be included in Final Terms of a Programme which complies with either the UK or the EU Prospectus Regulation, each line item in the Final Terms should be mandated as a securities note disclosure item in the relevant disclosure annex. Trade date is not an item mandated by the disclosure annexes and therefore should not, as a purely technical matter, be included. However, some agents are asking for the trade date to be included in Final Terms to form the basis of confirming the date. Their rationale is that including trade date in the Final Terms is an efficient way for such information to be provided without requiring an additional side letter and a separate authentication process in respect of the relevant signatory of the side letter. Other market participants take the view that this information should not be included in Final Terms as it is not relevant for investors, and it should therefore be confirmed bilaterally between the agent and the issuer outside of the Final Terms (for example, in a term sheet, trade confirmation or in a side letter).

Another relevant point to consider in this debate is that updates to pro forma Final Terms can only be made through supplementing or updating the Programme prospectus. This means that new line items, such as trade date, cannot simply be added at the point of issuance.

While the market and agents settle on an agreed approach over the coming months, the inclusion of trade dates in Final Terms and divergence in approaches is a good illustration of a mismatch between the regulatory position and what may be required in order to receive funds without any last minute issues on the settlement date.

For more information please contact: Peter Allen, Duncan Kellaway, Reena Parmar, Laura Clark-Jones or Greg Garfield