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Trading guide

Regulatory frame
  
  • Romanian Government Decision no. 802 of September 30, 1999, on adopting the Regulations for organizing and operating the Electronic Archive of Security Interests in Personal Property, published in the Official Gazette, Part I no. 499/October 15, 1999, as subsequently amended and supplemented;
  • Law no. 99 of May 26, 1999, on certain measures for accelerating the economic reform, published in the Official Gazette, Part I no. 236/May 27, 1999, as subsequently amended and supplemented;
  • Romanian Government Emergency Ordinance no. 77 of June 1, 1999 on certain measures for preventing incapacity to perform payments, published in the Official Gazette, Part I no. 256/June 4, 1999, as subsequently amended and supplemented; 
  • Law no. 357/ December 6, 2005 on commodities exchanges:
 o Art. 1, para. (4): “Commodities exchanges established pursuant to this law shall manage public interest markets and shall ensure to its members and clients centralized conditions of negotiation for operations involving: […] d) sales and purchases of commercial receivables on the receivables market”;
 
o Art. 3: “For the purpose of this law, the words and phrases below shall be defined as follows: […] r) receivables market – the open market organized for the sale or purchase of receivables”;
 
o Art. 4, para. (2): “The commodities exchanges manage cash markets, mixed markets, auction markets and receivables markets […]”;
 
o Art. 22, para. (4): “On the receivables markets, the shareholding and affiliated members as well as the clients of the exchange may register bids”;
 
o Art. 23, para. (1): “The exchange operations represent, but they are not limited to, the ensemble of trading rules regarding: […]  d) the registration, negotiation and conclusion of receivable assignment contracts on the receivables market.”
 
  • RCE’s Regulations for auctions involving commercial receivables.

Location for trading the receivables
 
Receivables are traded during open outcry auctions on BRM’s floor and on the floor of RCE’s representative offices in the territory.
 
Participants
 
The participants in trading are the (initial selling/purchasing) initiators, respectively the (selling/purchasing) bidders that register responding orders (against the orders launched by the initiators) at RCE for the purpose of concluding transactions with the already published orders. Also, RCE’s representatives, as well as potential spectators are also present on the floor.
 
Shareholding Members, Affiliated Members and Customers of RCE are those who can register bids and receive responses from any interested natural persons or legal entities, under the terms established by RCE’s regulations.
 
The acceptance of the natural persons or legal entities as participants in the trading procedures of receivables takes into account the fact that the debtor of the receivable is prohibited to recover it in full or in part, directly or indirectly.
 
The phases of the trading procedure for receivables
  
1.        Presenting, verifying and registering the initiators' bids;  
2.        Publishing the contract award notices regarding the bids registered under item 1;  
3.        Presenting, verifying and registering the bidders’ bids;  
4.        Performing the trading session:
 
  • Opening the session;  
  • Bidding the percentages to be used for the calculation of the prices at which the receivable assignment contracts shall be concluded;  
  • Closing the session.
  
1.      Presenting, verifying and registering the initiators' bids
 
The orders launched by the initiator are implicitly valid for maximum 6 successive trading sessions, upon registration of the order, being possible that the initiator specifies a lower number of successive trading sessions. Scheduling an order for more 6 successive sessions involves the re-registration of such order.
 
If a natural person or legal entity intends to act as a selling/purchasing initiator on RCE receivables market, it shall have to present to the Receivables and Financial Products Department, in addition to the sale/purchase order, a series of documents, as follows:
 
 

Selling initiator
 
Purchasing initiator
 
  • the power of attorney granted to the person that shall represent it, as the case may be; for natural person initiator, the power of attorney shall be certified by a notary public;  
  • the evidence attesting to the payment of RCE’s order registration fee;
  • the invoice certifying the receivable or other equivalent certifying document;  
  • an undertaking under authorized signature that it shall not set off/assign the receivable as long as its sale order is in progress at RCE , otherwise than as provided by “ RCE’s Regulation for Auctions with Commercial Receivables”;  
  • a certificate attesting to its tax obligations issued by the competent tax authority;  
  • the consent of the tax authority, as the case may be, for trading the receivable in case the assignor has outstanding tax obligations;  
  • an affidavit under authorized signature that the receivable resulted further to the supply of goods/services by the debtor and that such receivable is not fully set off /assigned.

 
  • an undertaking under authorized signature that the sale order related to such receivable is irrevocable for its entire term of validity;  
  • an affidavit that it does not act pursuant to a secret agreement with the debtor so that the latter may recover its own receivables and that it does not, directly or indirectly, hold interests higher than 10% in the debtor’s share capital, respectively that the debtor does not, directly or indirectly, hold interests higher than 10% in the share capital of the purchasing initiator;  
  • the undertaking to pay the fee to RCE, in case the purchasing initiator becomes a party to a receivable assignment contract.
 

 
In addition to such documents, the Receivable and Financial Products Department shall verify, the fulfillment of the following conditions:  
 

For the selling initiator
 
For the purchasing initiator
 
  • the receivable referred to in the selling order is not subject to any receivable assignment contract or security interest in personal property contract registered with the “Electronic Archive of Security Interests in Personal Property”, or it has not been fully set off;  
  • the invoice attesting to the receivable should have been expressly accepted by the debtor, if such is not registered according to Government Emergency Ordinance no. 77/1999.

 
  • within maximum 2 business days as from the registration of the purchase order, the initiator should have deposited into RCE’s account a bid bond representing 50% of the value of the bid bond required, and in case a complementary bid is registered, the bid bond should be completed up to 100% by one business day prior to the trading session at the latest.
 

 
2. Publishing the contract award notices for the bids of the initiators
 
The contract award notices regarding the bids of the initiators shall be published in a national daily newspaper, posted on RCE’s website and sent by fax or e-mailed to RCE’s shareholders.
 
As a rule, the contract award notice shall include the following:  
  • the debtor’s name and main identification data;  
  • the value of the receivable intended to be traded;  
  • the minimum value that may be provided in the responding orders;  
  • the date of the trading session.  
 
3. Presenting, verifying and registering the bidders’ bids
 
The orders sent by the bidders are implicitly valid for maximum 6 successive trading sessions, upon registering the order, being possible for the bidder to specify a lower number of successive trading sessions. Scheduling an order for less than 6 successive sessions involves the re-registration of the order.
 
In case a natural person or legal entity intends to act as a selling/purchasing bidder on RCE ’s receivables market, it shall have to submit to the Receivables and Financial Products Department, in addition to the sale/purchase order, a series of documents, as follows:
 
 

Selling bidder
 
Purchasing bidder
 
  • the power of attorney granted to the person that shall represent it, as the case may be; for natural person bidders, the power of attorney shall be certified by a notary public;  
  • the evidence attesting to the payment of RCE’s order registration fee;  

  • the invoice certifying the receivable or other equivalent certifying document ;

    the invoice certifying the receivable or other equivalent certifying document ;

  • the consent of the tax authority, as the case may be, for trading the commercial receivable in case the assignor has outstanding tax obligations;

  • an affidavit under authorized signature that the receivable resulted further to the supply of goods/services by the debtor and that such receivable is not fully set off /assigned.  
  • a certificate attesting to its tax obligations issued by the competent tax authority, also attesting that the natural person or legal entity acting as purchaser does not have any record of outstanding tax obligations;
  • an affidavit under authorized signature that it does not, directly or indirectly, hold interests higher than 10% in the debtor’s share capital, i.e. that the debtor does not, directly or indirectly, hold interests higher than 10% in the share capital of the purchasing bidder;
  • the undertaking to pay the fee to RCE , in case the purchasing bidder becomes a party to a receivable assignment contract.
 

 In addition to such documents, the Receivable and Financial Products Department shall verify, the fulfillment of the following conditions:
 

For the selling bidder
 
For the purchasing bidder
 
  • the value of the receivable intended to be traded is higher than or equal to the minimum value specified in the order to which it was responded;  
  • the receivable referred to in the selling order is not subject to any receivable assignment contract or security interest in personal property contract registered with the “Electronic Archive of Security Interests in Personal Property”, or it has not been fully set off;  
  • the invoice attesting to the receivable should have been expressly accepted by the debtor, if such is not registered according to Government Emergency Ordinance no. 77/1999  
  • the bid bond should be completed up to 100% by one business day prior to the trading session at the latest.  

 
4. Performing the trading session
 
The trading session shall be performed under the direct management of a session coordinator, subject to the bidders’ attendance, being monitored by a commission consisting of an uneven number of members – appointed by RCE’s President - General Manager, however, not less than three, which may also include the authorized representatives of the initiators, chaired by RCE’s President - General Manager or by a person appointed thereby.
 
For each scheduled order of a initiator, an entry shall be assigned. If no bidder registered for one of the entries of the initiators in a trading session, the commission shall declare the trading session closed with respect to such entry; and the respective entry shall be rescheduled for the following trading session.
 
On the trading day, prior to the opening of the trading session, the selling/purchasing initiator shall communicate in writing to the President of the Commission the minimum/maximum percentage of the value to be traded, requested for the sale/purchase of such receivable and, possibly, the starting percentage.
 
  • Opening the trading session  
When opening the trading session, the commission’s President announces:  
  1. the list of receivables to be traded during the respective session, presented by entries according to the order of their registration with RCE;  
  2. the value remaining for further trading (also including VAT) of the orders launched by the initiators, that were scheduled for the current trading session;
  3. the auction peak (is the initial peak denominated in percentages, used during the performance of the auction);  
  4. the additional peak (is the peak denominated in percentages, used when two or several bidders accept the percentage announced);  
  5. the reserve peak (is the peak, denominated in percentages, used for separation when neither of the bidders bids for the percentage announced);  
  6. the name/surname and first name and the bidders’ floor numbers, according to the order of their registration. 

 

  • Bidding for the percentages to be used for the calculation of the prices at which the receivable assignment contracts shall be concluded
 
In case the initiator is a seller, the receivable shall be bided for by Dutch type outcry auction, the percentages being bided for decreasingly; the starting percentage is the one communicated by the initiator or 100% in absence of stipulation.
 
In case the initiator is a purchaser, receivable shall be bided for by outcry auction, the percentages being bided for increasingly; the starting percentage is the one specified by the purchasing initiator.
 
A bidder may no longer participate in the auction after it ceases to accept the percentage announced, but it accepted, by raising the floor number the previously announced percentage, provided that the currently announced percentage is accepted by at least one other bidder.
 
In case that no other bidder accepts the announced percentage, the successive decrease/increase thereof shall be made without going under/exceeding the minimum/maximum percentage communicated by the selling/purchasing initiator; the session coordinator shall announce the “final peak” prior to calling out the percentage that equals to the minimum/maximum percentage requested by the selling/purchasing initiator.
 
The percentage condition means that the percentage to be announced by the session coordinator is higher than or equal to the minimum percentage communicated by the selling initiator, respectively lower than or equal to the maximum percentage communicated by the purchasing initiator.
 
The value condition means that the value remaining for further trading from the order of the initiator after the conclusion of a transaction is higher than or equal to the minimum value specified by the initiator.
 
The remaining value represents the value remaining for further trading if such value is lower than the minimum value specified by the initiator.  
 
  • Closing the trading session
 
After the President of the transaction supervisory commission announced the closing for the trading of an entry:

a. the initiator, the successful bidders and the session coordinator sign the trading notes, in three copies, one for each party;
b. the members of the commission, the successful bidders and the purchasing bidders that obtained the reserve statute shall sign the trading minutes. 
The trading minutes includes, for each trading entry:
 
  1. the name/surname and first name of the initiator;  
  2. name of the debtor of the receivable;  
  3. elements of every invoice or equivalent certifying document;  
  4. the name/surname and first name of the successful bidders;  
  5. the value of the receivable assignment contract;  
  6. the prices at which the receivables were traded;  
  7. the fees due to RCE;  
  8. the purchasing bidders that received the reserve statute and the percentages to be used for calculation of the prices at which they are to conclude, as the case may be, assignment contracts.  
 
The commission establishes both the reserve statute of the purchasing bidders for each entry, and the order in compliance with the final percentage accepted thereby.
 
Assignment contract
 
Receivable assignment contracts shall be drafted based on the minutes of the trading sessions, in three copies, one for each party and a copy for RCE and shall be signed by the parties within three business days following the date when the trading session was performed.
 
The assignee has the obligation to register the receivable assignment contract with the “Electronic Archive of Security Interests in Personal Property”, or to notify the assigned debtor of the receivable assignment, by a bailiff, or to obtain an acceptance statement therefrom, within maximum 24 hours prior to the date when it is to make the payment of the receivable.
 
According to art. 44 of Government Ordinance no. 802/1999, in case of registration of the receivable assignment contract with the “Electronic Archive of Security Interests in Personal Property”, the assignee has the obligation to serve to the debtor, within 24 hours following the registration of the receivable assignment endorsement, a copy of the receivable assignment endorsement form registered with the Archive.
 
The receivable assignment endorsement form registered with the Archive or the evidence debtor’s notification or acceptance shall also be served, in copy, to RCE , the Receivables and Financial Products Department.
 
Pursuant to art. 99 of Title VI of Law no. 99/1999, on certain measures for accelerating the economic reform, between the assignment notified to the debtor or accepted thereby and the assignment registered with the “Electronic Archive of Security Interests in Personal Property”, the registered assignment shall have priority.

Appendix 1 - Trading scheme for the selling initiator
Appendix 2 - Trading scheme for the purchasing initiator
 
 
 
 

 

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