CDS Clearing and Depository Services Inc. (“CDS”) published last November proposed amendments to the fees it charges securities issuers for certain services. The new fee regime, which is subject to regulatory approval, is expected to come into effect on April 1, 2015.
CDS services include the issuance of international security identification numbers (“ISINs”), depository eligibility, securities registration-related services and entitlement and corporate action (“E&CA”) event management. CDS currently charges a fee for ISIN issuance, eligibility and registration-related services, but does not charge a fee for E&CA event management.
CDS is proposing the following fee changes:
1. Introduce E&CA event management fees (ranging from $10 per event to $250 per event):
- Money Market interest and maturity events ($10/event);
- NHA interest events ($10/event) and maturity events ($20/event);
- Interest event ($100/event) and Maturity event ($150/event);
- Dividend event ($100/event);
- Corporate Action events with no option ($250/event);
- Corporate Action events with option ($250/event);
- Exchange Traded Fund Events ($250/event);
2. Introduce late fees where a depository eligibility request is made less than 48 hours prior to closing:
- Less than 48 hours but more than 24 hours prior to closing, a late fee of $2,000;
- Less than 24 hours prior to closing, a late fee of $5,000;
- Where the request is made on the closing date, a late fee of $10,000;
3. Introduce a security eligibility administration fee ($475 per eligibility request);
4. Simplify and reduce pricing for ISIN issuances ($160 per ISIN);
5. Introduce agency fees for managing certain events on behalf of a paying agent ($50/event) or depositary agent ($100/event); and
6. Reduce the existing certificate fee for Book Entry Only securities (from $550 to $125 per certificate).
The impact of the proposed E&CA management fees on debt and equity securities issuers will depend on the number of events managed for that issuer. For example, the more CUSIP/ISIN numbers associated with a security, the greater the cost impact of the new fee regime.
The introduction of late fees for depository eligibility requests made less than 48 hours prior to closing will have a significant impact on deals that close through CDS on an expedited timetable. In some cases, depending on the time the deal was priced, offering documents which are required to be filed with CDS in support of the depository eligibility request may not be in final form more than 48 hours prior to closing. In order to avoid late fees, the timing of the CDS depository eligibility request should be taken into account when transaction timelines are established. In anticipation of the new fee regime, some issuers are already working the depository eligibility request into deal timetables.