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•
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•
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Euroclear
Bank
Euroclear
Belgium
Euroclear
Nederland
Euroclear
France
Euroclear
UK & Ireland
Euroclear
Sweden
Euroclear
Finland
White paper
Adaptation of ESES CSD
services to Target2-Securities
1. Introduction ................................................................. 4
1.1 Objective of the White paper .......................................................................................................... 5
1.2 Project governance with ESES users ............................................................................................. 6
2. Executive summary..................................................... 7
2.1. Connectivity .................................................................................................................................. 7
2.2. Account structure .......................................................................................................................... 8
2.3. Matching and settlement ............................................................................................................... 8
2.4. Asset servicing .............................................................................................................................. 8
2.5. Issuer services .............................................................................................................................. 8
3. Connectivity ................................................................ 9
3.1. Connectivity options ...................................................................................................................... 9
3.1.1. ESES Connectivity offer – ICPs ..................................................................................... 11
3.1.2. ESES connectivity offer – DCPs .................................................................................... 13
3.2. Subscriptions and users management ........................................................................................ 14
4. Reference data ......................................................... 16
4.1. Account structure ........................................................................................................................ 16
4.2. Parties and securities accounts ................................................................................................... 20
4.3. Securities data ............................................................................................................................ 21
4.4. Dedicated cash accounts ............................................................................................................ 21
5. Settlement ................................................................. 23
5.1. Lean T2S settlement ................................................................................................................... 23
5.1.1. Validation and matching ................................................................................................. 23
5.1.1.1. Access to T2S matching system ................................................................................. 23
5.1.1.2. Type of instructions .................................................................................................... 24
5.1.1.3. Validation ................................................................................................................... 25
5.1.1.4. Matching rules ............................................................................................................ 26
5.1.1.5 Reporting ..................................................................................................................... 28
5.1.2. Settlement and operational day ...................................................................................... 29
5.1.2.1. T2S Operational day................................................................................................... 30
5.1.2.2. Settlement reporting ................................................................................................... 32
5.1.3. Settlement instruction management ............................................................................... 33
5.1.3.1. Hold and release mechanism ..................................................................................... 33
5.1.3.2. Partialling ................................................................................................................... 34
5.1.3.3. Transaction linking ..................................................................................................... 35
5.1.3.4. Prioritisation................................................................................................................ 35
5.1.3.5. Others ........................................................................................................................ 36
5.1.4. Liquidity management .................................................................................................... 37
5.1.4.1. Liquidity transfers ....................................................................................................... 38
5.1.4.2. Limit management ...................................................................................................... 40
5.1.4.3. End of day cash management .................................................................................... 41
Style Definition: List Paragraph,List
Paragraph 1: Bulleted + Level: 1 + Aligned at:
0.28" + Indent at: 0.53"
5.1.4.4. Cash blocking and reservation ................................................................................... 41
5.1.4.5. Liquidity monitoring..................................................................................................... 41
5.1.4.6. Auto-collateralisation .................................................................................................. 42
5.1.5. Cross-CSD settlement ................................................................................................... 47
5.1.6 Settlement with CSDs outside T2S ................................................................................. 49
5.2. Pre-settlement processes ........................................................................................................... 50
5.2.1. MTFs and CCPs transactions ........................................................................................ 51
5.2.2. Trade confirmation – SBI ............................................................................................... 52
5.2.3. Funds order routing ........................................................................................................ 54
5.3. Issuance and primary market settlement ..................................................................................... 55
5.3.1. Standard securities ........................................................................................................ 56
5.3.2. French money market instruments ................................................................................. 56
5.3.3. Funds issuance .............................................................................................................. 57
5.3.4. Warrants & certificates issuance (Plug & Clear service) ................................................. 58
5.4. Settlement of registered securities .............................................................................................. 59
5.4.1. French registered securities (BRN) ................................................................................ 59
5.4.2. Belgian registered shares .............................................................................................. 61
5.5. Other settlement related processes ............................................................................................ 62
5.5.1. Physical securities ......................................................................................................... 62
5.5.2. ISIN conversion (‘transfert valeurs’) ............................................................................... 62
5.5.3. Stripping and reconstitution of government debt ............................................................ 63
5.5.4. Dedicated ESES offer for free of payment without matching .......................................... 63
5.5.5. Bilateral repos ................................................................................................................ 64
5.5.6. Automatic balance transfers ........................................................................................... 64
6. ESES Central Bank Money triparty service ............... 66
6.1 General description of the service ................................................................................................ 66
6.2 How will the service interact with T2S? ........................................................................................ 68
7. Corporate actions and issuer services ...................... 70
7.1. Corporate actions ........................................................................................................................ 70
7.1.1. Corporate actions on stocks ........................................................................................... 70
7.1.1.1. Notification and entitlement advices ........................................................................... 70
7.1.1.2. Corporate action processing ....................................................................................... 71
7.1.1.3. Corporate action reporting .......................................................................................... 75
7.1.2. Corporate action on flows .............................................................................................. 76
7.1.2.1. Generic principles ....................................................................................................... 76
7.1.2.2. Market claims and transformations ............................................................................. 76
7.1.2.3. Buyer protection ......................................................................................................... 80
7.2. Issuer services ............................................................................................................................ 80
7.2.1. Overview of issuer services on the T2S platform ........................................................... 80
7.2.2. Titres au Porteur Identifiable (TPI) ................................................................................. 82
8. ESES Investor CSD offer .......................................... 83
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 2
9. Client readiness, migration and testing ..................... 85
9.1. Migration ..................................................................................................................................... 86
9.2. Testing ........................................................................................................................................ 87
Annex 1 - Overview of main ESES services and changes in relation to the T2S project .................... 89
Annex 2 - Overview of the future state of ESES settlement messages – Matching and Repo............ 94
Annex 3 - Overview of the future state of ESES settlement messages – Settlement ......................... 96
Annex 4 - Overview of the future state of ESES settlement messages – Payments........................... 98
Annex 5 - ESES – T2S messages life cycle ..................................................................................... 100
Annex 6 - Detailed CSDs and NCBs migration planning .................................................................. 102
Annex 7 - Future state of ESES documentation ............................................................................... 105
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 3
1. Introduction
We are pleased to provide you with version 3.1 with the third version of the White paper, Adaptation
of ESES CSD services to Target2-Securities. Since the last version, the Euroclear CSDs located in
the Euro-zone have all signed the T2S Framework Agreement with the Eurosystem, hereby
confirming their commitment to join the new platform.
This third version focuses entirely on the adaptation of ESES CSDs (Euroclear Belgium, Euroclear
France and Euroclear Nederland). The ESES CSDs intend to migrate their settlement services to T2S
in March 2016.
This document represents the latest status of ESES adaptation plan, prior to the publication of the
contractual documentation. This version is based on the latest version of the T2S documentation
published by the Eurosystem.
·
User Requirements Document (URD)
·
General Functional Specifications (GFS)
·
User Detailed Functional Specifications (UDFS)
This version includes changes and additional information essentially in the following areas:
·
mapping of ESES account structure with T2S
·
ESES T2S account naming conventions
·
connectivity options and services
·
description of project governance with ESES users
·
adaptation of certain ESES services that were not addressed in the previous version
·
changesdetails on auto-collateralisation in ESES
·
cross-border settlement outside T2S
·
allegement periods
·
processing of French and Belgian registered securities (BRN and BRS)
·
our documentation
·
more details on the migration dates and the migration process
During the past In the coming months, we have been communicating will expand our communication
on the ESES-T2S project, through dedicated presentations, documents and brochures. We have
introduced will also introduce dedicated governance for this project,; with the creation of ad hoc users
groups (please refer to section 1.2). We have also startedwill start also a dedicated training program
and will progressively adapt ESES contractual documentation. We intend to publish the main
documents impacted by T2S as from by the beginning of 2014. Please refer to section 9 for more
details.
Note
This White paper is also relevant for participants in the Irish market who want to access the T2S
platform. As the Euroclear UK & Ireland platform (which settles the Irish market transactions) will not
join T2S, the Irish market has requested that Irish securities are made eligible on T2S via ESES
Investor CSD offer described in section 8.
The information herein is not contractual and is subject to changes as a result of our analysis, market
requirements or changes in ESES or T2S platform function. In particular, the implementation of some
functions depends on the acceptance of ongoing T2S change requests.
Definitive features will be published before the launch of T2S, via new Detailed Service Descriptions,
Data Dictionaries or updates to existing documentation.
If you have any questions, please contact your Account Manager.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 4
1.1 Objective of the White paper
The main objective of this White paper is to give a view of the impact of connecting to the T2S
platform for users of the ESES platform. It serves the following purposes:
·
present the impact of reshaping the ESES platform as a result of connecting to the T2S
platform
·
allow market participants to make their own decisions as to how they will connect to the
T2S platform
·
help participants prepare for the changes required to operate on the T2S environment
We will give ESES participants the choice to connect directly to the T2S platform for settlement
services, or to maintain their current ESES connectivity configurations:
·
Participants who choose to connect directly to the T2S platform will be considered Directly
Connected Participants, and will be referred to throughout this White paper as ‘DCPs’
·
Participants that choose to maintain their current ESES connectivity configurations will be
considered Indirectly Connected Participants, and will be referred to throughout this White
paper as ‘ICPs’
For all services described in this White paper, we provide a view of the impact for both DCPs and
ICPs, with the necessary detail to guide their decisions as to which connectivity route to choose.
With regard to the way we will adapt our service offerings in relation to the T2S platform, we have
attempted to find the right balance, in consideration of the following principles:
·
ensure the continuity of services (i.e. avoid service regression to the greatest possible
extent)
·
minimise the impact of connecting to the T2S platform on the Euroclear service offerings,
thereby minimising adaptation costs for participants
·
take advantage of the T2S functionalities, to maximise the benefit of connecting to the T2S
platform
·
take advantage of the T2S project as a means of harmonising rules, in accordance with
international standards and market practices
·
based on the above principles, minimise the additional cost of T2S for ESES and its
participants
These principles may occasionally be in conflict with each other. When this happens, we favour the
optimal use of the T2S platform, and the resulting innovation, over continuity. This approach
maximises the longer-term benefits of the T2S platform for participants and enables easier adaptation
of the ESES platform to future T2S changes. It will, however, result in necessary changes for
participants. Such changes have been highlighted in this White paper, where applicable.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 5
1.2 Project governance with ESES users
We have are implementeding dedicated project governance with ESES users through the creation of
three ad hoc instances:
T2S National Coordination Committee
Theis T2S National Coordination Committeecommittee has been will be set up in each ESES market
and will gathers cash and securities professionals to cover the ESES / T2S project both from the cash
and the securities perspectives. The cCommittee is will be composed of the current members of the
local Euroclear Market Advisory Committee and by several cash professionals (including the
Chairman of the local T2 NUG and a National Central Bank (NCB) representative). Its main mission is
will be to:
·
ensure efficient coordination of T2S migration among cash and securities businesses
·
follow-up readiness of local market infrastructures and intermediaries
·
coordinate the testing calendars between NCBs and CSDs participants
This group will started working in May during Q2 2013.
ESES – T2S Users Group
This group ESES – T2S Users Group will gathers product/business experts from the three ESES
markets (including NCBs and the CCP), to address all service issues and evolutions in relation to
adapting ESES platform to T2S.
Another aim of this gGroup is to leverage and promote high market proximity with the ESES market in
relation to the project. Its main mission is will be to oversee the detailed adaptation of ESES services
to T2S (e.g. T2S harmonisation, account structure, connectivity).
Theis gGroup is will be based on the existing ESES Users Forum and will started working in May
during Q2 2013.
ESES – T2S Implementation Committee
This group ESES – T2S Implementation Committee will gathers T2S project managers from clients in
the three ESES markets. It will monitor client readiness and prepare the testing and migration
process. This group will play a key role in the roll-out of the project and in preparing the best
conditions for a successful migration.
Theis gGroup will start working in 2014.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 6
2. Executive summary
The three ESES CSDs signed the T2S Framework Agreement in June 2012 and plan to migrate their
settlements services to T2S in March 2016.
In relation to the T2S platform, the ESES CSDs will outsource matching and settlement services to
T2S, but will continue to directly offer all custody and other services to their clients. We will provide
ESES participants with the full benefits of the T2S platform, including:
·
harmonised matching and settlement rules and life cycles with all T2S counterparties
·
single settlement window
·
extended settlement and liquidity management services
·
single pool of liquidity and collateral
·
ability for clients to replace the multiple connections to European CSDs with a single
connection via ESES (thanks to ESES acting as investor CSD)
In this context, we will provide a single access point from the ESES platform to all T2S eligible
securities. This involves:
·
the activation of Delivery Versus Payment (DVP) links with the other T2S connected CSDs
thanks to the cross-CSD settlement feature of T2S
·
the provision of extended asset servicing on all securities
ESES participants will be able to consolidate all assets holding and their activity relating to the
securities of CSDs joining the T2S project, on the ESES platform.
We will continue to offer the other ESES services, such as triparty collateral management, custody
and issuer services and trade management. We intend to take advantage of the T2S platform in order
to expand the scope of these services, as required by ESES participants.
The connection to the T2S platform will, however, impact ESES participants. The extent of the impact
is addressed throughout this White paper. The impact will vary according to the current setup of each
participant and their connectivity. For details on the T2S impact on each ESES service offering, see
Annex 1.
2.1. Connectivity
·
Each ESES participant will be given the choice of connecting directly to the T2S platform
for settlement services only, or continuing to use the ESES platform as a single entry point
for settlement, custody and other services.
·
Settlement will be accessible from the ESES platform via EuroclearConnect for STP, for
ISO 15022-compliant and ISO 20022-compliant messages, or via the EuroclearConnect for
screens and from the T2S platform via ISO 20022-compliant messages or the T2S screen.
·
ESES proprietary settlement messages will be discontinued. Proprietary messages will be
kept for specific services such as SBI, TCN, BRN, TPI and FTT.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 7
2.2. Account structure
The current ESES account structure will be maintained and mapped with T2S account structure
components. Directly connected participants will have to adapt to T2S structure. Indirectly connected
participants will have the option to continue to dialogue with the ESES CSDs using the current ESES
account structure.
2.3. Matching and settlement
·
The T2S platform is expected to offer the same services as the ESES CSDs and will
·
Cross-CSD DVP settlement will be offered by the ESES platform.
provide some new functions.
·
The French repo service will be discontinued. We have proposed an alternative to but we
are investigating alternatives with the users of the service.
·
ESES pre-settlement services will be maintained (e.g. SBI, funds order routing). Related
settlement will be routed through the T2S platform. Equally, the ESES Central Bank Money
Triparty Collateral Management will be linked for settlement on the T2S platform.
2.4. Asset servicing
·
Corporate actions, whether on stocks or on flow, will continue to be processed on the ESES
platform.
·
Settlement of corporate action related movements will be processed on the T2S platform,
upon ESES CSDs instructions.
·
The classical ‘coupon’ payment procedure will be removed.
·
Significant harmonisation and standardisation of market practices are expected to take
place in Belgium, France and the Netherlands before and while connecting to the T2S
platform.
2.5. Issuer services
Registration services (French BRN service, Belgian BRS service) will continue to be processed in the
relevant ESES CSDs as they are today. The ESES platform will interact with the T2S platform to
manage the settlement instructions related to registered securities.
Other issuer services such as TPI (identifiable bearer securities) or the ESES Broadridge service (for
shareholder meeting management) should not be impacted by T2S.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 8
3. Connectivity
In a T2S environment, the ESES CSDs will introduce changes in the connectivity set up and new
options to ESES participants.
·
For pure settlement services, ESES participants will have the choice of connecting directly
to the T2S platform (DCP) or maintaining their current ESES connectivity configurations
(ICP).
·
ESES proprietary settlement messages will be discontinued. Settlement will be accessible
·
ESES participants opting for DCP will communicate with the T2S platform exclusively via
from the ESES platform via ISO 15022 compliant and or ISO 20022-compliant messages.
ISO 20022-compliant messages.
We will take the opportunity of joining the T2S project to decommission all ESES proprietary
settlement messages and adopt ISO standards for settlement messaging. This decision was made,
based on the following considerations:
·
full compliance for the ESES CSDs with the initiatives to remove Giovannini Barrier 1
·
cost reduction for ESES participants, as they will be able to harmonise ESES messaging
·
maintaining proprietary messages would imply adaptation costs for participants, as such
with other channels for which ISO-compliant messages are already used
messages need significant revamping to become compliant with function on the T2S
platform (e.g. hold/release, cross-CSD and the use SWIFT BICs)
Some non -settlement messages, however, will remain available in proprietary format only, either
because they have no ISO equivalent (e.g. BRN and TPI) or because there is no business case to
move such messages towards ISO compliance (e.g. SBI). For an overview of the status of ESES
settlement messages foreseen at the launch of the T2S platform, see Annexes 2, 3, 4 and 5 at the
end of this White paper.
3.1. Connectivity options
Difference between ICPs and DCPs
All ESES participants will maintain their business, legal and operational relationships exclusively with
their ESES CSDs whether they connect directly or indirectly to the T2S platform.
ICPs clients do not connect directly to T2S but send their messages exclusively via the ESES
platform and receive related reporting from the ESES platform only. The ESES CSDs will be
responsible for managing the connection with T2S on their behalf. We will shield ICPs as much as
possible from the connectivity impact inherent to the T2S project.
DCPs are defined as parties that are capable to send and to receive messages directly to the T2S
platform. According to their needs or to operate non settlement services, DCPs send also instructions
to the ESES platform. They receive reporting from the T2S platform or from the ESES CSDs,
depending on their subscriptions. In section 3.2, you can find a list of criteria that can be used to
configure the connectivity set up (this can include, for example, the securities account number and
ISO transaction code).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 9
DCPs will need to maintain a direct connection with their ESES CSDs, to access all services other
than settlement services. Equally, even for settlement, DCP connectivity is neither exclusive nor
definitive: the same party can decide to use both DCP and ICP channels, depending on the type of
operation or its internal business lines.
Figure 1: ICP and DCP connectivity
Note: ESES participants wishing to become DCP were required needs to confirm their intention, in a
non-binding manner, to the CSD Steering Group (CSG) before 15 at the latest in October 2013. Final
confirmation is required one year before the start of community testing (scheduled for mid-September
2014 for the ESES markets (wave 2) but to be confirmed) Expressions of interest received Aafter 15
October 2013 expressions of interest from DCPs could will only be considered for the next migration
cycle, i.e. after the 4th wave in 2017.
Figure 2: Service access – ICPs and DCPs
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 10
ESES direct connectivity
EuroClearConnect for STP
Proprietar
y
Settlement
Payment
Custody
messages
SBI trade
confirmation
Money Market
Instruments
(TCN)
Registered
securities
TPI
Funds order
routing
Triparty
collateral
management
EuroclearConnect
for Screens
ISO 15022
ISO 20222
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Direct
connectivity
T2S
T2S
platform
scree
n
ISO
20022
•
•
•
•
•
•1
•2
Table 1: Overview of connectivity means that will be offered for main ESES services
3.1.1. ESES Connectivity offer – ICPs
ICPs will interact with the T2S platform only via the ESES platform. ICPs will therefore have a single
entry point for all their activity, whether taking place on T2S or with ESES, for both settlement and
other services, including value-added services.
ICPs can communicate via:
·
EuroclearConnect3 for STP using ISO 15022- or ISO 20022-compliant messages for
settlement and ISO 15022-compliant messages for corporate actions. Some services will
continue to use existing proprietary format
·
EuroclearConnect for Screens
EuroclearConnect for STP
We intend to give ICPs access to almost all ISO 20022-compliant messages available on the T2S
platform, from the current EuroclearConnect for STP platform. Current ESES ISO 15022-compliant
messages will be maintained. However, their format will be adapted, to take into account the new
features of T2S. In addition, some new ISO 15022-compliant messages will be introduced, to ensure
full coverage of T2S functionality. For an overview on the impact of settlement messages, see
Annexes 2, 3, 4 and 5.
1
2
3
Dedicated browser
Dedicated browser
EuroclearConnect is the brand name for ESES connectivity means.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 11
To limit the adaptation costs for all ICPs, whether using ISO 15022 or ISO 20022-compliant
messages, we will:
·
offer the option of keeping some elements of the current ESES party and account structure
(such as the participant code, sub account, account nature, collateral indicator (ICPG))
·
maintain the concept of routing code which is currently available in ESES settlement
proprietary messages; this facility will be implemented for ISO15022 and ISO20022
messages
Alternatively, ICPs (particularly those who intend to be DCPs as well), can use ISO 20022-compliant
messages in full T2S format.
With regard to the STP channel, we will continue to offer an access through current network
providers:
·
SWIFT (FIN, TDA, Interact or File Act)
·
BT (BT/Radianz MQ, BT/Radianz FT)
EuroclearConnect for Screens
EuroclearConnect for Screens will be modified to offer clients with an access to their T2S activity in
real time. This will include the following functions:
·
matching and settlement instruction input, maintenance instructions4 and associated
reporting
·
security balance monitoring
·
liquidity messages and purchasing power monitoring
The access to EuroclearConnect for Screens can be subscribed by any client regardless of the
connectivity used for STP messages (i.e. a client which is directly connected for its STP messages
can have access to the EuroclearConnect for Screens to monitor its activity in T2S). This can be done
as the ESES CSDs will receive real time copies of applicable inbound and status messages.
New functionality offered on the T2S platform, such as management of priorities, linking or cross-CSD
instructions will also be accessible from EuroclearConnect for Screens. Consultation tools will be
upgraded to cover the larger scope of T2S securities and counterparties.
Other ESES CSDs services, such as corporate actions input and reporting or TCN issuance, will
continue as well to be offered from EuroclearConnect for Screens.
We will continue to offer an access through:
·
Public internet
·
SWIFT
·
BT/Radianz
Management of copies and duplicates
We will maintain the extensive functionalities already offered by EuroclearConnect that allow clients to
have copies of their messages sent to third parties. In addition, ICPs will have the option to select the
format of the copy (ISO 15022/ISO 20022) regardless of the original message.
Just like today, the ESES CSDs may send duplicate messages if the receiver of a message wants it
to be sent again.
4
Maintenance refers to modification or cancellation instructions.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 12
3.1.2. ESES connectivity offer – DCPs
DCPs can communicate with the T2S platform via:
·
T2S STP channel: this connectivity solution will provide access to the majority of T2S
functionality, including the use of ISO 20022-compliant messaging:
◦ sending settlement instructions to the T2S platform and receiving reports
◦ querying the T2S platform
◦ liquidity management and cash account monitoring
·
T2S screen: will provide an access to the complete T2S functionality, including all those
offered in STP mode
Requirements for direct connectivity
·
Contracts: DCPs must have a contractual relationship with the CSD. There will be no
contractual relationship between DCPs and T2S/Eurosystem. DCPs must also select and
have a contract with a Network Provider for its connection to the T2S platform.
·
Becoming a DCP: ESES participants wishing to become DCP have confirmed their
intention before must declare themselves by 15 October 2013. This will allows the
Eurosystem and the ESES CSDs to prepare their respective testing plans.
·
Certification and testing: DCPs must obtain ECB certification to ensure that they are
technically able to send messages to T2S without harming the platform. This certification is
received once and is valid for all CSDs. In addition, DCPs will have to follow the standard
certification and testing process defined by each CSD in which they want to act as a DCP.
See section 9.2 regarding testing.
·
ISO 20022: DCPs must comply with ISO 20022-compliant message formats for STP
connectivity.
·
DCP compliance: the activity flowing through direct connectivity must be DCP-compliant
(i.e. when the end-to-end process does not require direct interaction between the DCP and
the CSD). DCPs will still need access to the CSDs system for non-settlement purposes.
·
Network solutions: DCPs have will have to decide between the two main solutions
described below and select a Network Providers for Value Added Network (VAN)
accordingly. The Eurosystem will offer up to three Network Service Providers (NSPs) for
the connectivity solution:
- one dedicated link: the Eurosystem network (CoreNet)
- two licenses for Value Added Network (VAN):
◦ SWIFT
◦ SIA / Colt
For settlement services, the ESES CSDs will remain the single point of contact for operational
support, issues and incident management. On a day- to-day basis, there will not be interaction
between DCPs and the T2S operator, except in case of technical connectivity problems: a business
continuity procedure will be in place through which the DCP may contact the T2S Operator.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 13
Management of copies and duplicates
The T2S platform can, upon subscription, send copies of messages.
This feature can be used by DCPs to have copies of their sent or received messages to third parties
of their choice.
In addition, in order to process some services or to implement some controls, the ESES CSDs will
receive copies of messages sent by DCPs to T2S or status messages sent by T2S to DCPs. The
scope of relevant messages is under definition.
Upon request from the DCP client or from the ESES CSD, T2S can send duplicates of messages
already sent.
3.2. Subscriptions and users management
The ESES CSDs will be in charge of creating the necessary authorisations, privileges and
subscriptions for both ICPs and DCPs to connect to the T2S platform, for settlement activities. NCBs
will have the same responsibility for liquidity management aspects.
Two different profiles can be established in T2S:
·
Read-only direct access to T2S – for reporting and querying
·
Full access – for sending instructions, reporting and querying
T2S will offer flexibility in terms of access and reporting options. Subscriptions for reporting can be
based on different value criteria (i.e. set of data to be present in the message and conditions to be
fulfilled for the message to be sent by T2S). The possible criteria are the following:
·
Message type
·
Instruction type
·
Instruction status
·
Party (as account owner or receiving/delivering party or CSD, etc. depending on message
type)
·
Securities account
·
Cash account
·
ISIN
·
Currency of instruction
·
Already Matched flag
·
ISO transaction code
The ESES CSDs will:
·
define a default profile and reporting options that replicate current standard ESES setups
·
offer the flexibility to subscribe to customised profiles and reporting options, under specific
for both ICPs and DCPs
conditions that will be defined in the relevant ESES Detailed Service Descriptions
It is important to note that the ECB has set up some limitations in the use of this flexibility: the
maximum number of different sets of combined criteria that can be configured cannot exceed 1500
per CSD.
Just like today, the ESES CSDs will allow clients to grant access for instructing their settlement
instructions by other parties, by means of a Power of Attorney to, for example, Central Counterparties
(CCPs).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 14
ICP service offering
The members that will opt for indirect connectivity will have their accesses and user profiles set up on
the ESES platform, as today, by their ESES CSDs. Therefore, the user and profile management on
T2S is transparent for them. However, they can be granted access to the T2S screen, in addition to
EuroclearConnect access.
Routing code
The routing code allows the ESES participants to specify by default or explicitly in the settlement
instruction the address where the reporting for this instruction must be sent. This facility is available
today in ESES proprietary settlement messages.
This service will be maintained and improved within T2S and will be implemented in all the ISO15022
and ISO20022 messages sent by ICPs. A default value will be set up and used when the settlement
instruction does not include any routing code. Unlike today, where the choice of routing code is
available only for SLAB matching instructions, this facility will be offered for any kind of instruction
sent by the participant.
For certain settlement messages generated by the CSD only (such as market claims, corporate
actions) or by T2S platform only (such as auto-collateralisation), the ICPs will have the possibility to
specify a dedicated routing code. Based on the original ISO transaction code, the ESES CSD will
route the settlement reporting to the appropriate address defined by the client.
DCP service offering
Each ESES CSD will define a standard user profile on the T2S platform for DCP access to both the
T2S network and T2S screen, and create a DCP administrator profile for each DCP. The
administrator profile will grant a number of access rights to users, and will give them the ability to
amend and update certain features. The access rights will be limited, to ensure that DCPs cannot
perform operations on the T2S platform that are not covered by the contractual and service
arrangements between us and the DCP.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 15
4. Reference data
This section describes how core reference data will be managed by the ESES CSDs in relation to the
T2S project and in comparison with the way it is managed today.
We will only address data needed for the correct processing of settlement instructions (i.e. account
structure, securities, parties and cash accounts). Other data, such as that required to process
corporate actions, are not impacted.
4.1. Account structure
The ESES system and the T2S platform have different account structures. Both allow participants to
segregate their holdings in several sub-positions (ESES sub accounts or T2S accounts / restricted
balances). However, there are some specific components in the ESES account structure (e.g.
account natures and collateral indicators) that have no identical equivalent on the T2S platform. The
T2S account structure includes a layer for the CSD (which is implicit in the ESES CSDs).
ESES
T2S
CSD (SWIFT BIC)
Institution code
Party (SWIFT BIC)
Sub-account Account Nature (NDC)
Account
Collateral indicator (ICPG)
Earmarked balance
Table 2: ESES and T2S account structures
We intend to maintain the same account structure as today, in order to continue to offer the same
level of safety and flexibility to account holders and meet the business and legal requirements that
are behind the current account structure. In particular, the ESES multi-jurisdictional model will be
maintained. Therefore, each ESES security will continue to be assigned a single CSD of reference.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 16
The following table summarises how we will map current ESES account structures to the T2S
platform:
ESES
account
structure
component
Description
Size
T2S
equivalent
How will it be mapped to the T2S
account structure
Size
Institution
code
The identifier of
the Party
11N
SWIFT BIC
11 of CSD +
SWIFT BIC
11 of the
party
the SWIFT BIC 11 of the party, in
combination with
the SWIFT BIC 11code of the CSD
11AN
+
11AN
The same SWIFT BIC 11 of the party can
be used across all CSDs.
Type of
Sub-account
+
Sub account
Segregated
account opened
by the party
2AN
+
23AN
Account
Each ESES sub-account will be mapped
with one segregated T2S account per CSD
35AN
Account
Nature
(NDC)
Feature that
specifies the legal
nature of the
holding or the
usage of the
securities
3N
Account
This concept does not exist in T2S. Each
account nature (including default ‘Ordinary
securities’) will be mapped with a specific
T2S account per CSD. We will attach to the
account a specific Market Specific Attribute
(MSA) in T2S data base to reflect the
relevant account nature. The specific
checks made by ESES in relation to the
account nature will be replicated through
the use of Market Specific Restriction Type
(MSRT) section 5.1.1.3. paragraph
Additional controls set by the ESES CSD
part of
the
above
size
35AN
Note: exceptionally, we will map some
account natures with the Earmarked
balance (see below)
ICPG
Collateral
indicator.
1N
Earmarked
balance
In the context of
T2S, the scope of
the ICPG will be
extended to cover
all the subbalances that will
be managed in
T2S through the
earmarked
balance
component
The participant will have the choice to
manage the auto-collateralisation usage as
a sub-position of its account (earmarked
balance)either:
- AWAS for non-collateralised
holdings (ICPG 0)as a sub-position of
the participant account (earmarked
balance)
4AN
- EXXX for holdings eligible for autocollateralisation (ICPG 3) as a static
parameter of the participant account
(account earmarked for autocollateralisation)
We foresee also to use the earmarked
balance component, to segregate blocked
balances (e.g. for elections or certification
process for international bonds).
Table 3: Mapping ESES to T2S account structure
The main impact of moving from the ESES account structure to the T2S account structure can be
summarised as follows:
·
For ICPs, we will offer the option of managing the account structure using the legacy
structure. We will convert this data when communicating with T2S, so as to shield clients
from any impact.
·
For DCPs, or for ICPs opting for T2S account structure, the following impact is expected:
◦ ESES single operational account will be translated into up to three T2S accounts. In the
ESES account structure, account details can be identical across the three ESES CSDs. In
the T2S account structure, only the SWIFT BIC 11 of the party can be used across CSDs,
whereas account numbers must be specific per CSD.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 17
◦ Multiple T2S accounts will replace ESES specific account structure components (subaccounts, account nature and potentially ICPG). These account numbers will be specific
per CSD
T2S accounts naming convention
The CSDs joining T2S have agreed on a common high-level structure for naming the T2S securities
account. On the ground of this high-level structure, each CSD will then has defined a detailed
structure for the community of its clients. We will propose in the next few weeks a detailed structure
for ESES CSDs.
High level structure
·
4 first digits = the BIC4 of the CSD (e.g. 'EBEL' for Euroclear Belgium)
·
subsequent 31 digits: free text / 31 characters to be defined by the CSD with its clients
Figure 3: Structure of securities account in T2S
Following consultation with the ESES markets, via the ESES T2S User Group, we have defined the
following structure for the ESES CSDs:
Type
The BIC4 of the ESES CSDs
The ESES party BIC 11
The Account Nature (NDC)
The sub-account type
The sub-account number
Total
Length
4AN
11AN
3N
2AN
15AN (max)
35ANan
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 18
Formatted: Indent: Left: 0.5"
The following example illustrates the mapping of an ESES account structure to the T2S account
structure, for a participant that accesses the three ESES CSDs through a single operational securities
account.
ESES account structure
Institution
code
Subaccount
5555
L1 0
Account
nature
000
Ordinary
securities
Mapping to T2S account structure
ICPG
0
CSD SWIFT
5
BIC
SWIFT BIC
Account6
ESESBEBBXXX
ABCDEFGHXXX
CIKBABCDE
FGHXXX000
L10
ESESFRPPT2X
ABCDEFGHXXX
ESESNL2AXXX
ABCDEFGHXXX
ESESBEBBXXX
ABCDEFGHXXX
ESESFRPPT2X
ABCDEFGHXXX
ESESNL2AXXX
ABCDEFGHXXX
Earmarking
restriction type
Deliverable
(AWAS)
EBELZZZZ1
SICVABCDE
FGHXXX000
L10
Deliverable
(AWAS)
EFRAZZZZ1
NECIABCDE
FGHXXX000
L10
Deliverable
(AWAS)
ENLDZZZZ1
5555
L1 0
000
Ordinary
securities
3
7
CIKBABCDE
FGHXXX000
L10
Autocollateralisation
(EXXX)
EBELZZZZ1
SICVABCDE
FGHXXX000
L10
Autocollateralisation
(EXXX)
EFRAZZZZ1
NECIABCDE
FGHXXX000
L10
Autocollateralisation
(EXXX)
ENLDZZZZ1
5555
L1 0
001
Administered
registered
8
securities
0
ESESFRPPT2X
ABCDEFGHXXX
5555
L1 0
104
Specific
NOMS for
Belgian
registered
9
securities
106
Securities
exchange
account
0
ESESBEBBXXX
ABCDEFGHXXX
0
ESESNL2AXXX
ABCDEFGHXXX
000
Ordinary
shares
0
ESESBEBBXXX
ABCDEFGHXXX
ESESFRPPT2X
ABCDEFGHXXX
ESESNL2AXXX
ABCDEFGHXXX
5555
L1 0
5555
LM 235
SICVABCDE
FGHXXX001
L10
Deliverable
(AWAS)
EFRA001ZZZZ1
CIKBABCDE
FGHXXX104
L10
Deliverable
(AWAS)
EBEL104ZZZZ1
NECIABCDE
FGHXXX106
L10
Deliverable
(AWAS)
ENLD106ZZZZ1
CIKBABCDE
FGHXXX000
LM235
Deliverable
(AWAS)
EBELZZ235
SICVABCDE
FGHXXX000
LM235
Deliverable
(AWAS)
EFRAZZ235
NECIABCDE
FGHXXX000
LM235
Deliverable
(AWAS)
ENLDZZ235
Table 4: Example of mapping ESES to T2S account structure
5
Provisional illustration pending the naming convention that will be defined with ESES clients. The BIC4
and CSDs BICs shown in this example are illustrative; actual BICs and BIC4 will be confirmed in relevant
DSDs.
6
Idem
7
Auto-collateralisation is currently only available in Euroclear France. Following Subject to the local NCBs’
decision, it should also be extended to Euroclear Belgium and Euroclear Nederland at the time of the launch
of T2S.
8
This account nature is specific to the relevant ESES CSD. It should remain with T2S.
9
Idem
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 19
We intend to reduce the number of Account Natures (currently almost 100) on or before the launch of
T2S, in line with the proposals made by a dedicated marketplace working group in France in 2012.
The number of values for the ICPG component (currently 2) will increase as we intend to use this
level of the account structure to reflect 'earmarked balances' for other purposes that autocollateralisation as well. The detailed list of values will be published in the relevant ESES Detailed
Service Descriptions.
Impact of ESES account structure for T2S counterparties of ESES clients
In most cases, the account structure of ESES participants on the T2S platform should have little or no
impact on counterparties, independently if they are ICP or DCP, meaning that except for mandatory
matching criteria (CSD + SWIFT BIC of the participant), ESES counterparties (in the ESES CSDs or
in other CSDs) will not need to know all of the details of the accounts opened by the ESES
participant.
The two following elements, however, could influence counterparties:
·
the T2S account number is an optional matching criterion (matching is needed if the two
counterparties have specifically input the account). The aim is to reduce the instances of
cross-matching. If the market practice evolves towards the T2S account number becoming
a matching criterion, there is a risk of increased complexity for ESES counterparties, as
they will need to know all market specific accounts opened by ESES participants
·
as a consequence of the ESES multi-jurisdictional model, each ESES security will continue
to be eligible on the T2S platform only in a single CSD of reference. As the CSD is a
matching criterion on the T2S platform, the ESES counterparties on the T2S platform will
have to identify and populate the ESES CSD of reference linked to the security
For further detail on the matching process and matching criteria, see section 5.1.1. ‘Validation and
matching’.
4.2. Parties and securities accounts
The ESES CSDs will be in charge of creating parties and securities accounts in the T2S database, for
all ESES participants, regardless of whether they are directly or indirectly connected.
Parties are identified on the T2S platform by means of a SWIFT BIC 11, in combination with the
SWIFT BIC 11 of the CSD(s) of which they are a member. Consequently, ESES participants will need
to use a SWIFT BIC 11 to be set up correctly on the T2S platform. Some members may need to use
several SWIFT BICs. At the level of the ESES CSDs, the party will be linked to the institution code.
In order to have business continuity and to benefit from the same granularity as in the ESES CSDs
today, we recommend ESES participants to set up one BIC11 for each current ESES party account.
Securities accounts on the T2S platform are linked to a single party. A party can have several
securities accounts linked to it. Securities account numbers are defined by the CSD, at the opening
request according to standard rules defined in section 4.1. When opening a securities account the
ESES CSD will specify which types of balances are allowed:
·
only credit or zero balances or
·
credit, debit and zero balances
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 20
The ESES CSDs can allocate some additional specific parameters, called Market Specific Attributes
(MSAs) to parties and accounts. We will use this additional data to perform some validation checks on
the T2S platform, for example to check some management rules linked to the profile of the party or
the account.
If allocated to parties, MSAs will subsequently be applicable to the party and all underlying accounts.
An example of such additional data is the account nature linked to the securities account (e.g. bearer
and registered).
4.3. Securities data
CSDs will be in charge of the creation of securities in the T2S database. For each security eligible in
T2S, there is a single CSD which takes the role of SME (System Maintaining Entity). The SME is in
charge of creating and maintaining the data for this security for the whole T2S community.
·
For a security issued in T2S, the SME will be the issuer CSD.
·
In the case of a foreign security issued outside T2S, there will be one or several CSDs in
T2S, the technical issuer CSDs that accept this security via a direct or a relayed link with
the issuer CSD outside T2S. In such a case, the SME will be the technical issuer CSD (or
one of them only, if there are many10).
Data required by the T2S platform is limited to a number of basic elements that are common to all
CSDs. In addition, CSDs can add new elements in the form of MSAs ('Market Specific Attributes), to
be able to perform additional validations for country or service specific items, on T2S rather than on
their legacy systems.
We intend to use this feature to perform all validations on the T2S platform, to facilitate cross-CSD
settlement and direct connectivity. Examples of such additional data include legal form or the
category of securities.
In the context of ESES adaptation to T2S, we will be prepared to accept a maximum number of
securities as issuer CSD, investor CSD or technical issuer to cover the largest scope of T2S eligible
securities and to offer the required asset servicing. Nevertheless, there could be some exceptions. In
particular, we will not accept securities in face amount (FMT) with a Deviating Settlement Unit (DSU):
i.e. securities which settlement amount defined in T2S securities database is not a multiple of the
nominal.
4.4. Dedicated cash accounts
As far as payments are concerned, ESES participants will choose one of the following statuses:
·
payment bank, corresponding to the ESES status of settlement bank. As in ESES today, a
payment bank can:
◦ use its own RTGS account for a T2S-eligible currency or
◦ use the RTGS account of another payment bank (an agent), while having full control of
cash on the T2S platform.
·
payment bank client, corresponding to the ESES status of settlement bank client, which
fully outsources cash management to a payment bank
Please note that unlike in the current ESES situation, the auto-collateralisation mechanism will only
be available for payment banks s linked to their own RTGS account. This would be a change to the
10
The detailed criteria to select the SME for non-T2S securities will be defined jointly by the CSDs before
the launch.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 21
current auto-collateralisation mechanism which is open to all payment banks, including to those which
operate DCAs not linked to their own that are linked to their own RTGS account11.
Cash balances in central bank money will be held by payment banks on the T2S platform within
Dedicated Cash Accounts (DCAs). These accounts will include both the liquidity generated from the
auto-collateralisation process and the cash resulting from settlement, corporate actions or liquidity
transfers.
In T2S, a securities account is always linked to a T2S DCA via a Credit Memorandum Balance
(CMB). A CMB is a tool T2S uses to track the provision of credit from a central bank to a payment
bank (for central bank collateralisation) and from a payment bank to their clients.
A payment bank may authorise one or more of its clients to use its own DCA for the settlement of
their instructions. Each DCA is linked to one CMB related to the payment bank holding the DCA and,
possibly, to one CMB for each client authorised to use the payment bank's DCA for settlement of the
cash leg of its settlement instructions.
NCBs will be in charge of creating DCAs for payment banks in the T2S database. Unlike ESES,
where the DCA is linked to the party level (institution code), DCAs will be linked in T2S to the
securities account level. Each DCA will be allocated a specific number on the T2S platform.
Each party can open several DCAs for each securities account, in which case, a default DCA is
defined per currency. Settlement is operated in the default DCA unless a specific DCA is mentioned
in the settlement instruction. We will offer ESES participants the option to designate a specific DCA
for the use of corporate actions (income payments). CSDs will be in charge of creating links between
securities accounts and DCAs in the T2S database.
Figure 4: Link between securities and cash accounts
Each DCA will be linked to a RTGS account with an NCB in the relevant RTGS payment system (e.g.
TARGET2). For auto-collateralisation purposes, each DCA can only be linked with a single NCB
receiving account. The same DCA can be used for the settlement of transactions in various securities
accounts and in various CSDs.
11
Please note that there is an ongoing change request which may modify the conditions to access the autocollateralisation for payment banks.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 22
5. Settlement
This section covers all settlement and settlement-related services, as they will be offered by the
ESES CSDs on the T2S platform. ESES matching and settlement services will be fully outsourced to
the T2S platform. These services will be the ones that are the most impacted by the T2S project. In
most cases, new T2S features will replace current ESES functions.
In this section, we will:
·
provide an overview on how matching and settlement services will be impacted by the T2S
project.
·
describe how liquidity management and cross-CSD settlement will be operated by the T2S
platform
·
highlight the impact of the T2S project on issuance, primary market operations and on presettlement services
For each service, we will highlight how it is impacted by the T2S project, point out the differences with
current ESES processing, and indicate whether or not we anticipate any service level differences for
DCPs and ICPs.
5.1. Lean T2S settlement
5.1.1. Validation and matching
To efficiently reshape the ESES platform, matching will be fully outsourced to the T2S platform. To
that extent, the current ESES SLAB matching system will be discontinued and replaced by the T2S
matching system.
The T2S matching system follows similar workflows to those of the ESES SLAB matching system.
·
Two counterparties send buy and sell instructions
·
Allegement messages are sent to the counterparty for unmatched transactions
·
The system compares the two instructions according to standard matching criteria
·
Matched transactions are candidates for settlement
As a result of the discontinuation of the SLAB matching system, and in line with discussions held with
the market, the ‘Pension Livree’ repo mechanism will no longer be available to ESES clients. For
more details, see section 5.5.5. – ‘Bilateral repos’.
5.1.1.1. Access to T2S matching system
ESES ICPs will either send matching instructions from EuroclearConnect for Screens, or by sending
ISO 15022- or ISO 20022-compliant messages to the ESES platform. ESES matching proprietary
messages will be discontinued.
DCPs will communicate with the T2S matching system via ISO 20022-compliant messages or the
relevant T2S screens.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 23
Matching will be available to both ICPs and DCPs, in any of the following configurations.
Figure 5: Possible matching configurations
5.1.1.2. Type of instructions
The T2S matching system will accommodate the following types of instructions. As a new feature for
ESES participants, ‘Delivery with payment’ instructions and ‘cash only’ instructions can be input by all
participants, whereas today they can only be input for CCPs or for some corporate actions.
Instruction
Definition
Free of payment (FOP)/Deliver free of payment
(DFP)/Receive free of payment (RFP)
Delivery/Receipt of securities without payment being made
Deliver Versus Payment (DVP)/Receive
Versus Payment (RVP)
Exchange of securities against cash
Payment free of delivery (PFOD) or ‘cash only’
Exchange of cash without the delivery of securities
Deliver With Payment (DWP)/Receive With
Payment (RWP)
Delivery/Receipt of cash and securities from one party to
another
Table 5: Transaction types in T2S
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 24
5.1.1.3. Validation
Technical validation
At the receipt of a settlement instruction and before the business validation, T2S processes a
technical check which includes:
·
·
sender authentication and decryption
duplicate check validation (no pendingactive instruction from the same instructing party with
the same T2S Actor’ instruction reference)
·
privilege check validation (the T2S system user has the relevant privileges to send the
corresponding instruction)
Business validation
The T2S business validation processes will ensure that all incoming instructions are valid at the time
they are received by the T2S platform. These checks will be either:
·
the basic controls that are common to all CSDs participating to T2S
·
the additional controls that will be set up specifically by the ESES CSDs (e.g. related to
account natures, registration or issuance)
To the extent that it is possible, the ESES CSDs will outsource the basic and the additional settlement
validations to the T2S platform, even for transactions received from ICP clients. As a result, rejections
will be reported to ICPs, using T2S reason codes.
T2S will validate transactions vis-à-vis reference data on the intended settlement date only, whereas
ESES validates on the trade date and intended settlement date.
Additional controls set by the ESES CSDs
In the context of ESES adaptation to T2S, we intend to implement in T2S a number of controls or
processes which are currently performed by ESES system, through the creation of dedicated rules.
These controls or processes are needed for:
·
regulatory reasons (e.g. because of the legal features of the security or of the party),
·
security and integrity reasons (to ensure that various components of a settlement
instruction are consistent among themselves)
·
service reasons: to apply some processes which are needed to offer CSDs services which
are not in the scope of T2S lean settlement
T2S rule-based model provides CSDs with tools that allow them to decentralise these controls, for
example:
·
Market Specific Restrictions Types (MSRT)
·
Market Specific Attributes (MSA)
·
CSD validation hold
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 25
In particular, the ESES CSDs will set up a number of MSAs to complement T2S data base with
specific ESES attributes needed to perform these additional controls. These MSAs will relate to 3
components:
·
securities
·
parties
·
securities accounts
The number of rules and market specific attributes that each CSD is authorised to create is limited.:
·
the number of Market-Specific Attributes (MSAs) to be used is limited to 10 per CSD
·
the number of rules (restriction types) for system configuration is limited to 5000 per CSD
Actual limits are under discussion with the ECB in the context of the approval process of a
dedicated T2S change request.
Revalidation process
A revalidation process is triggered on all recycled instructions at the start of day or when there is a
change in the static data, in order to check that these instructions are still valid. If a pending
instruction does not pass the revalidation, T2S cancels the instruction and informs the participant.
However, T2S does not apply the revalidation process when there is a change in business rules set
by the CSD (Market specific restrictions) unless a new CSD rule is created. In such case, manual
cancellation should be processed.
5.1.1.4. Matching rules
This section compares the main matching rules on the T2S platform and the ESES platform.
Mandatory matching
Unlike on the ESES platform, free of payment without matching (‘dumps’) will no longer be authorised
on the T2S platform. The following are exceptions to this rule:
·
transfers between the accounts of the same party
·
already matched instructions sent by a party that has the required authorisation of the
accounts (e.g. CSD or CCP) of both counterparties. This will be limited to intra-CSD
transactions. In all cases, matching will be required for cross-CSD transactions
We will implement a solution for FOP without matching dedicated to ICPs, see section 5.5.4.
Matching criteria
Matching rules that will apply are those defined by the T2S platform, regardless of the configuration of
the party (i.e. matching criteria will be the same for both DCPs and ICPs). The matching criteria are
compliant with the European Central Securities Depositories Association (ECSDA) and the European
Securities Forum (ESF) matching standards.
Most of the matching criteria are similar to those currently used in the ESES SLAB sub-system. As
such, no major impact is foreseen from a client perspective.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 26
Matching criteria
Current ESES
With T2S
Delivering Party
•
•
Receiving Party
•
•
CSD of the Delivering Party
N/A
•
CSD of the Receiving Party
N/A
•
ISIN
•
•
Trade date
•
•
Intended settlement date
•
•
Settlement quantity
•12
•
Currency
•
•13
Settlement amount
•
•14
Credit/Debit
N/A
•15
Payment type
N/A
•
Securities movement type
•16
•
Instruction type
•
Mandatory matching fields
17
Reversing-entry indicator
•
Additional matching fields (mandatory matching as soon as one party has input the field)
18
Opt-out ISO transaction condition indicator
•
19
CUM/EX indicator
•
Optional matching fields (mandatory matching only if the two parties have input the field- matching against blank
allowed)
Common trade reference
•
Client of delivering CSD participant
• (client reference)
•
Client of receiving CSD participant
• (client reference)
•
Securities account of the delivering party
•
Securities account of the receiving party
•
Table 6: ESES/T2S matching criteria gap analysis
Matching tolerance
A matching tolerance is the maximum difference authorised between the cash amounts input by the
seller and the buyer in settlement instructions. This principle currently exists on the ESES platform,
and will apply on the T2S platform, with slightly different conditions.
12
Two separate matching criteria on the ESES platform (i.e. ‘expression of the quantity’ and ‘quantity of
securities traded’) will be covered in a unique matching criterion on the T2S platform.
Only a matching criterion for DVP and DWP instructions.
14
Idem
15
Idem
16
The current ESES matching criterion is ‘purchase/sale codes’, used in RGV proprietary format
messaging only.
17
The ‘reversing entry indicator’ informs the counterpart that the settlement instruction is the reversal of a
former settlement instruction.
18
If Opt-out: counterparties in the underlying transaction may choose to ‘opt-out’ of the transaction
management process if they want to indicate that no market claims and transformations at all should apply
on a given transactionthe opt-out indicator is Y (Yes), the CSD will exclude the settlement from market
claims processing.
19
Cum/ex: counterparties in the underlying transaction may choose to include the ex/cum indicator only if
they want to deviate from the standard market claim procedure, as described in the CAJWG standards.A
party populates this field if it wants to override the standard market practice for market claim detection (e.g.
market claim is raised in favour of the seller instead of the buyer).
13
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 27
Matching tolerance
Current ESES
With T2S
EUR 2
EUR 2 (if settlement amount is less
than or equal to EUR 100.000)
EUR 25 (if settlement amount is
greater than EUR 100.000)
EUR 25 (for repo instructions ‘Pension
Livrée’)
Table 7: Matching tolerance in EUR
Additional matching period
The additional matching period defines the period following the intended settlement date of an
unmatched transaction, during which it still has a chance to match and settle. After that period, the
unmatched instructions are automatically cancelled.
Additional matching period
Current ESES
With T2S
Per instruction type (0, 5 or 10 days)
20 days after ISD or the last status
change
Table 8a: Additional matching period
Allegement
Similar to today in the ESES CSDs:
·
T2S sends an allegement to the counterparty of an unmatched transaction to alert them
that a matching instruction is required on their side
·
the allegement message is cancelled or removed when it is no longer needed for the
counterparty
For more details, see section 5.1.1.5.
Cancellation
Similar to today in ESES:
·
unmatched transactions can be cancelled unilaterally
·
cancellation of matched transactions must be bilaterally requested
Note: the senders of instructions that are already submitted as ‘already matched’ can cancel the
instructions themselves.
5.1.1.5 Reporting
Upon the receipt of instruction, relevant reporting will be sent to the relevant parties, whether ICPs or
DCPs. This will include:
·
an ‘Accepted’ or ‘Rejected’ Securities Settlement Transaction Status Advice
·
a ‘Matched’ Securities Settlement Transaction Status Advice, in real time
·
an allegement message to be sent to the counterparty if the instruction is not matched
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 28
The allegement message will only be sent either:
Timing
I > SD-1
I = SD-1
Current ESES
2h
20 min
until SD noon
I = SD
1 min after noon
T2S
1h until SD 13:00
(1-hour delay period from the
first unsuccessful matching
attempt)
Real time after 13:00
(from 5-hour delay period
measured backwards from
18:00 (the FOP cut-off time))
I = Date of issuance of matching instruction
SD = Intended settlement date
Table 8b: Allegement periods
·
a certain time after the first matching attempt (standard delay period) or
·
at a specified time, before the cut-off time of the Intended Settlement Date at the latest (i.e.
in case the end of the standard delay period would leave less than the standard delay
period before the cut-off)
Instead of subscribing to individual allegement messages, the participant can subscribe to receive the
Statement of Settlement Allegements report. This report includes details of all transactions that its
counterparties have alleged against it on a settlement day. The report can be generated at a specific
time or upon the occurrence of specific event(s).
Cancellation/removal of allegements
As it is today on the ESES platform, based on the messages subscription, an allegement message
can be removed or cancelled after it has been sent to the counterparty of an unmatched transaction.
·
If an unmatched instruction is cancelled, the counterparty receives an advice that the
allegement is cancelled.
·
In case the counterparty sends its corresponding instruction and if both instructions match,
the counterparty receives an advice that the allegement is removed.
5.1.2. Settlement and operational day
T2S provides free of payment and DVP book-entry settlement services that follow most of the ESES
principles:
·
Central Bank Money settlement
·
integrated model by which securities accounts and cash positions in central bank money
are held within the same settlement platform
·
auto-collateralisation mechanism
·
overnight batch settlement and daytime real-time settlement
·
real-time exchanges with TARGET2
T2S settlement is built as a multi-currency platform open to the Eurozone NCBs and to any other
NCB that has signed a currency participation agreement with T2S. Nevertheless at the launch of the
platform, only euro currency will be eligible.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 29
5.1.2.1. T2S Operational day
This section describes the main features of T2S operational day and T2S settlement reporting.
In the framework of T2S, the ESES operational day will be amended to cope with the new timing,
deadlines and milestones that will be triggered on the T2S platform. The T2S accounting day will be
considered the Master day. As a result, the timings related to matching and settlement activity will be
aligned with T2S timings, while other timings, related either to added value settlement services or
custody services offered by ESES, might be modified to fit within this new framework.
Operational day generic framework
Note: all times mentioned are in Central European Time (CET).
The main characteristics and sequences used within the T2S operational day take place in the
following order:
1.
2.
3.
Operational day value S will start on the T2S platform around 18:45 on S-1
Start-of-day processing
Night-time settlement period:
- first night time starts around 19:30
- last night time starts around 21:45
4.
Maintenance window from 03:00 to 05:00
5.
Real-time settlement period:
- starts before 03:00 or at 05:00 depending on T2S reception of notification status
- real time settlement closure at 16:00
6.
End-of-day processing at 18:00
The following figure provides a high level overview of the main exchanges between the ESES
platform and the T2S platform.
Figure 6: Interaction between ESES and T2S platforms
During each window and period, some specific flows and exchange of information will be performed.
These timings are indicative.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 30
Main impact
Due to the changes that will arise from the new timings set by the T2S platform and the various
exchanges between the ESES platform and the T2S platform, some of the key milestones of the
current ESES operational day will be modified.
Each window and period can include sub-cycles or sub-sequences that can be used for numerous
reasons, such as:
·
increasing settlement efficiency
·
cut-off processing
·
partial settlement processing
·
prioritisation
The following table summarises the new timing of the main milestones of the accounting day for the
settlement processes that will be directly processed on the T2S platform.
Deadlines/events
Current
timeline on
the ESES
platform
Future ESES timeline with T2S
Start of day
20:00 - 20:30
18:45 - 19:30
Night-time sequence
20:30 - 22:30
19:30 - 03:00
Overnight real-time settlement
22:30 - 03:00
N/A
Maintenance window
03:00 - 05:00
03:00 - 05:00
Real-time settlement window
05:00 - 16:00
05:00 - 16:00
Optional sweep
07:00
Between 17:00 and 17:40
Partial settlement windows
5 windows:
- Overnight
batch
- 05:00
- 09:40
- 12:15
- 14:10
3 windows:
- Overnight batch
- 14:00 (with deactivation at 14:15)
- 15:45 (with deactivation at 16:00)
DVP cut-off
16:00
16:00
Additional matched FOP between parties
16:00 - 17:00
16:00 - 18:00
Additional CBO (Central Bank Operations) window
16:00 - 18:20
16:00 - 17:40
BATM, intra-day FOP trades, securities restriction cut-off
20
17:30
Mandatory end-of-day sweeps
16:30 and 17:20
17:45 - 18:00
End-of-day process
18:20
18:00
Table 9: Main core settlement deadlines/events timing gap analysis
20
If the NTS ends before 03:00, an additional window for real-time settlement will begin as of the end of the
NTS window.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 31
The following table shows the new timing of corporate actions milestones that will be processed on
the ESES platform:
Deadlines/events
Current
timeline on
the ESES
platform
Future ESES timeline with T2S
Corporate action processing
20:30
19:15
Market claims and transformations
Real time
Hourly batch:
- from end of day to
maintenance window
- then from opening of the
real-time settlement window,
up to 18:00
Deadline for direct payment SPA release mechanism
15:45
15:45
Deadline for corporate action reversals (i.e. cancellations
or reverse movements)
15:45
15:45
Table 10: Corporate actions deadlines/events timing gap analysis
Note: all of the timings indicated in this section are only indicative and will be confirmed in the
relevant Detailed Service Description.
Fails recycling
At the end of each settlement day, failed instructions are recycled for a period of time known as the
‘recycling period’. The T2S recycling period will be unlimited, whereas in ESES it varies according to
the movement type code. Fails can only be cancelled bilaterally by the two counterparts or by the
CSD.
Recycling period
Current ESES
With T2S
10 days for standard matched DVP/FOP
30 days for SBI transactions
0, 2 or 5 days depending on the instruction type
Unlimited
Table 11: Recycling period
5.1.2.2. Settlement reporting
Today, the ESES overnight reporting is sent to clients between 21:15 and 22:30 and the daytime
reporting is sent in real time.
In T2S, during the overnight process, settlement results are provided by files sent after each
sequence of the overnight batch cycle. This means that several reports can be received. During the
day, reporting is sent in real time.
For DCPs, settlement results are reported on a subscription basis to the party indicated as the
subscriber.
For ICPs, in line with current ESES processing, we will provide settlement results after the overnight
batch at once and in real time during the day.
For ICPs, we will send the overnight reporting:
·
before 03:00 if we receive the T2S status notification related to the start of Real-time
Settlement or
·
by 03:00, at the latest, when we receive the T2S status notification related to the
maintenance window
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 32
5.1.3. Settlement instruction management
The T2S platform will offer a number of tools that will help users to better manage the settlement of
their transactions. They will help to:
·
create interactions between T2S settlement and internal books of the participant
·
optimise settlement efficiency
·
secure the settlement of transactions
·
reduce financing needs
Some of these tools are already available on the ESES platform. Others will be completely new, as
shown in the following table:
Service offer
Hold and release
Current ESES
• (pre-matching)
With T2S
•
Partial settlement
• (SBI and Settlement Connect
•
transactions, manual process for
Over-The-Counter (OTC))
Priority management
•
Linkage
•
Table 12: Settlement instructions management
In this section, we list the main settlement tools that will be offered by the T2S platform and highlight
differences with the current ESES functionality.
5.1.3.1. Hold and release mechanism
A hold and release mechanism does not exist as such on the ESES platform, but a similar
functionality is available through the SLAB pre-matching facility. This mechanism is used by
custodians to ensure that the underlying internal client has the required securities or cash provision
before committing to settle. By using this mechanism, a custodian can prevent a matched instruction
from settling, even if the settlement date is reached and even if it has all resources required for
settlement in its account.
On the T2S platform, the mechanism will consist of managing the status of the instruction (initial
instruction and subsequent amendments) between the statuses ‘on hold’ and ‘released’. This change
of status can be managed until the instruction has reached a final status. T2S also allows you to set
up a securities account with a hold and release indicator that will apply automatically to all instructions
on this securities account.
The T2S hold/release mechanism will be used as a substitute to the current ESES pre-matching
functionality. The main difference between the two is that on the ESES platform, when a transaction
is released (status changed from pre-matched to matched), it is routed to the settlement system and it
can no longer be held, whereas the hold/release mechanism allows to put a released transaction
back on hold as long as it has not settled.
The hold and release mechanism can also be used by CSDs to operate some controls before
allowing transactions to settle (‘CSD hold’ functionality).
The hold/release mechanism will be offered by the ESES platform to both DCPs and ICPs, through
STP and screen channels.
When a party puts a matched instruction on hold before the settlement date, the counterparty is not
informed immediately by T2S, it will be notified by T2S only on the intended settlement date.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 33
5.1.3.2. Partialling
In the current context of ESES, there are two automated processes that aim to optimise settlement:
·
shaping process
·
partialling process
These processes are only available for CCP transactions (Settlement Connect) and SBI transactions,
with no opt out 21 possibility. A manual partialling process is offered for CCP transactions on the OTC
market, with an opt-out possibility.
The T2S platform will offer a ‘partial settlement’ solution that will replace the current ESES STP and
manual processes. It will apply to all eligible settlement instructions. No shaping process will be
available. Unlike on the ESES platform, this will be an optional service that will occur:
·
after the second sequence of the last night-time settlement cycle, with deactivation at the
close of the night-time settlement period and
·
during the day time settlement window:
◦ at 14:00, with deactivation at 14:15 and
◦ at 15:45 (15 minutes before the DVP cut-off time) with deactivation at 16:00.
For the instruction to be eligible for partial settlement, a number of conditions must be met:
·
both parties must have flagged the instruction as eligible for partial settlement or leave the
corresponding value in the instruction blank. This is done through the input of the Partial
Settlement Indicator:
◦ NPAR (not allowed)
◦ PART (allowed)
◦ PARC (allowed with cash threshold)
◦ PARQ (allowed with quantity threshold)
·
the instructions involving cash (DVP, DWP, PFOD) are subject to a default threshold in
cash, they must have a cash value of :
◦ over EUR 10,000 (or equivalent in foreign currency) for equity instructions or
◦ over EUR 100,000 (or equivalent) for debt instructions.
·
FOP instructions are subject to a quantity threshold which is the minimum settlement unit
and the settlement unit multiple of the underlying security defined in T2S securities
reference data
If they both agree, parties can use another value than default threshold (e.g. quantity in an instruction
involving cash).
The original instruction’s reference is kept as single linking reference for all partially settled siblings of
this original parent instruction.
Linked instructions and blocking settlement restrictions (5.1.3.5.) are not eligible for partialling.
Users can change the value on the partialling flag, unless the value has been set by the CSD.
Partial settlement will be accessible to DCPs and ICPs via STP and screen channels.
21
‘Opt out’ is the flexibility that allows a party to request that its instruction is not subject to partialling.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 34
5.1.3.3. Transaction linking
This is a new functionality for ESES participants.
The T2S platform will allow for the linking of instructions on a one-to-one, one-to-many or many-tomany basis. An instruction will be linked by means of a common reference and the sequence of
settlement determined by the use of a code indicating the sequence of settlement.
T2S foresees a number of linking options:
·
WITH: the linked instructions must settle simultaneously on an ‘all or none’ basis
·
AFTER and BEFO: the instruction will settle after/before the linked instruction
Instructions can also be linked by means of a common repo or pool reference (several settlement
instructions have the same pool reference and are settled in the WITH mode).
Note: Linked transactions are not eligible for partial settlement.
Transaction linking will be accessible to DCPs and ICPs via STP and screen channels. On
EuroclearConnect for Screens, the user will be able to see these links WITH, BEFORE, AFTER,
INFO and Pool reference in the view of each settlement instruction. Furthermore, the user will be able
to consult all the settlement instructions of a pool by selecting the Pool Reference in the selection
criteria screen.
5.1.3.4. Prioritisation
This is a new service for ESES participants.
The T2S platform allows the setting of priorities in settlement instructions.
T2S supports four level of priority:
1.
2.
3.
4.
Reserved priority - only for CSDs and NCBs
Top priority - provided by the CSD to CCPs or MTFs
High priority - available for participants
Normal priority - default priority
Note: corporate actions generated by the CSD have by default the highest priority in the overnight
settlement process based on their ISO transaction code CORP.
Users have access to priority levels 3 and 4. These levels can be amended throughout the life cycle
of the instruction, both before and after matching, but before final settlement.
For matched instructions, T2S determines the applicable level of priority based on the highest value
set on each settlement instruction. If no level of priority is indicated in the settlement instruction, T2S
allows the CSD to parameter in the static data, default values automatically taken into account
according to the data contained in the incoming settlement instruction (e.g.: instruction type, party
type, Transaction Code).
The priority is used as a means of sequencing instructions for settlement. When the priority is taken
into account, T2S gives the preference, among instruction in competition to use the same securities
position and/or cash balances, to the ones with the highest applicable level of priority.
If an additional choice has to be made between instructions with the same level of priority, T2S gives
the preference to the oldest ones based on their intended settlement date.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 35
During the night-time settlement period:
·
the T2S platform takes into the account the applicable level of priority for all settlement
instructions before any settlement attempt.
During the real-time settlement period:
·
T2S does not take into account the level of priority at the first settlement attempt.
·
T2S takes into account the applicable level of priority only for pending instructions during
the recycling and optimisation process
The user prioritisation mechanism will be accessible to DCPs and ICPs via STP and screen channels.
5.1.3.5. Others
The T2S platform offers a number of other instruction management tools. Some of them can only be
used at the initiative of the CSDs.
Realignment
Realignment is a specific mechanism that is set up on the T2S platform to allow smooth and efficient
cross-CSD processing. Upon receipt and matching of a cross-CSD instruction, the T2S platform will
generate realignments, to allow for the transfer of the relevant resources in the books of the various
CSDs that are involved in the cross-CSD instruction. Realignments only impacts CSDs and are not
visible to clients. For further details on cross-CSD processing, see section 5.1.5 of this White paper.
Conditional settlement
Conditional settlement (CoSD) is a process that allows a third party (the ‘administering party’, e.g.
CSD) to put an instruction on hold until an external condition is met. The administering party releases
the instruction, to enable its settlement when the external condition is met. An example of the use of
this functionality would be the settlement of a T2S transaction involving external CSDs or NCBs
(outside the T2S platform) or the processing of some corporate actions. The current assumption is
that such a feature will only be used by CSDs and should not impact participants. So far, the ESES
CSDs do not foresee to use this functionality.
Blocking, reservation and earmarking
These instructions, also known as ‘restriction case 3’ offer the ability to segregate balances within a
given sub-balance (blocked, reserved or earmarked balance) for specific purposes and with different
management rules for the balances in question.
To segregate such a balance the participant must:
·
send a specific FOP settlement instruction: ‘settlement restriction’ which moves securities
between sub-balances of the same account (available for blocking, reservation and
earmarking) or
·
send a standard already matched instruction (available only for earmarking22)
Given that so far there is no business usage foreseen in the ESES context for the blocking and
reservation features, these functionalities will not be offered. Earmarking will be offered using
standard already matched instructions. Hence the use of the type of instruction ‘settlement restriction’
is not foreseen.
22
Please note that in such a case, only one position type can be specified. By default, the position type of
the counterparty is always the deliverable balance.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 36
Blocking
Through this instruction, a position is made unavailable, for example, by the CSD, but the legal title
remains with the account holder. The CSD can unblock the balance and return the stock to the freely
available balance of the account holder. The current assumption is that ESES CSDS will not offer the
possibility to use blocking but only earmarking to segregate securities balances within a given
securities account.
Reservation
Through this instruction, balance is segregated for a specific purpose and can only be transferred to
another account for that given purpose. If the position in the account is insufficient, the reservation will
also apply to any new balance. The ESES CSDS will not offer this possibility.
Earmarking
Earmarking is similar to a reservation. The main difference is that earmarking cannot be automatically
extended to any new incoming balance. In the ESES context, earmarking will be used for example by
a participant to segregate balances eligible for auto-collateralisation purposes. :
·
by a participant, to segregate balances eligible for auto-collateralisation purposes or
·
by the CSD:
◦ for blocking securities in the context of corporate actions eligible events
◦ for blocking securities in the context of certification process (international securities)
◦ to segregate securities in the context of international deliveries outside T2S
Whether initiated by the CSD or a participant, eEarmarking instructions will be generated with
standard already matched instructions.
5.1.4. Liquidity management
The T2S platform will offer payment banks a number of tools and functionalities to manage or monitor
activity related to cash, such as:
·
liquidity transfers
·
limit management
·
end-of-day cash management
·
cash and blocking reservation
·
liquidity monitoring
·
auto-collateralisation
These processes are foreseen to be used in any currency that is supported in T2S (EUR only at the
start of T2S).
As a new feature for ESES participants, the T2S auto-collateralisation mechanism will be available
not only between NCBs and payments banks, but also between payments banks and their clients.
Note: ‘pure’ cash operations (involving DCAs only and not securities accounts; e.g. liquidity transfers)
are relevant for the contractual relationship between the ESES participant and its NCB. Nevertheless,
we will allow you to process most of these operations from ESES connectivity, so as to benefit from
service continuity and a single window for all your activity in T2S. To access these functionalities from
the ESES CSDs, you will be required to provide a Power of Attorney to the ESES CSD(s).
For ICPs, main cash related messages will be normally accessible in ISO15022 and ISO20022
formats. However, a number of messages will only be accessible in ISO 20022 format as they have
no equivalent in ISO15022. Please refer to Annexes 4 and 5.2 for the detailed list of messages.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 37
5.1.4.1. Liquidity transfers
T2S allows clients to manage liquidity transfers between different Dedicated Cash Accounts (DCA), or
between T2S DCA and RTGS accounts. Cash transfers are allowed between two DCAs, as long as
the accounts belong to the same payment bank or are linked to the same RTGS account. Unlike with
the current ESES CSD service, inbound and outbound cash transfers (‘liquin’ and ‘liquout’,
respectively) will be possible with any RTGS account in the RTGS payment system, of the relevant
currency. Nevertheless, each DCA is linked to a single RTGS account in the relevant payment bank
for the processing of end of day sweeps.
These liquidity transfers can be set for:
·
immediate processing (i.e. immediate liquidity transfers) or
·
future processing (i.e. pre-defined liquidity transfer orders and standing liquidity transfer
orders)
All transfers from a DCA account23 can be initiated by:
·
DCPs via ISO 20022-compliant T2S messages and via the T2S screen and
·
ICPs via ISO 15022- or 20022-compliant messages and for the immediate liquidity
transfers, via EuroclearConnect for Screens
As today, cash transfers from RTGS to DCA (i.e. inbound liquidity transfers) will have to be directly
instructed using facilities provided by the relevant central banks.
Concept of Credit Memorandum Balance
In T2S, a securities account is always linked to a T2S dedicated cash account via a Credit
Memorandum Balance (CMB). A Credit Memorandum Balance is a tool T2S uses to track the
provision of credit from Central Banks to payment banks (for central bank collateralisation) and from
payment banks to their clients.
A payment bank may authorise one or more of its clients to use the payment bank’s T2S dedicated
cash account for the settlement of their instructions. Each T2S dedicated cash account is linked to:
·
one CMB related to the payment bank holding the T2S dedicated cash account and
·
possibly, to one CMB for each client authorised to use payment bank's T2S dedicated cash
account for settlement of the cash leg of its settlement instructions
Figure 7: Outbound liquidity transfer configuration
23
This covers both outbound liquidity transfers and internal liquidity transfers.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 38
Figure 8: Internal liquidity transfer configuration
Figure 9: Inbound liquidity transfer configuration
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 39
The following table provides an overview of the gap analysis between current ESES and
T2S functions:
Service offer
Liquidity management
Current ESES functions
With T2S
Inbound liquidity transfer
•
•
Outbound liquidity transfer
•
•
Internal liquidity transfer
•
Types of transfers
Immediate liquidity transfer
•
Pre-defined liquidity transfer
Standing liquidity transfer
•
•
•24
•
Table 13: Liquidity management functionalities gap analysis
5.1.4.2. Limit management
In T2S, cash limits will be monitored by central banks and payment banks to ensure settlement can
be successfully achieved. The different limits that will be used are defined as follows:
Limit set by a central bank to a payment bank
·
Central bank auto-collateralisation limit – a limit set by a central bank to cap the intraday credit provided by a central bank to a payment bank that owns the T2S Dedicated
Cash Account.
Limits set by a payment bank to its client
·
External guarantee limit – a limit set by a payment bank, to cap the intra-day credit
provided to its clients and secured outside T2S before any client-collateralisation in T2S.
·
Client auto-collateralisation limit – a limit set by a payment bank, to cap the intra-day
credit provided to its clients and secured in T2S. This limit is used once the external
guarantee limit is fully used. It is limited to the capacity of the client to provide eligible
collateral in T2S. Similar to NCB process, it is achieved through a client-collateralisation
operation that is automatically generated by T2S during the provision check process.
·
Unsecured credit limit – a limit used to cap the intra-day credit provided by a payment
bank to its clients, and secured outside T2S. This limit is used once both the external
guarantee limit and the client collateralisation limit are fully used.
Note: an NCB or a payment bank can decide not to set an auto-collateralisation limit to a client, by
providing the maximal limit allowed by the system.
For each of these limit types, the ‘headroom’ limit is the remaining amount of available intra-day
credit. It is initialised at the limit amount at each start of day and updated by T2S as a result of the
settlement of an instruction or an update on the limit amount.
These limits are defined at the level of the Credit Memorandum Balances (CMB) linked to the
dedicated cash account. The payment bank may change limits of its client. The CMB can be linked to
one or several securities accounts.
24
Standing liquidity transfers are possible in ESES, but for inbound transfers only.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 40
NCBs and payment banks manage the limits through the following tools:
·
setting up of the initial limit
·
the modification of the limit
·
the consultation of the limit utilisation or limit headroom
This will be done either by directly using the communication tools offered by T2S. Via Indirect
Connectivity, ICPs will be able to send the updates of limits to the ESES CSDs via the ISO 20022
messages.
The following table provides an overview of the gap analysis between current ESES and T2S
functions.
Cash limits management
Current ESES
With T2S
Central bank auto-collateralisation limit
•
•
External guarantee limit
•
Client-auto-collateralisation limit
Unsecured credit limit
•
•
•
Table 14: Limit management functionalities gap analysis
5.1.4.3. End of day cash management
Just like today in the ESES CSDs, there will be several processes that will ensure that all the intraday credit instructions provided by a central bank, i.e. auto-collateralisation, are reimbursed by the
end of the day25 , and that all the cash remaining on DCA accounts is duly transferred to the relevant
RTGS accounts (the end-of-day mandatory cash sweep).
All of these operations will be automatically triggered and processed on the T2S platform. All these
operations will be reported to parties, either in ISO 20022 for those being DCP, either in ISO 15022 or
ISO 20022 for those being ICP. In particular, ICPs may view cash sweeps on the EuroclearConnect
for Screens.
5.1.4.4. Cash blocking and reservation
T2S offers the possibility to move an amount of cash in a specific cash balance within a T2S DCA
account, and make it available for specific purposes.
These are new concepts that are currently not available on the ESES platform. Therefore, parties will
have to use either:
·
‘settlement restriction’ transaction, to set up, increase or decrease a restricted cash balance
or
·
settlement instruction to use a restricted cash balance
It is foreseen that a cash settlement restriction service this service will be offered to ICPs (via ISO
15022- and 20022-compliant messages) or and DCPs (via ISO 20022-compliant messages).
5.1.4.5. Liquidity monitoring
The T2S platform offers parties a set of functions to monitor activity on their cash accounts or the
cash accounts of their clients.
These functions will primarily be related to:
·
notifications regarding the liquidity situation
25
For more information, see the section on auto-collateralisation.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 41
·
reports (e.g. statement of accounts)
·
queries (e.g. on cash balances or limits)
A subset of this information will be made available to ESES ICPs, via STP messages or
EuroclearConnect for Screens. In particular, payment banks purchasing power will also be displayed
on the screen. More information will be provided in the relevant ESES Detailed Service Description.
5.1.4.6. Auto-collateralisation
Generic framework
T2S offers central banks and payment banks (hereafter also referred to as ‘credit providers’) the
capacity to provide credit consumers with intra-day credit that is automatically secured in T2S with
eligible collateral. This capacity is achieved through the auto-collateralisation that is technically
available in all T2S settlement currencies.
The intra-day credit provided through auto-collateralisation by a central bank (hereafter also referred
to as ‘central bank collateralisation’) is intended to cover shortages of cash on the T2S dedicated
cash account managed in its books.
The intra-day credit provided through auto-collateralisation by a payment bank (hereafter also
referred to as ‘client-collateralisation’) is intended to cover insufficient external guarantee headroom
for its client.
In addition, the auto-collateralisation process allows automatic release of collateral and automatic
substitution in order to cover lack of securities.
If the auto-collateralised securities are needed for the settlement of a transaction, the T2S platform
will trigger a dynamic reimbursement and automatic substitution. Such substitution is triggered only if
the impacted securities position in a delivery instruction is ‘earmarked for auto-collateralisation’. When
a reimbursement instruction is submitted and sufficient cash is not available, then T2S platform will
trigger an automatic substitution
Auto-collateralisation mechanism
The mechanism on the T2S platform for auto-collateralisation uses both ‘on-flow’ and ‘on-stock’
collateralisation, and is demand driven. This is similar to the concepts that are used for autocollateralisation on the ESES platform today, except that this one is limited to central banks (no autocollateralisation between payment banks and payment bank clients).
The following table provides an overview of the gap analysis between current ESES and T2S
functions:
Service offer
Current ESES functions
With T2S
On-stock
•
•
On-flow
•
•
Demand driven
•
•
Central bank auto-collateralisation
Payment bank auto-collateralisation
On-stock
•
On-flow
•
Demand driven
•
Table 15: Auto-collateralisation functionalities gap analysis
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 42
Each central bank chooses one of the following methods of auto-collateralisation on the T2S platform:
·
Repo: the selected collateral is transferred against cash from the securities account where
it is held to a securities account of the credit provider
·
Pledge: the selected collateral is transferred from the securities account where it is held to
·
Sub-pledge: same as pledge, except that pledge account is managed as a restricted
a pledge account of the holder that can only be debited by the NCB
balance of the account of the holder
The only method available for payment banks (client auto-collateralisation) is Repo. As a reminder, on
the ESES platform, ‘Repo’ processing is used for the auto-collateralisation mechanism.
Generation and processing of auto-collateralisation settlement instructions will be based on
identification of:
·
the available collateral, including the relevant valuation
·
missing resources (i.e. lack of cash)
·
sufficient headroom capacity
The setting up of the cash accounts and the various parameters to be used for these processes must
be done directly on the T2S platform, by the NCBs or the parties (regardless of whether the parties
are DCPs or ICPs).
Reporting will be provided to all relevant parties upon settlement of the instruction, via ISO 15022- or
ISO 20022-compliant messages for ICPs, or ISO 20022-compliant messages for DCPs.
Impact of corporate actions
Just like today in the ESES CSDs, auto-collateralisation entries may also be generated to settle
corporate actions and market claims when these movements include cash. Unlike NCB autocollateralisation operations, client auto-collateralisation operations may be subject to market claims or
transformations when they are recycled overnight.
Reverse collateralisation mechanism
At the moment of the initial delivery of collateral to the credit provider, reverse collateral instructions
will be generated by the T2S platform, to ensure the intraday credit reimbursement. This instruction
will automatically be put on hold upon generation.
The payment bank26 will be able to release the reverse an instruction at any time during the day, to
process the reimbursement of the auto-collateralisation operation. The release can be instructed via
ISO 20022-compliant messages for DCPs and ISO 15022- or ISO 20022-compliant messages for
ICPs, as well as via the relevant screens.
In addition, the T2S platform can process an automated substitution during the day if the
collateralised securities are needed to settle a settlement instruction. The automated substitution will
be achieved by reimbursing the original auto-collateralisation instruction and setting up another autocollateralisation instruction using a different security as collateral.
If central bank reverse collateral instructions have not been released by the payment bank at the end
of the real-time settlement window, an automated release will be triggered by the T2S platform.
If a central bank reverse collateral instruction cannot be settled by the end of the operational day, a
specific mechanism will be set up to force the reimbursement.
26
Acting as a credit consumer in the case of central bank auto-collateralisation, or as a credit provider in
the case of payment bank auto-collateralisation.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 43
This mechanism will include:
·
liquidity rebalancing between relevant DCA accounts and
·
relocation of collateral if the above mentioned rebalancing is not sufficient (similar to current
ESES neutralisation process).
This is similar to the mandatory reimbursement that is currently processed on the ESES platform, the
sole difference being that there is additional liquidity rebalancing that is used on the T2S platform.
The following table provides an overview of the gap analysis between current ESES and T2S
functions:
Service offer
Current ESES functions
With T2S
Substitution
•
•
Intra-day optimisation/mandatory reimbursements
•
Intra-day reimbursement initiated by the payment bank
Not needed
•
End-of-day forced reimbursement
•
•
Central bank reverse collateral processing
Table 16: Reverse collateral functionalities gap analysis
Notes
·
Unlike the ESES CSDs, there will be no intra-day optimisation process that generates
reimbursements of outstanding auto-collateralisation instructions. Reimbursement is either
generated by the payment bank intra day or by T2S at the end of day mandatory process.
·
For client auto-collateralisation instructions, there is no end of day mandatory
reimbursement. Hence, these instructions can remain open overnight in the system. The
reverse collateralisation mechanism is initiated by the payment bank through release
instructions sent at its discretion.
·
Although NCB and client auto-collateralisations follow similar workflows, there is no linkage
or dependency between the two processes. In particular, the scope of securities can be
different.
How NCBs and payments banks establish the list and the value of securities they accept as
collateral?
T2S provides tools to NCBs and payments banks that allow them to configure in the T2S static
database the conditions they will apply to their clients:
·
auto-collateralisation rules:
◦ method: pledge, repo…(Payment banks can repo is only use the repo methodavailable for
payment banks)
◦ maximum credit percentage that the CB grants for collateralised securities (for NCB only)
◦ information whether the CB uses the above maximum credit percentage for calculation in
monetary policy operations (for NCB only)
·
the list of securities they accept for auto-collateralisation:
·
the securities valuation: daily price feed per a security eligible and per currency
·
close links: securities that cannot be used as collateral by a party (only open to NCBs)
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 44
The list of securities defined by NCBs represents the total or a subset of the pool of securities eligible
in the Euro system.
For client auto-collateralisation, the list is established by each payment bank according to its own
criteria and is not restricted to the ESCB eligible panel.
This information is transmitted to T2S via dedicated STP messages or via the T2S screen (except
auto-collateralisation rule, only through the T2S screen). Possible ICP access to these messages will
be defined later.
Auto-collateralisation with ESES CSDs
Currently, on ESES platform, the auto-collateralisation is only available in Euroclear France with
Banque de France acting as Credit provider. With T2S, this process can be extended to the 3 ESES
CSDs and the 3 NCBs. The following processes will be available for all ESES clients.
How will ESES clients flag their securities eligible for auto-collateralisation?
To indicate that its securities are eligible for auto-collateralisation, ESES participants will use the
following one or both of these two methods, which is are both valid for both NCBs and client autocollateralisation:
·
account earmarked for auto-collateralisation: the ESES client can request the CSD to
flag one securities account as eligible for auto-collateralisation on a permanent basis. This
information will be stored in the static data base. T2S will consider by default that all the
balance of the account can be used as collateral if conditions are met. This is a new
process for ESES participants.
Formatted: List Paragraph,List Paragraph 1
·
transfer to sub-balance (earmarked balance): the ESES client can transfer part of the
balance of an account to a sub-balance that will be eligible for auto-collateralisation. This
process is similar to current ESES process (transfer to ICPG 3). To generate this transfer,
the client will send an already matched instruction to debit the 'deliverable' balance (AWAS
or ICPG 0) and credit the 'auto-collateralisable' balance (EXXX or ICPG 3).
Rebalancing of assets flagged as auto-collateralisable
For our participants using the auto-collateralisation service (payment banks), we offer the possibility
to subscribe to an automatic rebalancing of their auto-collateralisable balances at the end-of-day
(EOD) and at the beginning of day (SBOD).
The service of Rebalancing of Earmaked for Auto-Collateralisation assets is used by participants who
are willing to use auto-collateralisation on an intra-day basis only and that do not wish, for legal
reasons, to keep auto-collaterallisable balances at EOD.
This is used in particular when a custodian is authorised to use the assets of its clients as collateral
on an intraday basis only. Participants can subscribe to EOD and SBOD rebalancing or to EOD only.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 45
The service operates as follows:
Step
What happens
1
at EOD, the ESES system transfers all collateralisable securities from status collateral indicator 3 (ICPG 3) to
collateral indicator 0 (ICPG 0)
2
at SBOD (overnight processing), ESES transfers all collateralisable holdings that were transferred the previous
day ,to status collateral indicator 0 to be assigned to collateral indicator 3 (the identical holdings)
In the context of T2S, this service will continue to be offered through the use of 'intra-day restriction'
concept as follows:
·
before the end of T2S operational day between (17:30-17:45 to 18:00), ESES will 'freeze'
the balances of the relevant accounts earmarked for auto-collateralisation and transfer
them to the deliverable balance
·
at SBOD, the ESES CSDs will return these holdings to the earmarked balance
In line with today's service, no STP settlement reporting will be sent to ICPs. However, as today, the
related transactions can be seen from EuroclearConnect for screens. DCPs will receive settlement
reporting in accordance with their subscriptions.
Other services
The following ESES services are not available in the standard T2S offer. Subject to market demand
and business case, we may assess the feasibility of replicating these services for ESES clients by
using T2S rule based model.
·
NDC 65: the ESES CSDs allow clients to reserve some securities to the exclusive use of
auto-collateralisation. This is done by transferring these securities to a specific account
nature (NDC65=. non-deliverable securities eligible for auto-collateralisation). This
functionality will be decommissioned
·
Intra-day reimbursement: the ESES CSDs performs an optimisation process several
times a day and before each sweep. This process attempts to reimburse the outstanding
auto-collateralisation transactions based on the available cash balance. In T2S, the
reimbursement is done only once at the end of the day. Following the request of the French
Treasurers Group (GTTPF), we are assessing a solution that would replicate similar
functionalities.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 46
5.1.5. Cross-CSD settlement
The T2S platform will allow transactions to settle on a Central Bank Money (CeBM) DVP basis
between participants of the various CSDs connected to T2S and in all T2S eligible currencies. From
the perspective of ESES participants, this service should offer a significant benefit, as, at present,
cross-border transactions settle in most cases on a free of payment basis.
In addition, it is expected that T2S will act as catalyst to remove barriers preventing settlement out of
an account outside the issuer CSD. We intend to offer our clients the full benefit of the T2S crossCSD settlement service to the furthest extent possible and on the largest range of securities.
The level of efficiency of cross-CSD settlement will depend on the level of harmonisation that will be
reached at the time of T2S and the future regulatory environment.
In this section, we describe:
·
the general processing of cross-CSD transactions
·
how we intend to use this facility for securities issued:
◦ primarily on the ESES platform (as issuer CSD)
◦ in other CSDs on the T2S platform (as investor CSD)
◦ in a CSD outside the T2S platform (as investor CSD)
General processing of cross-CSD transactions
In practice, the admission of a security in the link between two CSDs will require that both CSDs set
up this link on the T2S platform to activate cross-CSD settlement. Several options are offered by T2S
to CSDs to configure this process: ISIN per ISIN, automatic acceptance of all new securities,
automatic for selected countries of issuance...
On the T2S platform, cross-CSD instructions will have the same format and follow the same rules and
matching/settlement life cycle as intra-CSD transactions. Realignment transactions between CSDs
will be automatically generated by T2S, in a manner that is transparent to the client.
In specific areas, there will be some differences between cross-CSD and intra-CSD transactions:
·
cross-CSD transactions must be matched in the T2S matching engine before settlement (it
·
market claims and transformations related to cross-CSD transactions will need to be
will not be possible to send already matched transactions)
matched as described in section 7.1.2 – ‘Corporate actions on flow’
Figure 10: Cross-CSD settlement
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 47
ESES domestic securities (Belgian, Dutch and French assets)
Regarding ESES domestic securities, each ESES CSD will authorise non-ESES CSDs to operate on
a free of payment or DVP basis on its securities, to the extent that these CSDs have made the
necessary legal and technical arrangements to connect to the ESES platform (e.g. account opening).
Therefore, the actual use of this facility and its scope will depend only on the decision of the Investor
CSDs.
Non-ESES T2S securities
We intend to extend our offer as ‘Investor CSD’ beyond the current securities and market coverage
(ESCB eligible securities and foreign securities listed on NYSE-Euronext issued in CSDs outside the
ESES CSDs) and this up to all securities of CSDs joining T2S, as described in section 8.
To fully benefit from T2S and, in particular, allow cross-CSD settlement in CeBM, the ESES CSDs will
keep securities issued by other T2S CSDs exclusively through direct links. Therefore, all securities
currently held through Euroclear Bank relayed links will be migrated to the issuer CSD on or after the
T2S launch.
Non-T2S securities
We intend to keep securities that are issued outside T2S eligible on the ESES platform after the T2S
launch. For such securities, the ESES CSD of reference will keep its current link with Euroclear Bank
or the local CSD, as the case may be and will act within the framework of T2S as a technical issuer
CSD.
With this set up:
·
transfers outside T2S will continue to be processed on an free of payment basis as
described in section 5.1.6 below
·
transfers with ESES counterparties will continue to be operated on an free of payment or
DVP basis as is the case today
·
the ability to operate transfers (on an free of payment or DVP basis) with other T2S CSDs
depends on various criteria, such as the:
◦ decision of the other CSDs to accept these securities into their systems
◦ setup chosen by each CSD to hold these securities
◦ capacity to operate efficient realignments with the issuer CSD, if the two CSDs decide to
keep their link with the domestic market
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 48
5.1.6 Settlement with CSDs outside T2S
Scope
In the context of the ESES CSD migration to T2S, the current links with (I)CSDs located outside T2S
will remain available with the current scope of securities and current types of operations. The links
that would fall in this category are the following:
·
ESES CSDs link with Euroclear Bank:
◦ direct links for securities deposited with the ICSDs (such as Eurobonds)
◦ relayed links with non-T2S CSDs (e.g. DTCC, Euroclear UK & Ireland (UK securities)
·
ESES CSDs links with domestic markets:
◦ Euroclear France link with Morocco
◦ Euroclear France link with South Africa
Processing
As today, settlement with foreign CSDs counterparts will be available on free of payment basis only.
Since there is no T2S standard processing for cross-border settlement with CSDs outside T2S,
settlement with foreign counterparties can only be instructed in Indirect Connectivity Mode (ICP) via:
·
EuroclearConnect for Screens or
·
EuroclearConnect for STP in ISO 15022 or ISO 20022 messages.
EuroclearConnect for Screens or EuroclearConnect for STP (ISO 15022 or ISO20022 messages).
Current cross-border proprietary messages will be decommissioned.
To process the settlement, whether delivery or receipt, the ESES CSD will:
·
send already matched instructions to T2S
·
exchange the appropriate messages with the foreign (I)CSD
Cross-border matching for the Non-issued T2S securities will be performed in the issuer CSD.
Settlement will be reflected in T2S as an intra-CSD settlement (i.e. with no realignment between
CSDs).
The current ESES types of operations will remain and will be processed as follows:
International Delivery Order (('IDO') from ESES participant to counterpart at the foreign CSD)
·
the participant sends a FOP instruction (IDO) to the ESES CSD, in ISO 15022, ISO 20022
or through EuroclearConnect for Screens
·
the ESES CSD sends an already matched instruction to T2S to debit the deliverer and to
credit a CSD technical account representing the mirror balance of the ESES CSD
·
the ESES CSD will then instruct the foreign CSD to debit its omnibus account and credit the
foreign counterpart
Note: we intend to improve the processing of IDOs and relating reporting as follows:
When we receive the IDO, we will:
·
first debit the participant and report a provisional status (that the transaction has been sent
to the foreign CSD but waiting for matching / settlement confirmation from the foreign CSD).
·
Once we receive confirmation from the foreign CSD that the transaction is actually matched
and settled with the counterparty, we will report a final status to the ESES client.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 49
Formatted: List Paragraph,List Paragraph 1
we will:
first block the securities in an earmarked balance in the name of the deliverer to reflect the fact actual
transaction has not been matched yet in the issuer CSD and
we will debit the sub-balance of the participant and credit the ESES CSD mirror account once we
receive confirmation from the foreign CSD that actual transaction is matched and settled with the
counterparty
International Incoming Order ('IIO') from the counterpart at the foreign CSD to the ESES participant
·
the ESES CSD receives an instruction from the foreign CSD to credit an ESES participant
·
the ESES CSD sends an already matched instruction to T2S to debit its mirror account and
credit the ESES participant
·
the credit of securities is notified to the ESES participant in its settlement reporting
International Receipt Instructions ('IRI') sent by the ESES participant
In some cases, the ESES participant is required to send an International Receipt Instruction (IRI) that
will match with the delivery instruction sent by its counterpart with the foreign CSD. The ESES CSD
will only send the IIO when it receives confirmation that transaction is matched and settled with the
foreign CSD. This process will remain the same as today. The IRI is sent to the ESES CSD in ISO
format or through the screen.
Reporting
Standard settlement reporting will be sent by the ESES CSD or by T2S to clients according to their
profile (DCPs and ICPs) and their subscriptions.
5.2. Pre-settlement processes
The ESES CSDs manage processes and services other than bilateral matching that give rise to
settlement instructions. These processes can be related to various types of services, including:
·
processing of MTF and CCP feeds
·
trade confirmation services (SBI)
·
funds order routing platform services
Typically, these services are outside the scope of T2S. They do lead, however, at some point, to the
settlement of a transaction in T2S.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 50
Figure 11: Pre-settlement systems
5.2.1. MTFs and CCPs transactions
On the ESES platform, settlement of MTFs and CCPs transactions are offered through two distinct
services.
Service to Euronext regulated market CCP (LCH.Clearnet SA)
This service, known as Settlement Connect, consists of a daily feed of single-sided and irrevocable
instructions sent by the CCP to the three ESES CSDs before the overnight settlement. Following the
Continuous Net Settlement (CNS) process, fails are automatically cancelled at the close of business.
Related transactions are subject to an STP partialling and shaping process.
As part of this service, the ESES CSDs route to Euroclear Bank the transactions of the CCP with
counterparties in the ICSD. When relevant, they generate automatic realignments between the ESES
and Euroclear Bank accounts of the CCP.
Service for MTFs and CCPs on the OTC markets
Typically, this service is used today by EuroMTS trading platform and by LCH.Clearnet SA for the
settlement of MTF transactions (e.g. Broker Tech and MTS France).
MTFs and CCPs send both legs of a transaction to the SLAB matching system for matching.
Afterwards, settlement follows the standard ESES life cycle.
On the T2S platform, CCPs will need to maintain their existing contractual relationships with CSDs, to
manage their assets and transactions and to send settlement instructions on behalf of clients. T2S
should allow CCPs that settle today with multiple CSDs to generate pan-European settlement from
one CSD account (when the CSD in question offers an investor CSD service).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 51
CCPs will be able to send settlement instructions to T2S directly or indirectly (through a CSD)
provided they have received the appropriate powers of attorney from CSDs and the settlement
agents. The feed may consist of either:
·
to send already matched instructions for intra-CSD transactions
·
two legs of the transactions to match on the T2S platform, for cross-CSD transactions
CSDs may grant CCPs with privileges, to tailor the T2S settlement processes to their particular
needs, for example:
·
·
to send already matched instructions
to prevent their counterparties from amending settlement instructions (i.e. prevent them
from putting an instruction on hold, changing the priority or cancelling it)
·
to give the instruction a higher priority ranking than those accessible to other users
As there is no automatic cancellation process for fails, CCPs that operate on a CNS basis will be
required to cancel any outstanding instructions at the end of each day, to include the instructions into
the next day’s settlement.
The final set up of existing ESES services to MTFs and CCPs is not yet defined and will depend on:
·
decisions to be made by each infrastructure on how it will connect to T2S
·
ongoing or future discussions with us on the best way to adapt each existing feed
In the context of T2S, we will offer MTFs and CCPs (regardless of whether or not they are already
connected to the ESES platform) an opportunity to connect to T2S using ESES services and
connectivity and to access, from ESES platform, a maximum number of counterparties in the various
CSDs joining T2S.
5.2.2. Trade confirmation – SBI
SBI is the trade confirmation system used by brokers in the three ESES CSDs to confirm the
execution of trades to custodians acting on behalf of their retail or institutional clients. Once approved
by the custodians, the SBI transaction notices are sent to the ESES settlement platform as
irrevocable instructions that settle in the accounts of the SBI parties or the accounts of their agents.
SBI transactions are subject to ESES shaping and partialling process.
The T2S platform will not offer a trade-confirmation facility. Therefore, in the context of T2S, We
intend to keep SBI as it is and the service will remain accessible via indirect connectivity in proprietary
messages. We will create a link between SBI and the T2S platform to generate settlement. At the
close of each day, SBI will send already matched instructions for confirmed trades that will settle on
the T2S platform.
To ensure service continuity, SBI generated settlement instructions will have a partial indicator at
‘Yes’, while allowing ICPs or DCPs to amend these instructions.
New feature
Users will be able to hold/release SBI generated settlement instructions in T2S.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 52
Figure 12: Connecting SBI to T2S
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 53
5.2.3. Funds order routing
The funds order routing platform allows full STP management of subscription and redemption orders
for funds. Through this platform, the fund distributor (or its custodian) sends orders to the transfer
agent of the fund. Once the order is executed, the transfer agent sends an execution notice to the
order giver. If one or both counterparties have chosen the settlement generation option, the platform
sends one leg or the two legs of the instruction to the SLAB matching system, between the quasi
issuance account of the transfer agent (Account Nature 62) and the distributor account. Currently, this
service is only available in Euroclear France.
In the context of T2S, we intend to keep the funds platform as it is. The service will remain accessible
via indirect connectivity. We will create a link between the funds order routing platform and the T2S
platform. The ESES platform will generate instructions to match onto T2S matching engine.
Figure 13: Connecting funds order routing platform to the T2S platform
In terms of connectivity, the current interfaces and message formats for the funds order routing
platform will be maintained. Orders can be sent via:
·
ISO 20022-compliant messages via Euroclear Connect for STP or
·
the funds screen
Reporting on settlement instructions initiated by the funds order routing platform will be managed via
the standard T2S settlement reporting means (i.e. via ISO 15022- and ISO 20022-compliant
messages for ICPs, and ISO 20022-compliant messages for DCPs).
For further information on funds issuance process, please refer to section 5.3.3.
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5.3. Issuance and primary market settlement
Issuance and Primary market settlement of securities on the ESES platform follow various processes
that depend on the type of security, their form and their legal environment. In general, the issuance of
securities follows several steps, each of which will be processed differently by T2S.
Code allocation and creation of securities data
These services are outside the scope of T2S. They will continue to be offered by the ESES CSDs via
indirect connectivity. Once a security is created on the ESES platform, the relevant T2S data
(including MSAs) are sent to the T2S platform in STP mode and the security is created on the T2S
platform. This can be done in real time. The CSD may create in T2S a number of management rules
called Market Specific Restriction Types (MSRTs) that will allow the T2S platform to process
additional validation checks on settlement instructions to ensure that they comply with, for example,
the legal nature of the security (e.g. bearer, registered).
Issuance
The T2S platform allows for the issuance of new securities through the management of accounts with
negative balance. Such accounts can be created in the name of the CSD, or in the name of a party
(e.g. issuer agent). The rules and parties authorised to use such debit accounts are defined and
processed by the CSD. The ability or inability to generate issuance via direct connectivity depends on
the legal nature of the instruments and are addressed in greater detail below.
Primary market settlement
As long as it is not associated with the creation from the two steps addressed above, primary market
settlement follows the standard processes and life cycle.
In this section, we will address how we anticipate the issuance and primary settlement processes for
each of the methods used on the ESES platform.
·
Standard securities
·
French money market instruments (TCNs)
·
Funds
·
Warrants issuance (Plug & Clear)
Figure 14: Security issuance process
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 55
5.3.1. Standard securities
In the three ESES CSDs, equities, bonds and funds are typically set up by the operations team of the
issuer CSD on receipt of the related information from the issuer or its agent (e.g. ‘Accounting letter’ or
global certificate). For these securities, the interaction between the issuers (or their agents) and the
CSDs is not automated. The issue is created by the ESES CSD and securities are credited on the
account of the issuer agent.
The same process will continue on the T2S platform and therefore, issuance of these securities will
be accessible only via indirect connectivity. Once the security is codified and created on both the
ESES and T2S databases, the ESES CSD will issue the securities out of its T2S issuance account for
the credit of the issuer or issuer agent.
5.3.2. French money market instruments
Issuing and Paying agents (IPAs) of French money-market instruments (TCNs) benefit from a full
STP process that allows them to generate the code allocation, the issuance and the distribution of the
securities, in real time.
The IPA has several options in the issuance process, from handling each of the various steps
separately, to using a single instruction to combine all steps of the issuance. For these instruments,
the issuance account is handled and is in the name of the IPA (account nature 92).
In the context of T2S, Euroclear France will create a dedicated issuance account in the name of the
IPA, which will be accessible to either ICPs or DCPs. Specific rules will be set up by the ESES CSD
to ensure that only the IPA is authorised to use this account for the relevant ISIN. Just like today in
the ESES CSDs, to ease reconciliation, issuance instructions for money-market instruments will bear
the appropriate ISO transaction code. We will check the consistency between the ISO transaction
code and the account nature used by the issuing agent.
As shown in the following table, operations including codification will only be feasible for ICPs.
TCN
Single codification
ICP
•
DCP
Codification/Issuance
•
Codification/Placement
•
Single issuance
•
•
Issuance placement
•
•
Placement
•
•
Table 17: Connectivity for TCN issuance
In terms of connectivity, all specific TCN messages (e.g. codification and valorisation) exist only in
proprietary format. This will be maintained on the T2S platform.
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5.3.3. Funds issuance
For funds eligible on the ESES platform, the code allocation request and the initial balance creation
are handled manually through the standard issuance process (see section 5.3.1).
For French funds, once they are created, the transfer agent has the ability to increase or decrease
the issue amount based on subscriptions and redemption orders, through the use of a quasi issuance
account (account nature 62) opened in its name. These mark up and mark down operations can be
operated on a free of payment basis or a DVP basis (to deliver/receive the securities simultaneously
to/from the distributor).
Figure 15: Funds issuance in a T2S environment
In the context of T2S, this process will be maintained. Euroclear France will create a dedicated quasi
issuance account in the name of the transfer agent that will be accessible either for ICPs or DCPs,
and that can have a negative or positive balance.
Specific rules will be set up by Euroclear France to check that only the transfer agent is authorised to
use this account for the relevant ISIN. Just like today in the ESES CSDs, to ease reconciliation, the
settlement of funds subscription and redemptions will bear the appropriate ISO transaction codes. We
will check the consistency between the ISO transaction code and the account nature of the
centralising agent used in the debit or the credit.
Processing of foreign funds
For foreign funds eligible in Euroclear France, a local French centralising agent is appointed. They
are in charge of centralising the subscription and repurchase operations and updating the issue
account in Euroclear France through the use of a quasi issuance account (account nature 62) opened
in its name.
In the context of T2S, this process will also be maintained. Euroclear France will create a dedicated
quasi issuance account in the name of the local centralising agent that will be accessible either for
ICPs or DCPs, and that can have a negative or positive balance. We will apply the same controls as
described above.
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5.3.4. Warrants & certificates issuance (Plug & Clear service)
Warrants and certificates that are eligible on the ESES platform can be issued using an STP process,
Plug & Clear, which allows the issuing agent to request the code allocation and the issuance of the
securities through a single file. The issuing agent can also use the same file to request that the
security is made eligible in Euroclear Bank and listed on Euronext.
Figure 16: Processing of Plug Files in a T2S environment
The service will continue to be offered in the same manner on the T2S platform. After receipt of the
Plug file and code allocation, the ESES CSD will create the securities out of its T2S issuance account
for the credit of the warrant agent.
Plug messages have been specifically designed for warrants & certificates activity on the ESES
platform and have no ISO equivalent. The service will only be accessible via indirect connectivity.
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5.4. Settlement of registered securities
No functionality specifically designed for the processing of registered securities is foreseen on the
T2S platform. However, the T2S platform offers a number of tools that will be used by ESES CSDs to
maintain their existing services.
On the ESES platform, there are two specific processes designed for the settlement of registered
securities, and we play a role in the registration process:
·
French BRN process
·
Belgian BRS process
The following sections describe how we see the adaptation of these processes on the T2S platform.
5.4.1. French registered securities (BRN)
For French registered securities, the issuer is informed of any transfer of securities through a specific
BRN message sent by the custodian, which specifies details of new/old beneficial owners and the
type of transfer (e.g. sale, portfolio transfer or inheritance).
These registration details are sent to the issuer as a separate flow from to the settlement instructionof
transaction. Euroclear France monitors this exchange of information and ensures the reconciliation
between settlement instructions and BRNs through the Ancillary Accounting system, according to the
following flows:
·
the custodian presents the BRNs to Euroclear France
·
Euroclear France sends the BRN to the issuer
·
the issuer accepts or rejects the registration and sends back his answer to Euroclear
France
·
Euroclear France returns the BRN to the custodian
As there are numerous validation rules associated, clients must hold French registered securities in
(a) specific account nature(s) (e.g. NDC 001 and 010).
For French registered securities, all account holders in Euroclear France will have to open a specific
account that replicates the features of the registered account natures. As today, this obligation will
apply also to the investor CSDs.
Foreign custodians or CSDs can choose a specific status (e.g. Registered Intermediary 'Intermédiaire
Inscrit'), which allows them to send BRN in their name, without specifying the underlying investor, as
long as it is a not a French resident.
Several events concerning French registered securities can generate settlement processing within
T2S platform (e.g. Stock exchange trade, OTC transfer, Conversion…). The type of event must be
identified according to the Code Type Operation (CTO). DCPs and ICPs will have to populate (in a
manner that will be specified in future ESES Detailed Service Descriptions) the code type of operation
within DVP or FOP settlement instructions.
In the context of the adaptation of this process to T2S platform, we will replicate a number of current
controls:
·
compatibility between account nature and type of participant
·
compatibility between account nature and legal form of the securities
·
debited/credited account compatibility between NDC 000 (bearer form) and NDC 001
(administered registered form)
·
ESES account manager control for NDC 009 (pure registered securities)
·
CTO controls
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In addition, for free of payment operations on French registered securities, the custodian must
populate the Code Type of Operation (CTO), which identifies the underlying type of transfer.
The adaptation of this process for the T2S platform will have the following impact:
·
for French registered securities, all account holders in Euroclear France will have to open a
specific account that replicates the features of the registered account natures. As today,
this obligation will apply also to the investor CSDs. Euroclear France will replicate all
related validations rules on the T2S platform, through the use of MSRTs and by attaching
MSAs to related securities and parties
tThe BRN flows will remain the same. Such messages will continue to be sent to Euroclear France via
indirect connectivity. Euroclear France will ensure the Ancillary Accounting reconciliation through the
receipt of daily reports on registered securities from the T2S platform, and comparing the reports with
BRN registration details received
Figure 17: Processing of French registered shares on T2S platform
·
in free of payment operations, DCPs and ICPs will have to populate (in a manner that will
be specified in future ESES Detailed Service Descriptions) the code type of operation
Figure 18: French registered shares lifecycle on T2S platform
In terms of connectivity, BRNs will continue to be routed via current proprietary formats and channels
(EuroclearConnect for STP and EuroclearConnect for screen). Related settlement will follow standard
T2S rules.
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The corporate action process for French registered securities will be maintained as it is today. We will
use specific account natures, to ‘block securities due to corporate action waiting for registration’.
5.4.2. Belgian registered shares
BRS service ('Belgian registered shares') is the name of the service operated by Euroclear Belgium
for the settlement and custody of Belgian registered securities that are listed on Euronext Brussels.
Belgian registered securities are specific in that, with the exception of stock-exchange transactions,
securities transfers are booked outside the ESES platform in the issuer register, after approval by the
issuer. However, a specific process exists for stock-exchange transactions received from
LCH.Clearnet SA:
·
these transactions settle on a gross basis, without CCP guarantee
·
when received on the ESES platform, they are put on hold until Euroclear Belgium has
verified the ‘selling power’ and the ‘buying power’ documents of the counterparties and
updated the issuer register
With T2S, the process will be slightly different, as the ESES platform will automatically instruct T2S:
1. one1 DVP (Delivery Versus Payment) transaction with a link AFTER to two free of payment
instructions (FOP)
2. two FOP (Free of Payment) instructions in status CSD Hold that are already matched and
sent by the ESES platform to T2S (to be then released). Euroclear Belgium validates the
consistency between the ‘Selling Power’ document and the trade leg seller, as identified by
the LCH.Clearnet reference. If the checks are OK, our Operations team releases the
already matched FOP instructions
3. the settlement of the two FOP instructions will allow for the DVP settlement.
Figure 19: Connecting BRS system to T2S
In the context of T2S, regarding CCP transactions, Euroclear Belgium will use T2S facility called
‘validation/hold’, which allows the CSD to release the instructions for settlement only after internal
verifications. Therefore, Euroclear Belgium will send BRS related transactions to the T2S platform
with a ‘CSD hold’ status. Upon the confirmation that all checks have been performed successfully,
Euroclear Belgium will release the instructions to settle.
For all the other transactions, with regard the interaction between Euroclear Belgium and the issuer,
the processes will take place as they do today. This should have no impact on the client.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 61
5.5. Other settlement related processes
5.5.1. Physical securities
The dematerialisation of securities in France, Belgium and the Netherlands is almost complete.
Therefore, the topic might not be relevant at the launch of T2S.
Physical settlement will only be possible using the CSDs’ existing infrastructure, and instructions can
only be sent via indirect connectivity. These instructions will be identified using the proper ISO
transaction type.
On the ESES platform, the deposit process takes the form of deliveries of securities into a vault
managed by a CSD, for safekeeping. After checking the validity of securities, the CSD credits the
securities by debiting its quasi issuance account and crediting the account of the deliverer. The same
process will be used on the T2S platform, with the CSD sending an already matched instruction to the
T2S platform, to credit the client.
Securities withdrawals currently take the form of a paper instruction sent to the ESES CSD of
reference. Once the securities are withdrawn, the CSD debits its client and credits its quasi issuance
account. The same process will be used on the T2S platform, with the CSD sending an already
matched instruction to the T2S platform, to debit the client.
5.5.2. ISIN conversion (‘transfert valeurs’)
The ISIN conversion service is an ESES service that allows a party to convert a certain number of
securities from one ISIN to another ISIN that is linked to it. This service is primarily used in the
following cases:
·
conversion of non-tradable securities (e.g. loyalty premium shares, shares reserved for
certain categories of investors such as employees) into tradable securities
·
operations of the reconstitution of government debt (see section 5.5.3).
With this service, we automatically update the issuing accounts of the original security and the
targeted security. ISIN conversion is accessible via the EuroclearConnect workstation or via a free of
payment STP message (proprietary or ISO-compliant, using a dedicated movement type).
In the context of T2S, this service will continue to be offered via indirect connectivity, via
EuroclearConnect and ISO compliant messages. Following the receipt of the client instruction, the
ESES CSD will generate appropriate already matched instructions on the T2S platform, to transfer
the securities and update the related issuing accounts. Settlement reporting will be sent to the ESES
participant, according to its profile (via direct or indirect connectivity).
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5.5.3. Stripping and reconstitution of government debt
Stripping and reconstitution of debt is a service offered by Euroclear France to primary dealers of
French government securities (Spécialistes en Valeurs du Trésor (SVTs)). The service allows primary
dealers to transform an amount of French Government bonds (OATs) into fungible strips. The service
also allows the primary dealer to reconstitute the original security from underlying fungible strips. With
this service, the issuing accounts of the bonds and of the fungible strips are automatically increased
or decreased by Euroclear France. Stripping is accessible via the EuroclearConnect workstation.
Reconstitution is accessible via the ISIN conversion instruction or ‘Transfert valeurs’ (described in
section 5.5.2).
In the context of T2S, this service will continue to be offered via indirect connectivity only, through the
same tools and messages formats that exist today. Following the receipt of the SVT stripping or
reconstitution instruction, Euroclear France will generate appropriate already matched instructions on
the T2S platform, to transfer the securities and update the related issuing accounts. Settlement
reporting following these instructions will be sent to the primary dealer, according to its profile (via
direct or indirect connectivity).
5.5.4. Dedicated ESES offer for free of payment without matching
In accordance with market practice in France, client portfolio transfers between custodians are
operated via free of payment transfers without matching, sent by the original custodian. Specific fields
in the free of payment message allow the receiver to identify the reference of the client and the
portfolio valuation on an STP basis.
The T2S platform does not allow the use of dumps with external accounts. Therefore, the French
market has requested that Euroclear propose a dedicated solution to generate free of payment
transfers without matching on the T2S platform. The following solution will be implemented:
1.
2.
3.
4.
5.
6.
·
the custodian to be debited sends a free of payment instruction without matching, with a
specific format, to the ESES CSDs in favor of participant B
we verify that both the party and the counterparty have subscribed to the service
if both parties have subscribed to the service, we will send an already matched instruction to
T2S platform for settlement, on behalf of participant A and participant B
T2S settles the transaction. Participant A is debited and participant B is credited in T2S
platform
T2S platform sends the reporting to the ESES CSDs
we send the reporting to participant A and participant B (including, for example, portfolio
transfer details)
the custodian to be debited sends a free of payment instruction without matching to ESES
platform
·
we verify that both counterparties have subscribed to the service
·
if both counterparties have subscribed to the service, we will send already matched
instructions between the two parties to the T2S platform
·
T2S settles the transaction
The solution will apply only via indirect connectivity, and only between counterparties who have
subscribed to the service. Although requested primarily for portfolio transfers, the solution can be
used for any type of free of payment transfer.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 63
Figure 20: Processing of FOP instructions without matching via ESES
5.5.5. Bilateral repos
Following the decommissioning of the SLAB matching system, the ESES repo service (Pensions
Livrées) will no longer be offered on the T2S platform. This service allows two counterparties to match
their transactions, with subsequent STP generation of near leg and far leg and, for certain rates, the
automatic calculation and payment of interests.
Following market consultation, we have proposed the use of the ESES Central Bank Money triparty
collateral management services as an alternativeWe have consulted the AFTI Taux working group,
(representing current users of the service) to analyse the available alternatives. . This offere working
group has considered that the ESES CeBM triparty collateral management service could, under
certain conditions, be a valuable alternative:
·
it is a comprehensive STP solution that matches already most of current ‘Pensions Livrées’
features (matching, automatic redemption)
·
it includes the option for counterparties to select a single ISIN as collateral (so called
'Manual mode’)
However, enhancements are needed for the service to fill the gap with the current ‘Pension Livrée’
service (especially, market claims regularisation and automatic EONIA rate calculation).
We are currently assessing the feasibility of developments requested by the users and plan to revert
to the AFTI in Q2 2013.
5.5.6. Automatic balance transfers
The ESES CSDs currently offers a service allowing an automatic transfer of balances between two
accounts. This service is used in the following situations:
·
transfer of portfolio: when a participant transfers all its holdings to another account (e.g.
closure, merger, change of custodian)
·
'Domiciliation' transfer: when an issuer appoints another IPA for its Money-Market
Instruments (MMIs)
When requested, this process is generated at the start of the overnight process, before the execution
of corporate actions.
This service will be replicated in the context of T2S. The ESES CSDs will send already matched
instructions to generate the transfer. To keep the current level of priority for these instructions, these
will be sent with a transaction type code set to CORP.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 64
Reporting
For DCPs, the settlement reporting will follow the parameters set by the participant for its CORP
instructions. ICPs will have the possibility to filter the settlement reporting for these transactions.
No custody messages (MT 56X) will be generated.
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6. ESES Central Bank Money triparty service
The ESES Central Bank Money (CeBM) Triparty Collateral management service is a comprehensive
solution that allows parties to process their collateral operations on an STP basis, for the following
operations:
·
monetary policy with the NCB
·
bilateral financing
·
operations with CCPs (for CCP cleared operations fed by MTFs)
The Interoperability service launched in 2013 allows ESES clients to operate with counterparties in
Euroclear Bank on an extended scope of foreign collateral.Further developments will be implemented
in 2013:
extension of the scope of foreign collateral eligible in the ESES CSDs
launch of the Interoperability project allowing ESES clients to operate with counterparties in Euroclear
Bank
service extension to on-market operations cleared by CCPs
Figure 21: Overview of CeBM service
6.1 General description of the service
The ESES triparty service is built on the same collateral management infrastructure as Euroclear
Bank’s service, which is linked to the settlement process of the ESES platform. This service covers
the following functions:
·
deal matching
·
automatic screening and selection of collateral
·
settlement (DVP), margin calls and substitutions
·
valuation through daily mark-to-market
·
comprehensive reporting
All transactions that are generated by the Collateral Management System (CMS) take the form of
single- or multiple-standard free of payment or DVP instructions that are sent to ESES settlement.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 66
Eligibility criteria
The collateral management service enables collateral givers and collateral takers to enter into
collateral management transactions using pre-defined baskets of eligible securities. These baskets
are defined and implemented in the Euroclear CMS based on the requirements of the market, or on a
bilateral basis, while remaining within the spectrum of eligible securities
Collateral baskets can be built based on various types of eligibility criteria, amongst which:
·
instrument type
·
rate type: fixed rate, variable or zero coupon
·
maximum remaining time to maturity
·
market type: domestic, i.e. issued in the domestic market, versus International or Foreign
(launched by a foreign borrower in a domestic market) or global ( one or more domestic
markets and the international market)
·
quotation age
·
rating: based on Issuer and security rating
·
issuer type
Haircuts
On top of haircuts as specifically defined by the ESCB in the context of its credit operations, haircuts
levels can be applied in a very flexible way, across all eligible securities and specific haircut levels
can also be applied to specific subsets of eligible securities.
In the context of the triparty service with the NCB, the haircuts and prices of the Eurosystem apply to
the standardised basket of ESCB eligible securities.
Concentration limits
Concentration limits can be applied in a very flexible way, across all eligible securities but specific
concentration limits can also be applied to specific subsets of eligible securities. Concentration limits
are applied in percentage.
One unique basket for Eurosystem credit operations
We have created one basket of securities eligible for Eurosystem credit operations. This basket is
made of ESCB eligible securities and the haircuts of the Eurosystem apply.
Eurosystem Credit Operations
As a credit institution, you can obtain Central Bank credit from your NCB. To do so, you need to first
deliver NCB-eligible collateral free of payment into the collateral account of your NCB.
Now, you will be able to deliver such collateral by using the ESES collateral management services
provided:
·
your NCB has an ESES account for the deposit of collateral and has agreed to use Triparty
services
·
you send or input collateral management transactions on the ESES platform to deliver
collateral from your ESES securities account to the NCB collateral account, allowing your
NCB to perform the provision of cash in your TARGET2 account
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Bilateral OTC transactions
As a credit institution, you can manage your collateral for your repurchase transactions by using the
ESES collateral management services provided:
·
your counterparty has an ESES account and has agreed to use Triparty services
·
you send or input collateral management transactions on the ESES platform to deliver
collateral from your ESES securities account to your counterparty securities account on a
DVP basis.
Settlement will take place in T2S.
Interoperability
Interoperability service will use the cross-CSD functionality to settle the transactions between ESES
CSD and Euroclear Bank Participants.
6.2 How will the service interact with T2S?
The Triparty collateral management service is not within the scope of T2S. Therefore, the service will
only be accessible to ICPs. In the T2S platform, the same workflows as today will be maintained:
·
when relevant, the ESES platform will dialogue with T2S to identify the available balances
of the collateral givers and the settlement status of their pending transactions, so as to
evaluate the available pool of collateral that can be used in the CMS transactions
·
to settle CMS transactions, the ESES platform will send to T2S DVP or FOP instructions
between the Collateral Givers and the Collateral Takers:
- already matched instructions (intra-CSD ESES) or
- instructions to be matched (cross- CSD settlement to operate with a Euroclear Bank
counterparties on non-ESES securities)
Account structure
We will maintain the current options that are available to the participants to identify the balances that
can be used as collateral by the ESES triparty system.
As today, the participant can decide to:
·
have its accounts flagged as auto-collateralisable also eligible for ESES triparty or
·
have an account dedicated to the triparty activity solely
In the first case, the participant will have the choice to manage the auto-collateralisation usage as a
sub-position of the participant account (earmarked balance). either:
as a sub-position of the participant account (earmarked balance)
as a static parameter of the participant account (account earmarked for auto-collateralisation)
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 68
Figure 22: Interactions of the ESES Triparty Collateral Management System with T2S
Connectivity
Access to the CMS will only be available in ICP mode, using current ISO15022 messages.
Regarding settlement, we will flag all instructions sent to T2S with the appropriate ISO transaction
code ‘TRPO’ for opening and ‘TRVO’ for closing..
Depending on the configuration of the participant, settlement reporting will be sent either:
·
by the T2S platform in ISO 20022 format
·
by the ESES platform in ISO 15022 or ISO 20022
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 69
7. Corporate actions and issuer services
7.1. Corporate actions
The processing of corporate actions, both for on stock and on flows will continue to be processed on
the ESES platform. However, as securities and cash balances (resulting from settlement or required
for settlement purposes) are held on the T2S platform, any debit or credit in securities and/or cash
resulting from corporate actions will be processed on the T2S platform. Therefore, the corporate
actions module on the ESES platform will interact with the T2S platform for the correct processing of
corporate actions on the securities they hold on behalf of their clients.
In accordance with the results of harmonisation thus far, corporate actions should be processed and
settled on the T2S platform, according to both T2S Corporate Actions Subgroup (CASG) and
Corporate Action Joint Working Group (CAJWG) standards. These standards impact both corporate
actions on balances and corporate actions on transactions, especially market claims and
transformations.
We assume the following:
·
at the launch of the T2S platform, and in line with the harmonisation calendar agreed upon
by the MIGs (Market Implementation Groups) of Belgium, France and the Netherlands,
most of CAJWG standards will be in place in the three markets, especially with regard to:
◦ key dates and their sequence
◦ use of custody ISO messages
◦ use of STP election services
◦ implementation of the top-down method, including ratio and fractions management
·
current ESES market claims and transformation processing will evolve towards CASG
standards at the start of T2S. These standards will be available for testing at the start of
T2S testing period, as recommended by the CASG
7.1.1. Corporate actions on stocks
This section describes how the ESES platform will interact with the T2S platform, to continue to offer
efficient and cost effective corporate action services.
7.1.1.1. Notification and entitlement advices
In the framework of T2S, corporate action announcements and entitlements will be provided by the
ESES platform, according to the same calendar that is currently used.
·
Most of the time 25 business days before the payment date for fixed income, assuming that
relevant information is available from the issuer (or its agent).
·
As soon as the information is available for other types of corporate actions, for original
announcements.
·
At the close of the record date, for entitlements.
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Original announcements will be generated on the ESES platform, based on the last balances
received from the T2S platform (either end-of-day balances or the last available extract). Additional
announcements, currently sent in real time by the ESES platform, will now be offered on an hourly
basis, as from the close of the T2S overnight window.
Additional services related to announcements on instructions, which should be implemented on the
ESES platform before the launch of the T2S platform, will also be adapted according to the same
rules and frequency (i.e. hourly detection of the transactions that should lead to announcement).
Pre-advice entitlements and pre-entitlements and entitlements will be based on the balances
retrieved from the T2S platform.
This information will only be provided in indirect connectivity mode in ISO 15022-compliant corporate
actions messages.
7.1.1.2. Corporate action processing
This section describes the changes that will arise from T2S implementation, primarily focusing on
client impact.
Scope of corporate actions
The scope of corporate actions that will be offered on the T2S platform will be the same as what
exists today in the ESES CSDs, with the exception of classical payment, which will be phased out27.
These corporate actions will be processed according to the investor CSD model, whereby each CSD
will be in charge of processing corporate actions for its own clients, regardless of whether or not it is
the issuer CSD of the security. This is consistent with current ESES model.
Corporate actions processing – generic framework
The ESES platform will generate instructions that will be used to settle corporate actions movements
on the T2S platform.
This will be based on the:
·
corporate action details received by the ESES CSD and keyed-in in the ESES Corporate
Actions securities database, either from the issuer (or its agent) or a foreign (I)CSD, before
the corporate action (including the extensive set of dates to be used for processing)
·
end-of-day balances retrieved from the T2S platform
The ESES platform will process corporate actions for all account holders, regardless of whether they
are directly or indirectly connected.
Once created by the ESES platform, the instructions to be used for corporate action processing will
be sent as already matched instructions to the T2S platform for settlement. The matched instructions
will be identified by a specific ISO transaction type code (‘CORP’) that will enable clear identification
of them on the T2S platform. The instructions will also carry on some corporate action information,
such as the unique Corporate Action reference assigned by the issuer CSD (COAF), to facilitate
reconciliation by the client.
Subject to ongoing detailed analysis, some changes might be needed in current accounting schemes
or the account structure used to process corporate actions. However, the impact on current ESES
clients should remain limited.
27
The ESES Standing Instructions service offer will also be discontinued.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 71
It is assumed that the use of pivot/offset accounts between the SPA (System Paying Agent) and the
account holders for both distributions and reorganisations will be maintained.
Further information will be provided in the relevant ESES Detailed Service Descriptions.
Figure 23: Corporate action processing – generic framework
Mandatory cash distributions
Direct payment
Currently, two procedures are used:
·
green light process
·
specific process for French government debt
Green light procedure
For the processing of mandatory cash distributions (e.g. income payments), the issuer (or its agent)
or the ESES CSD of reference will continue to play the role of SPA, under the same conditions that
exist today. The direct payment release mechanism ('green light') offered to the SPA will be
maintained. It will be accessible only via indirect connectivity. At the end of the record date, the ESES
CSD will send already matched payments free of delivery instructions (‘cash only’) to T2S with a CSD
hold status to debit the SPA and credit the account holders. These instructions will remain 'on hold'
until the SPA sends its 'green light', at which point the ESES CSD will release the instructions to
generate the payments.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 72
The cash proceeds will be credited on the default DCA associated with each account, by the account
holders. However, as a new feature, ESES clients, including the SPA will be able to specify a
dedicated DCA to be used solely for corporate action purposes.
ESES clients will have the possibility to transfer the cash proceeds from these DCAs to Target2 via
either:
·
the set up of a Liquidity Standing Order (batch mode)
·
an immediate liquidity transfer
Formatted: Font: Bold
The communications means available to the SPA for the management of the direct payment process
will remain the same as they are today, i.e. EuroclearConnect for Screens or EuroclearConnect for
STP.
Please note that :for the ‘green light’ message, there will be no more use of the MT 043 proprietary
message but the ISO compliant message MT 530.
Specific process for the French government debt
Currently, income payments for French government bonds are credited automatically to the ESES
participants during the overnight processing without ‘green light’ mechanism (the issuer agent, Banque de
France, is authorised to have a negative cash position intra-day).
The specific direct payment procedure that applies today to the French government bonds will be
maintained. The 'green light' procedure will not apply to these securities. The cash credits of ESES
clients will continue to be instructed during the night time processing.
·
·
the specific direct payment procedures that applies today to French government bonds28 will
be decommissioned. The standard 'green light' procedure will apply to all securities
Mandatory stock distributions and distributions with options
For other corporate actions, the aim is to keep ESES accounting schemes, both to preserve the level
of service and minimise impact on the client. Therefore, we intend to keep most of the existing ESES
features, including the use of interim securities for distribution with options.
For distributions with options, the SPA will be able to specify full details of each available election
option with a unique option identifier, to enable STP processing and reconciliation.
The initial credit of the securities in the SPA securities account will remain processed as they are
today, upon receipt of the relevant information on the ESES platform.
For more information on option elections, see the section on elections.
Phase out of classical (‘coupon’ payment)
In line with international market standards, the classical payment procedure (coupons payment) will
be phased out in ESES CSDs at the latest with the introduction of T2S. In addition to this, the
Standing instructions procedure for coupons payment will also be phased out.
For euro-payments, it will be replaced by the Direct Payment Mechanism described above.
For non-euro payments, it will be replaced by the existing service of non-euro payments in the
Euroclear Bank accounts of ESES clients. This service is currently used for a selection of instruments
(namely all non-euro securities eligible in Euroclear Nederland and French monetary instruments
issued in a non-euro currency). At the latest at the launch of T2S, it will be extended to all non-euro
28
Currently, income payments for French government bonds are credited automatically to ESES
participants during the overnight processing without ‘green light’ mechanism (the issuer agent Banque de
France is authorised to have a negative cash position intraday).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 73
Formatted: Normal,Body Copy
income payments generated by the ESES platform. Based on eligible balances of ESES clients, we
will initiate the payments in their Euroclear Bank accounts as today.
Reorganisations
We intend to keep ESES features, including the use of both ‘top down’ and ‘bottom up’ approaches
according to each market standards recommendations.
Mandatory reorganisations and default options on any remaining non-elected position for mandatory
reorganisations with options corporate actions (i.e. CHOS events) will continue to be processed via
the top down approach.
For reorganisation with options, the SPA will specify full details of each available election option, with
an option number attached to each option, to enable STP.
For mandatory reorganisations29, or for default option processing, the ESES platform will send
settlement instructions to the T2S platform, to debit the quantity from the client securities account and
credit the SPA’s securities account. For any corporate actions, the SPA will make the cash or
securities distribution associated with the reorganisation.
Elections
For distributions with options and reorganisations with options, the election of relevant options will
remain offered by the ESES CSDs. This automated feature will only be offered to ICPs.
·
Clients in indirect connectivity will send elections to the ESES CSD via ISO 15022compliant
MT 565 Corporate Action Instruction messages or via EuroclearConnect for Screens,
specifying the relevant corporate action reference number and the option number for their
choice of proceeds. The election of relevant option will not be not possible in direct
connectivity mode or via settlement instructions (DVP or Matched FoP) with the issuer
agent.
·
After completion of syntax and format checks, and when relevant, the ESES CSD will
'block' the instructed quantities of underlying securities (via the use of a specific account
naturean earmarked position)
·
The client will receive an election status advice message (MT 567) and the issuer agent
appointed to centralise the event will receive an Elective instruction message (MT 565) 30.
·
The ESES CSDs will then send matched instructions to the T2S platform based on the
clients’ corporate action instructions, with intended settlement date the payment date of the
corporate action.
·
Other specific features that are currently being rolled out in the frame of CSE project
(Custody services evolutions) will remain available, such as election on pending
transaction.
29
The instructions will be already matched instructions, and will include the ‘CORP’ ISO transaction type
code.
As defined in the scope of Custody Services Evolutions phase 2, to be implemented at the end of 2013.
30
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 74
Figure 24: Option election for ICPs
The ESES platform will process the distribution on behalf of the SPA, thereby minimising adaptation
costs for the clients and the SPA and allowing them to keep their custody reporting in place with the
appropriate references, for easy reconciliation.
7.1.1.3. Corporate action reporting
For corporate actions, the entitled account holder will receive corporate action confirmation upon
processing of the corporate action, including the appropriate corporate action references, either via
ESES platform or the T2S platform directly.
ICPs will receive ISO 15022-compliant custody messages, and if relevant ISO 15022- or ISO 20022compliant settlement messages.
15022 custody reporting will be always produced in ESES CSD format with Participant code/BIC, subaccount type + sub-account, NDC and ICPG.
The T2S platform will also generate some securities settlement confirmation messages that will be
sent to the ESES platform and DCPs.
DCPs will be able to filter the production of ISO 20022-compliant messages from the T2S platform.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 75
The following table shows the communications means that will be offered for corporate action
processing:
ESES indirect connectivity
EuroclearConnect
EuroclearConnect
for STP
for Screens
ISO
ISO
15022
20022
MT 564 Corporate Action
Notification
•
MT 564 Pre-advice entitlement
•
•
MT 564 Corporate Action
Entitlement
•
•
MT 565 Elective instructions
•
•
MT 566 Corporate Action
Confirmation
•
•
MT 567 Corporate Action Status
and Processing Advice
•
•
MT 568 Corporate Action
Narrative Message
•
•
Corporate Action Settlement
Confirmation
•
Direct connectivity
T2S
T2S screen
platform
ISO 20022
•
•
•
•
•
Table 18: Corporate action messaging
7.1.2. Corporate action on flows
7.1.2.1. Generic principles
As is the case for corporate actions on stock, corporate actions on flows will be processed according
to the investor CSD model (i.e. each CSD will be in charge of detecting and processing corporate
actions for its own participants). The detection, processing31 and reporting of market claims and
transformations will continue to be processed on the ESES platform, and the ESES platform will
instruct the T2S platform accordingly. However, due to the implementation of the T2S cross-CSD
functionality, additional impact on the client is expected.
In line with the Belgian, French and Dutch markets, the buyer protection mechanism will not be
automated for any type of corporate action event on the ESES platform. Buyer protection will be
handled bilaterally between CSD participants.
7.1.2.2. Market claims and transformations
Detection
The detection of eligible transactions will be based on the key dates, record date and payment date of
the original corporate action, as recommended in the CAJWG standards. The detection of market
claims and transformations will be processed for all the instructions related to an ESES CSD,
regardless of whether or not the originator of the instruction is and ICP or DCP. Detection will also
apply on settled instructions for reverse market claims, in line with the rules to be applied from
September 2013 in the context of CSE project (Custody Services Evolutions).
To limit the interaction costs between the ESES platform and the T2S platform, the detection
frequency of eligible transactions will change. Detection will take place during the T2S real-time
settlement window, on an hourly basis, instead of real time, as is the case on the ESES platform. This
change should not impact the service level. Detection will apply for 20 business days, as from the
record date, or market deadline (for the transformation on CHOS) which is the standard set by the
CASG and CAJWG. As a reminder, the current ESES detection period is 45 business days, starting
as of the ex date of the corporate action.
31
Matched instructions for intra-CSD transactions and matching instructions for cross-CSDs transactions,
sent to T2S for settlement.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 76
The ESES platform will interact with the T2S platform to identify eligible transactions. The claim
detection process will take into account both ‘opt out’ and ‘cum ex’ specific T2S indicators. The 'opt
out' indicator will override 'cum ex' and date configuration, pending CASG confirmation.
Processing
Different processing will be used for market claims and transformations.
Market claims processing
Upon detection of eligible transactions, the ESES platform will instruct the T2S platform for the
processing of market claims. This will be carried out by creating new separate transaction(s) 32:
·
already matched instructions, when the underlying instruction is an intra-CSD transaction
·
instruction to be matched, when the underlying instruction is a cross-CSD transaction
These transactions will be identifiable by the ISO transaction type code CLAI and, at a minimum, the
T2S reference of the underlying transaction and the unique Corporate Action reference (COAF) of the
event assigned by the issuer CSD.
The settlement of market claim instructions will follow standard T2S settlement rules, and will be
independent from the settlement of the underlying transactions.
Transformation processing
Upon detection of eligible transactions, the ESES platform will instruct the T2S platform for
processing the transformation in the form of two separate instructions:
·
cancellation of the underlying instruction
·
creation of the relevant new instructions33
These two instructions will be sequenced so as to ensure that the new instructions are only created
(and subsequently settled) upon confirmation of the cancellation of the underlying instructions. The
ESES platform will send the cancellation instruction and the new instruction in the form of:
·
already matched instructions, when the underlying instruction is an intra-CSD transaction
·
instruction to be matched, when the underlying instruction is a cross-CSD transaction
These transactions will be identifiable by the ISO transaction type code TRAN and, at a minimum,
the T2S reference of the underlying transaction and the COAF. Cancellation will also be identifiable,
and will mention that the cancellation is due to the processing of the transformation.
32
In the case of multiple proceeds, a separate transaction for each proceeds will be sent by the ESES
platform to the T2S platform.
33
This is an upgrade of current ESES processing, in which there is no cancel-and-replace mechanism for
transformation into cash (related to mandatory reorganisation against cash without option).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 77
The ESES automated processing of transformations will include a large range of cases, including the
processing of single or multiple proceeds, fractions and compensation into cash. Further details will
be provided in the forthcoming ESES Detailed Service Description.
Figure 25: Market claims and transformations – generic framework – Intra-CSD case
Tax status
Even if the point is still under discussion at the market level, the assumption is that the tax status of
the claim could be derived from the issuer CSD tax status. This point will be further addressed in the
forthcoming ESES Detailed Service Description.
Cross-CSD focus
Upon detection of a cross-CSD transaction giving rise to a market claim or a transformation, both
CSDs involved in the transaction will send a matching instruction to the T2S platform, to process the
market claim or the transformation. To that extent, the ESES CSD service level will also depend on
the level of service of the other CSD involved in the transaction.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 78
Figure 26: Market claims and transformations – Cross-CSD case
Reporting
For ICPs, various communication configurations will be offered, allowing for the reception of a range
of messages, either using ISO 15022-compliant custody messages, or ISO 15022- or ISO 20022compliant settlement messages. Further details on the configuration and exact content of the
messages will be provided in the forthcoming ESES Detailed Service Description.
The T2S platform will also generate securities settlement confirmation messages that will be sent to
the ESES platform and DCPs. DCPs will be able to filter the production of 20022-compliant messages
from the T2S platform.
ESES indirect connectivity
EuroclearConnect
EuroclearConnect
for STP
for Screens
ISO
ISO
15022
20022
MT 564 Corporate Action/Market
Claim Announcement
•
•
MT 564 Market Claim Creation
•
•
MT 564 Market Claim
Cancellation
•
•
MT 566 Market Claim
Confirmation (custody message)
•
•
Market Claim Confirmation
(settlement message)
•
•
•
Direct connectivity
T2S
T2S screen
platform
ISO 20022
•
•
Table 19: Market claims and transformation message
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 79
7.1.2.3. Buyer protection
In the context of corporate actions harmonisation works, it was considered that implementing an
automated buyer protection by CSDs is not mandatory. However, an investor CSD needs to provide
buyer protection if they connect to an issuer CSD which has automated buyer protection but the
investor CSD doesn't need to implement it on an automated basis.
In line with market view, no automated buyer protection process will be established on the ESES
platform. Only the Buyer Protection Deadline and Guaranteed Participation Date will be provided by
ESES with the event’s notification. In that respect, a manual procedure will be rolled out between
participants.
7.2. Issuer services
7.2.1. Overview of issuer services on the T2S platform
Outside of core services (such as corporate actions, new issues and registered securities, as
described in previous sections), the ESES CSDs offer a wide range of services to issuers (or their
agents). In this context, the CSDs primarily act as an interface between issuers and custodians, to
provide information or to collect information, for purposes such as the following:
·
identification of shareholders (e.g. Euroclear France TPI service and Euroclear Belgium
Capitrak Level 2, ESES/ Capital Precision foreign shareholding identification service)
·
general meetings (e.g. ESES/Broadridge service)
·
information routing to custodians
·
identification of account holders (e.g. reporting OPCVM)
To perform some of these services, the ESES CSDs must interact with ESES settlement system to
identify balances or transactions related to a given ISIN. Where such interaction is necessary, in the
context of T2S, the ESES platform will communicate with the T2S platform.
In general, the T2S project will only slightly impact (if it will have any impact at all) on the way issuers
services are currently processed on the ESES platform. In particular, messages and communications
with issuers and custodians should remain the same as today, and proprietary messages will
continue to be used as they are today. Therefore such services will only be accessible in indirect
connectivity mode.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 80
T2S impacts on corporate issuers (non banking), members of Euroclear France
Currently, Euroclear France accepts as participants corporate issuers (non banking) that only operate
free of payment operations.
With T2S, such issuers, as today, will not be obliged to open a dedicated cash account (DCA) if they
do not intend to manage instructions against payment (free of payment only).
However, they will have to get a BIC to be identified in T2S.
Figure 27: Overview of ESES issuer services in the context of T2S
In the longer-term, we expect indirect impact, as the T2S project will allow issuers to enlarge their
investor base in the Eurozone. It is likely that this will create a need and an opportunity for further
harmonisation of issuer services, especially in the area of shareholders transparency.
To illustrate how issuer services might be impacted by the T2S project, we provide below a
description on the impact we foresee on the TPI shareholder identification service.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 81
7.2.2. Titres au Porteur Identifiable (TPI)
The Disclose Bearer Securities service (Titres au Porteur Identifiable (TPI) is a Euroclear France
regulatory service that allows issuers of bearer securities to know the nominative list of their
shareholders and holdings.
When a request is sent by an issuer, Euroclear France sends the information to the custodians that
have a balance. The custodians are then required to provide identification of the shareholders before
the deadline, as established by the market. Euroclear France consolidates the responses received
from the custodians and sends the full list to the issuer.
Figure 28: Processing shareholders identification (TPI)
In the context of the T2S project, this service will continue to be offered via indirect connectivity.
Exchanges with issuers and custodians will follow the same flows and same communication means
(i.e. STP proprietary messages or eTPI) as is the case today. The only change will be that Euroclear
France will identify eligible balances of custodians through the T2S platform (instead of the ESES
settlement system).
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 82
8. ESES Investor CSD offer
The ESES CSDs will expand their investor CSD role going forward by increasing coverage up to all
T2S eligible securities and by further developing its asset servicing. This offer will provide ESES
participants with a single entry point to hold and settle in central bank money all T2S-eligible
securities.
Figure 28: ESES as single entry point to CSDs in T2S
We will reinforce direct links between the ESES platform and the other T2S CSDs to enable the:
·
acceptance of all T2S securities on the ESES platform
·
allowance of cross-CSD settlement in CeBM with all T2S counterparties
We will further enlarge and enhance our ESES asset servicing offer to meet the most demanding
participant requirements for the custody of ESES home securities and foreign securities. Towards that
end, the ESES CSDs will leverage the expertise and infrastructure available in the Euroclear group.
Current links
Links H2 2013
T2S implementation
Austria: OeKB
Belgium: NBB – SSS
Euroclear Bank (XS)
Finland: Euroclear Finland
Germany: CBF
Italy: Monte Titoli
Spain: Iberclear
Switzerland: SIX SIS
Austria: OeKB
Belgium: NBB – SSS
Euroclear Bank (XS + other
international securities)
Finland: Euroclear Finland
Germany: CBF
Greece: BOGS
Italy: Monte Titoli
Spain: Iberclear
Switzerland: SIX SIS
Direct links with all markets joining
T2S
Irish securities
Euroclear Bank (XS + other
international securities)
Table 20: ESES links with European markets
As part of this offer, the ESES CSDs will also include Irish securities. The main features of the ESES
investor CSD offer are the following:
Connectivity
The investor CSD offer will be available to ICPs and DCPs allowing for a single connectivity towards
European markets via the ESES CSDs. We will offer a unique interface for the Euroclear Group
including STP using ISO format and a single-screen interface.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 83
Account structure
The investor CSD offer will allow clients to:
·
hold ESES home securities and foreign securities in a single securities account
·
benefit from a single cash arrangement
Settlement
Intra-CSD and cross-CSD settlement of foreign securities will follow ESES CSD and T2S rules, as
described in this White paper. The Euroclear group is actively involved in the working groups dealing
with harmonisation and steps to lift the barriers to smooth cross-CSD settlement. For further details
on cross-CSD settlement, see section 6.5.
Liquidity Management
Payment banks will be able to effectively centralise their liquidity on a single DCA using autocollateralisation on all ESCB eligible securities that they hold either:
·
on their securities account in ESES
·
on securities accounts in other CSDs in T2S
Through ESES, both Payment banks and payment banks clients will benefit from the largest pool of
collateral to support adequately:
·
the auto-collateralisation with their credit provider
·
the triparty collateral operations with their counterparties
Asset servicing
We will enlarge the range of ESES asset servicing offered to facilitate the holding of European assets
from the ESES securities account:
·
corporate actions: all end-to-end corporate actions and market claim services will apply to
the securities accepted on the ESES platform in the context of the investor CSD offer. By
the launch of the T2S platform, we will continue to gradually extend these services to
provide upgraded reporting and additional flexibility in the management of corporate actions
·
tax services: as a new feature of the ESES service offering, we will support ESES
participants in managing the withholding of taxes. The ESES CSDs will offer an at Source
service and Quick Refund and Standard Refund (when applicable in the domestic market).
·
proxy voting services: will be offered for home and pan-European foreign assets. This will
include proxy voting reporting such as meeting notification, pre-meeting voting instruction
status
Upgraded asset servicing service for domestic ESES securities
As an optional feature, we will offer ESES clients this extended asset servicing also for ESES
domestic securities, especially in relation to tax management.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 84
9. Client readiness, migration and testing
The Governing Council of the ECB has proposed the final Framework Agreement to the CSDs on 22
November 2011. A Currency Participation Agreement will also be offered to the non-EUR central
banks.
To date, 234 CSDs have signed the T2S framework agreement and will migrate to the new platform
between 2015 and 2017.
The Eurosystem has also concluded its specifications phase which includes the release of the
following documentation:
·
General Function Specification (GFS) V4.0 on 31 May 2010
·
User Requirement Document (URD) 5.02 on 7 September 2012
·
User Detailed Functional Specifications (UDFS 1.2.1) on 7 September 2012
·
Graphical User Interface (GUI) Business Functionalities, version 1.8 7 September 2012
·
Business Process Description V1.1 on 16 November 2012
·
T2S User Handbook (UHB) V1.0, 14 December 2012
We intend to roll out the project with users as follows:
May 2013
·
We started issuing dedicated Newsletters to inform you about the roll out of the project
·
We created a dedicated page on our website (https://www.euroclear.com/T2S)
·
We requested ESES clients to provide the name of a Single Point of Contact (SPOC)
·
We started Implementing the new governance related to the ESES T2S project, with the
launch of the ESES T2S Users Group (ESES TUG) and the launch of the ESES T2S
National Coordination Committee (ESES T2S NCC) (May 2013, sSee section 1.2)
June 2013
·
We started the workshops and training sessions about the project (general presentation).
These will be followed by dedicated sessions on , settlement, connectivity, migration…)
By the beginning of 2014
·
We will release main ESES contractual documentation: DSDs and Data Dictionaries
impacted by T2S
·
We will start the works of the Implementation Committee with users that will prepare the
migration until the launch
In Annex 7, you will find a provisional list of DSDs impacted by T2S.
Figure 29: ESES – T2S project roll out with users
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 85
9.1. Migration
Migration to T2S will be organised in four waves. In addition, one contingency migration wave date is
set up in case one CSD cannot migrate as originally planned. This contingency wave is foreseen no
later than six months after the last migration wave.
The distribution of the waves has been discussed between ECB, NCB, and CSD and their related
communities (Clients) with the aim to minimise the risks. The ESES CSDs will migrate in the second
the wave (foreseen in the weekend of 25 to 28 March 2016). The ESES CSDs will migrate in the
same wave as:
·
the Portuguese CSD Interbolsa so as to have all securities listed on Euronext markets
migrating simultaneously
·
the National Bank of Belgium (NBB – SSS), so as to have all Belgian securities migrating
simultaneously
Wave
Migration weekend
Country
CSD
1
19 – 22 June 2015
Greece
Bank of Greece
Italy
Monte Titoli
Malta
Malta Stock Exchange
Romania
Depozitarul Central
Switzerland
SIX SIS (EUR only)
Belgium
Euroclear Belgium
Belgium
NBB – SSS
France
Euroclear France
Netherlands
Euroclear Nederland
Portugal
Interbolsa
Austria
Denmark
Germany
Luxembourg
Hungary
OeKB
VP Securities (EUR only, DKK
from 2018)
Clearstream Banking Frankfurt
LuxCSD
VP Lux
Keler Hungary
Estonia
AS Eesti Vaartpaberikeskus
Finland
Euroclear Finland
BelgiumHungary
BNY Mellon (CSD)Keler
Hungary
Lithuania
CSD of Lithuania
Slovakia
CDCP Slovakia
Slovenia
KDD Slovenia
Spain
Latvia
Iberclear
Latvian CSD
2
25 – 28 March 2016
3
9 – 12 September 2016
Luxembourg
4
3 – 6 February 2017
Table 21: CSDs migration waves to T2S
For CSDs, NCBs and ECB, each wave will be organised in three different steps:
1.
pre-migration period: three months before the migration week end (see below)
2.
migration weekend: weekend during the CSDs will switch from their current system to
the new system
3.
stabilisation period: During one month as from the migration week end, ECB, CSDs
and NCBs will provide a strong focus regarding the system availabilities and efficiencies
As from the pre-migration first wave, the ESES CSDs will interact with T2S. T2S will offer the
possibility to a CSD migrating in a future wave to act as ‘CSD SME only’.
This specific feature will allow the ESES CSDs to create/maintain their securities (i.e. securities for
which they are the issuer: issuance account held in the ESES CSDs). The aim is to allow CSDs and
NCBs migrating in wave 1 to trade on securities for which the ESES CSDs are Securities Maintaining
Entity.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 86
9.2. Testing
Testing on the T2S platform will be organised in stages, which involve different players in the
following order:
Figure 30: Testing phases for the T2S platform
1. Internal tests by the Eurosystem
2. Tests involving the Euro-system and the CSDs
3. Tests between CSDs and their clients
Internal tests by the Eurosystem
·
Eurosystem Acceptance Test: Eurosystem verifies the quality of the system that is
required to begin user testing. This testing phase starts before the connectivity tests and
continues in parallel with it. These tests are ongoing and should end in SeptemberOctober
2014.
Tests Involving the Euro-system and the CSDs
·
Connectivity tests will consist of:
◦ the ability to reach the welcome page and log-in of the T2S screen;
◦ the exchange of messages at the application level; and
◦ push-and-pull services for reports
·
CSDs’ Acceptance Test: CSD to confirm that the T2S platform complies with T2S Service
Description and scope defining set of documents
·
Bilateral Interoperability testing: CSD tests the T2S platform to ensure the readiness of
·
CSD certification: this stage aims to provide evidence that the CSD platform does not
its IT system to interoperate with the platform
harm the T2S platform as the result of inappropriate technical communication or
procedures
·
Multilateral Interoperability Testing: CSD tests with other participating CSDs and Central
Banks belonging to the same migration wave and of previous migration waves
For the ESES CSDs, these tests should start in October 2014 and end before the start of community
testing.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 87
Formatted: Heading 2
Tests between CSDs and their clients
·
Community Test: the CSD and its participants verify the correct functioning of the T2S
platform and validates that CSD participants can interact correctly end-to-end with the T2S
platform (both ICPs and DCPs)
·
DCP certification: this stage aims to provide evidence that the DCP client does not harm
the T2S platform as a result of inappropriate technical communication or procedures
·
Business Day Testing: comprises the simulation of several consecutive business days of
T2S platform operation after completing a migration rehearsal for the respective CSD
migration wave using the expected production data set-up. It includes all CSDs of a
migration wave and their respective communities, their central banks and their payment
banks. During this period some business contingency tests will be performed. The end of
this phase will be run in life timing production.
·
Authorisation tests: the CSD will use this testing stage to verify whether its participants
respectively (the whole community), comply with its rules, procedures and requirements to
go-live in T2S
Testing details for the ESES CSDs
The below high level description will be detailed in due course:
·
users testing should start mid September 2015
·
ESES participants will be required to have all their connectivity with ESES platform fully
operational before the start of the community testing
·
we will define mandatory testing scenarios for all ESES participants, which will constitute a
prerequisite to be eligible for the migration into production in March 2016 (authorization
tests will be included)
·
we foresee to organise three switchover tests:
◦ one at the opening of the testing platform (this implies that clients are active and generate
instructions on the testing platform ahead of this switchover test)
◦ the two others in Q1 2016
Specific features of DCP testing
·
As far as ESES functional testing is concerned, DCPs will be required to follow the common
ESES testing program. No major difference is expected between DCPs and ICPs.
·
In addition to this functional testing, DCPs will be required to test their connectivity with the
T2S platform and obtain the related ECB certification, by delegation of their CSD. An ESES
participant which has already obtained its certification in wave 1 will not be required to
obtain an additional certification for migrating to ESES. For DCPs migrating for the first time
with the ESES CSDs, the ECB certification testing should be performed in the early weeks
of the ESES testing period (September / October 2015).
Note
ESES participants who want to become DCP should have needs to confirmed their intention in a nonbinding manner by 15in October 2013, at the latest. After this dateOctober 2013, expressions of
interest from DCPs could only be considered for the next migration cycle, i.e. after the 4th wave
planned in 2017.
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 88
Annex 1 - Overview of main ESES services and changes in relation to the T2S
project
Settlement-related services
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
Standard
settlement
Slab matching
Settlement
Changes
due to
the T2S
project
Manual partialling
SLAB
Fails recycling
Liquidity
management
Settlement with
external CSDs
Cash transfers
(liquin, liquout)
Sweeps
Presettlement
Registered
securities
Specifics
Autocollateralisation
Cash limit
management
Rebalancing of
balances flagged
as autocollateralisable
Settlement
Connect /MTF
feeds
Trade
confirmation (SBI)
Funds order
routing
Triparty collateral
management
French BRN
Belgian
Registered
Shares (BRS)
Settlement of
registered
securities
Repo
ISIN conversion
Stripping /
reconstitution
Comment
No
change
•
•
Pre-matching
Automatic
partialling SBI
Settlement
Connect
Automatic shaping
SBI Settlement
Connect
Service
no
longer
offered
•
•
Dumps
Cross-border
settlement
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
•
•
•
To be
extended to
DVP
settlement
To be
replaced by
hold and
release
To be
replaced by
T2S partialling
process. To
apply to all
transactions
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 89
Issuance and primary market
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
Codification/admission
Issuance
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
Changes
due to
the T2S
project
Standard Securities
codification/admission
STP TCN
codification/admission
TCN block of code
•
STP warrants
codification/admission
(Plug & Clear)
Issuance standard
securities
Issuance/quasi
issuance Funds/ TCN
•
Service
no
longer
offered
Comment
No
change
•
•
•
•
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 90
Custody services
Services
continue to
be offered but
outsourced to
the T2S
platform
(Accessible
to ICPs an
DCPs)
Corporate
actions
Corporate
action
notifications
Corporate
action
entitlements
Elections
Vaults
•
To be
replaced by
ESES Direct
Payment
procedure
(standard
procedure
'green light')
•
To be
replaced by
ESES Direct
Payment
procedure
Idem
No
change
•
•
•
•
Direct Payment
(standard
procedure
'green light')
Direct Payment
(specific
procedure for
French
government
debt)
Physical
securities
Comment
•
Transformations
Standing
instructions for
coupons
Deposits and
withdrawals
Changes
due to
the T2S
project
Service
no
longer
offered
•
Market claims
Corporate
actions
settlement
Coupons
payments
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
•
•
•
•
Services
may have
been
discontinued
by the time
of
connection
to the T2S
platform
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 91
Issuer services
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
Shareholder
identification
Shareholders meeting
management
Accountholder
identification
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
Changes
due to
the T2S
project
Comment
Service
no
longer
offered
Comment
Service
no
longer
offered
Comment
No
change
TPI
•
Capitrack level 2
•
•
ESES/Broadridge
service
ESES Fund Holders
Statement
Reporting OPCVM
Service
no
longer
offered
•
•
•
TCN holders screen
(EuroclearConnect)
Capilog
•
•
Capitrack Level 1
Communications
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
STP channel
ESES screens
EuroclearConnect for
STP
EuroclearConnect for
Screens
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
Changes
due to
the T2S
project
No
change
•
•
Information services
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
Information services
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
Changes
due to
the T2S
project
TCN information flow
•
•
Capinews
ESES vision
No
change
•
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 92
Others
Services
continue to
be offered
but
outsourced
to the T2S
platform
(Accessible
to ICPs an
DCPs)
Others
Financial Transaction
Tax
Automatic balance
transfers
Services continues to
be offered via the
ESES platform only
(Accessible to ICPs
only)
Changes
due to
the T2S
project
Service
no
longer
offered
Comment
No
change
•
•
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 93
Annex 2 - Overview of the future state of ESES settlement messages – Matching
and Repo
Inbound messages
Removed
Kept
RGV proprietary
format message
Message
type
MT001
Message
label
Instruction
ISO 15022 format
message
Message
type
MT 540
MT 541
MT 542
MT 543
MT002
MT003
Reverse
Transaction
Instruction
Cancellation
request
N/A
MT 540
MT 541
MT 542
MT 543
MT004
Instruction
Modification
Request
MT 540
MT 541
MT 542
MT 543
N/A
N/A
New
MT 530
Message label
ISO 20022 format message
Message type
Message label
Receive Against
Payment
Receive Against
Payment
Deliver Free of
Payment
Deliver Against
Payment
N/A
sese.023.001.03
SecuritiesSettlementTransactionInstructionV03
N/A
N/A
Receive Against
Payment
Cancellation
Request
Receive Against
Payment
Cancellation
Request
Deliver Free of
Payment
Cancellation
Request
Deliver Against
Payment
Cancellation
Request
Receive Against
Payment
Amendment
Request
Receive Against
Payment
Amendment
Request
Deliver Free of
Payment
Amendment
Request
Deliver Against
Payment
Amendment
Request
Settlement
Instruction
(Hold/Release)
sese.020.001.03
SecuritiesTransactionCancellationRequestV03
sese.030.001.03
SecuritiesSettlementConditionModificationRequestV03
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 94
Outbound messages
Removed
RGV proprietary
format message
Message
type
MT007
Message
label
Matching
reminder
instruction
Kept
ISO 15022 format
message
Message
type
MT 578
MT 578
MT012
MT011
Instruction
reminder
Cancelled or
Removed
Information
on instruction
MT 578
MT 544
MT 545
MT 546
MT 547
MT011
Information
on instruction
MT 548
MT 548
MT095
Error
MT 548
N/A
N/A
MT 548
MT 586
MT008
MT009
MT013
MT014
MT016
MT017
MT019
MT020
Matching
reminder for
reverse
transaction
instruction
Securities
substitution
matching
reminder
notice
Information
on deputising
member
instruction
Information
on reverse
transaction
instruction
Information
on deputising
member's
reverse
transaction
instruction
Information
on Banque
de France
repo
instruction
Daily report
Summary
report:
acknowledge
ment of
messages
received
New
N/A
ISO 20022 format message
Message label
Message type
Settlement
Allegement
Notification
Settlement
Allegement
Advice
Settlement
Allegement
Cancellation
Advice
Receive Free
Confirmation
Receive
Against
Payment
Confirmation
Deliver Free
Confirmation
Deliver Against
Payment
Confirmation
Transaction
Status Advice
Cancellation
Request
Status Advice
Transaction
status
Modification
Request
Status Advice
Statement of
Settlement
Allegements
N/A
sese.028.001.03
Message label
SecuritiesSettlementTransactionAllegementNotificationV0
sese.029.001.03
SecuritiesSettlementAllegementRemovalAdviceV03
semt.020.001.03
SecuritiesMessageCancellationAdviceV03
sese.025.001.03
SecuritiesSettlementTransactionConfirmationV03
sese.024.001.03
SecuritiesSettlementTransactionStatusAdviceV03
sese.027.001.03
SecuritiesTransactionCancellationRequestStatusAdviceV03
sese.024.001.03
SecuritiesSettlementTransactionStatusAdviceV03
sese.031.001.03
SecuritiesSettlementConditionModificationStatusAdviceV03
semt.019.001.03
SecuritiesSettlementTransactionAllegementReportV03
N/A
N/A
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Annex 3 - Overview of the future state of ESES settlement messages –
Settlement
Inbound messages
Removed
Kept
RGV proprietary
format message
New
ISO 15022 format
message
Message
type
MT027
Message
label
Securities
movement
Message
type
MT 542
N/A
N/A
MT 542
MT028
Request for
cancellation
of securities
transfer
N/A
MT 542
MT022
International
Delivery
Order
MT 542
MT041
International
Receipt
Instruction
MT 540
N/A
MT 542
Message
label
Own Account
Transfer
Instruction
Physical
Withdrawal
Instruction
Own Account
Transfer
Cancellation
Request
Physical
Withdrawal
Cancellation
Request
Deliver Free of
Payment
(International
Delivery
Order)
Receive Free
of Payment
(International
Receipt
Instruction)
ISO 20022 format message
Message type
Message label
sese.023.001.03
SecuritiesSettlementTransactionInstructionV03
sese.020.001.03
SecuritiesTransactionCancellationRequestV03
sese.023.001.03
SecuritiesSettlementTransactionInstructionV03
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 96
Outbound messages
Removed
RGV proprietary
format message
Message
type
MT034
Message label
Transfer of
securities
settled or failed
Kept
ISO 15022 format
message
Message
type
MT 544
MT 546
MT 546
MT037
Euroclear entry
settled or failed
MT 548
MT 544
MT 546
MT031
Acceptance or
rejection of
securities
transfer
MT 548
MT 544
MT 546
MT 548
MT023
MT042
MT036
Information on
International
Delivery Order
Information on
International
Receipt
Instruction
International
transfer Settled
or failed
MT 544
MT 546
MT 548
MT038
MT030
MT035
International
transfer rejected
Rejected DVP
movement
DVP settled or
failed
MT 544
MT 546
MT032
MT085
MT080
MT080
N/A
Rejection of
request for
cancellation
Securities
balance
Statement of
transactions
Statement of
pending
transactions
N/A
New
MT 548
MT 548
MT 535
MT 536
MT 537
MT 586
Message label
ISO 20022 format message
Message type
Message label
Physical Deposit
Confirmation
Physical
Withdrawal
Confirmation
Own account
owner
Confirmation
Settlement Status
Receive Free
Confirmation
Deliver Free
Confirmation
Settlement status
Receive Free
Confirmation
Deliver Free
Confirmation
Settlement status
sese.025.001.03
SecuritiesSettlementTransactionConfirmationV03
sese.024.001.03
sese.025.001.03
SecuritiesSettlementTransactionStatusAdviceV03
SecuritiesSettlementTransactionConfirmationV03
sese.024.001.03
sese.025.001.03
SecuritiesSettlementTransactionStatusAdviceV03
SecuritiesSettlementTransactionConfirmationV03
sese.024.001.03
SecuritiesSettlementTransactionStatusAdviceV03
Receive Free
Confirmation
Deliver Free
Confirmation
Settlement status
sese.025.001.03
SecuritiesSettlementTransactionConfirmationV03
sese.025.001.03
SecuritiesSettlementTransactionConfirmationV03
sese.024.001.03
SecuritiesSettlementTransactionStatusAdviceV03
Receive against
payment
Confirmation
Deliver against
payment
Confirmation
Settlement status
Settlement status
sese.025.001.03
SecuritiesSettlementTransactionConfirmationV03
sese.032.001.02
sese.027semt.01
5.001.03
SecuritiesSettlementTransactionGenerationNotificationV02
SecuritiesTransactionCancellationRequestStatusAdviceV03
Statement of
Holdings
Statement of
transactions
Statement of
pending
transactions
Statement of
settlement
Allegement
semt.002.001.04
SecuritiesBalanceCustodyReportV04
semt.017.001.02
SecuritiesTransactionPostingReportV02
semt.018.001.02
SecuritiesTransactionPendingReportV02
semt.019.001.02
SecuritiesSettlementTransactionAllegementReportV02
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Annex 4 - Overview of the future state of ESES settlement messages –
Payments
Inbound messages
Removed
Kept
RGV proprietary
format message
Message
type
MT024
N/A
Message
label
Cash
transfer
order
N/A
New
ISO 15022 format
message
Message
type
MT 202
MT 292
Message
label
Liquidity
Transfer Out
Instruction
Liquidity
Transfer Out
Cancellation
ISO 20022 format message
Message type
Message label
camt.050.001.03
SecuritiesSettlementTransactionConfirmationV0
3
N/A
N/A
camt.066.001.01
camt.072.001.01
camt.074.001.01
camt.011.001.05
camt.024.001.04
camt.003.001.05
IntraBalanceMovementInstructionV01
IntraBalanceMovementModificationRequestV01
IntraBalanceMovementCancellationRequestV01
ModifyLimitV05
ModifyStandingOrderV04
GetAccountV05
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 98
Outbound messages
RGV proprietary
format message
Message
type
MT025
ISO 15022 format
message
Message
type
MT 299
Message
label
Liquidity
Transfer Out
Failure Advice
MT 296
N/A
Message
label
Cash
transfer
settled or
failed
Cash
transfer
confirmation
or rejection
N/A
N/A
N/A
MT 910
N/A
N/A
MT 900
N/A
N/A
MT 910
MT039
Cash and
purchasing
power
positions
N/A
MT 941
Total cash
in failed and
purged DVP
movements
MT 940
Liquidity
Transfer Out
Cancellation
Advice
Liquidity
Transfer out
Confirmation
(credit
confirmation)
Liquidity
Transfer In
Confirmation
(credit
confirmation)
Liquidity
Transfer out
Confirmation
(credit
confirmation)
Liquidity
Transfer In
Confirmation
(credit
confirmation)
Intra-day
Liquidity
Position
Statement
Liquidity
Movements
Statement
End of Day
Liquidity
Statement
MT026
N/A
MT029
N/A
MT 900
MT 942
ISO 20022 format message
Message type
Message label
N/A
N/A
camt.054.001.02
BankToCustomerDebitCreditNotificationV02
camt.025.001.03
ReceiptV03
camt.052.001.02
BankToCustomerAccountReportV02
camt.053.001.02
BankToCustomerStatementV02
camt.067.001.01
camt.068.001.01
camt.073.001.01
IntraBalanceMovementStatusAdviceV01
IntraBalanceMovementConfirmationV01
IntraBalanceMovementModificationRequestStat
usAdviceV01
IntraBalanceMovementCancellationRequestStat
usAdviceV01
ReturnAccountV05
ReturnTransactionV05
camt.075.001.01
camt.004.001.05
camt.006.001.05
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 99
Annex 5 - ESES – T2S messages life cycle
Settlement
Reporting
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 100
Payments
Corporate actions
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 101
Annex 6 - Detailed CSDs and NCBs migration planning
Wave 1
Entity
Actor type
Comments
Clearstream Banking
SME CSD
Securities static data migration only
Euroclear Belgium
SME CSD
Securities static data migration only
Euroclear France
SME CSD
Securities static data migration only
Euroclear Nederland
SME CSD
Securities static data migration only
VP Securities
SME CSD
Securities static data migration only
Bank of Greece
Migrating CSD
Full migration of settlement business
Depozitarul Central
Migrating CSD
Full migration of settlement business
Malta Stock Exchange
Migrating CSD
Full migration of settlement business
Monte Titoli
Migrating CSD
Full migration of settlement business
SIX SIS
Migrating CSD
Migration of EUR settlement business
Bank of Greece
Migrating NCB
Full support of all four T2S NCB roles
Bank Centrali ta'Malta
Migrating NCB
Full support of all four T2S NCB roles
Banca d'Italia
Migrating NCB
Full support of all four T2S NCB roles
Banca Nationala a Romaniei
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Banco de Portugal
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Deutsche Bundesbank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
National Bank of Belgium
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Banque de France
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
De Nederlandsche Bank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Banco de Espana
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Banque centrale du
Luxembourg
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Oesterreichische Nationalbank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Danmarks Nationalbank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Suomen Pankki
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Banka Slovenije
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Eesti Pank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Lietuvos Respublikos centriniu
banku
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 102
Magyar Nemzeti Bank
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Narodna banka Slovenska
Migrating NCB
In the T2S NCB roles ‘System Entity’ and
‘RTGS System Owner’
Wave 2
Entity
Actor type
Comments
Euroclear Belgium
Migrating CSD
Full migration of settlement business
Euroclear France
Migrating CSD
Full migration of settlement business
Euroclear Nederland
Migrating CSD
Full migration of settlement business
Interbolsa
Migrating CSD
Full migration of settlement business
NBB – SSS
Migrating CSD
Full migration of settlement business
NBB
Migrating NCB
Full support of all four T2S NCB roles
Banque de France
Migrating NCB
Full support of all four T2S NCB roles
De Nederlandsche Bank
Migrating NCB
Full support of all four T2S NCB roles
Banco de Portugal
Migrating NCB
Full support of all four T2S NCB roles
See Wave 1
Already migrated
CSDs
Migrated in Wave 1
Wave 3
Entity
Actor type
Comments
Clearstream Banking
Migrating CSD
Full migration of settlement business
LuxCSD
Migrating CSD
Full migration of settlement business
OeKB
Migrating CSD
Full migration of settlement business
VP Lux
Migrating CSD
Full migration of settlement business
VP Securities
Migrating CSD
Migration of EUR settlement business,
DKK settlement envisaged starting from
2018
Keler Hungary
Migrating CSD
Full migration of settlement business
Deutsche Bundesbank
Migrating NCB
Full support of all four T2S NCB roles
Banque centrale du
Luxembourg
Migrating NCB
Full support of all four T2S NCB roles
Oesterreichische Nationalbank
Migrating NCB
Full support of all four T2S NCB roles
See Waves 1-2
Already migrated
CSDs
Migrated in Waves 1 and 2
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 103
Wave 4
Entity
Actor type
Comments
CDCP Slovakia
Migrating CSD
Full migration of settlement business
Iberclear
Migrating CSD
Full migration of settlement business
AS Eesti Vaartpaberikeskus
Migrating CSD
Full migration of settlement business
CSD of Lithuania
Migrating CSD
Full migration of settlement business
Euroclear Finland
Migrating CSD
Full migration of settlement business
KDD Slovenia
Migrating CSD
Full migration of settlement business
BNY Mellon CSDKeler Hungary
Migrating CSD
Full migration of settlement business
Latvian CSD
Migrating CSD
Full migration of settlement business
Banco de Espana
Migrating NCB
Full support of all four T2S NCB roles
Suomen Pankki
Migrating NCB
Full support of all four T2S NCB roles
Banka Slovenije
Migrating NCB
Full support of all four T2S NCB roles
Eesti Pank
Migrating NCB
Full support of all four T2S NCB roles
Lietuvos Respublikos centriniu
banku
Migrating NCB
Full support of all four T2S NCB roles
Magyar Nemzeti Bank
Migrating NCB
Full support of all four T2S NCB roles
Narodna banka Slovenska
Migrating NCB
Full support of all four T2S NCB roles
See Waves 1-3
Already migrated
CSDs
Migrated in Waves 1 and 2
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 104
Annex 7 - Future state of ESES documentation
Current ESES Detailed Services Description
(DSD)
With T2S
Status
T2S impact
SLAB over-the-counter matching
ESES Matching and Settlement Services
Cancel / Replace
High
Settlement sub-system
Cancel / Replace
High
Operational day management
Cancel / Replace
High
Communications means
Modified
High
Migration to T2S platform
New
High
Reference data
Account structure and subscription
management
Cancel / Replace
High
Corporate action reversals
Corporate actions and market claims
Communications means
Cancel / Replace
High
Stock distributions and distributions with options
Cancel / Replace
High
Corporate actions
Cancel / Replace
High
Mandatory cash distributions
Cancel / Replace
High
Reorganisation
Cancel / Replace
High
Procedures between SPA and CSD for corporate actions
Cancel / Replace
High
Market claims
Cancel / Replace
High
International links
ESES foreign securities services
Cancel / Replace
High
ESES interaction with TARGET2 and related tools
ESES interaction with payment systems
Modified
High
ESES acceptance testing
ESES acceptance testing
Modified
High
ESES forms
ESES forms
Modified
High
Repurchase agreement operating procedures
ESES Triparty collateral management
Modified
Medium
Securities eligibility and admission rules
Securities eligibility and admission rules
Modified
Medium
Plug & Clear
Plug & Clear
Modified
Medium
SBI trade confirmation platform
SBI trade confirmation platform
Modified
Medium
UCITS French order routing
Processing of UCITS
Modified
Medium
Modified
Medium
Cancel / Replace
Medium
French registered securities – custody
Cancel / Replace
Medium
French registered securities admitted in Euroclear France and
trading
Cancel / Replace
Medium
French registered securities – basic and miscellaneous
procedures
Cancel / Replace
Medium
UCITS Reporting
French registered securities – settlement
French registered securities
Belgian registered securities - Settlement and custody
Belgian registered securities - Settlement
and custody
Modified
Medium
Euroclear Nederland specific services
Euroclear Nederland specific services
Modified
Medium
Euroclear Belgium dematerialisation services
Euroclear Belgium dematerialisation
services
Modified
Low or None
Euroclear Belgium specific services
Euroclear Belgium specific services
Modified
Low or None
TPI
TPI
Modified
Low or None
TCN vending service
TCN vending service
Modified
Low or None
Capinews
Capinews
Modified
Low or None
Financial Transaction Tax
FTT
Modified
Low or None
Physical securities handling
Physical securities handling
Modified
Low or None
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 105
Our main Data Dictionaries may also be impacted by the T2S project. It is the case for (nonexhaustive list):
·
ISO 15022 Data Dictionary - Settlement & Reconciliation
·
ISO 15022 Data Dictionary - Payment
·
ISO 15022 Data Dictionary - Corporate Actions
·
ISO 20022 Data Dictionary - Settlement & Reconciliation
Our main contractual documentation is also impacted:
·
ESES Terms & Conditions Book 1
·
ESES Terms & Conditions Book 2 Euroclear France
·
ESES Terms & Conditions Book 2 Euroclear Belgium
·
ESES Terms & Conditions Book 2 Euroclear Nederland
·
Annex to ESES Terms & Conditions
·
Operating manual part 1
·
Operating manual part 2
·
Form of Agreement
·
Euroclear France rules (as CSD)
·
Euroclear France rules (as SSS)
White paper – Adaptation of ESES CSD services to Target2-Securities – Version 3.1 I December 2013 I 106
euroclear.com – Tel: +32 (0)2 326 1211
Euroclear is the marketing name for the
Euroclear System, Euroclear plc, Euroclear SA/NV
and their affiliates. © Euroclear Bank SA/NV is incorporated in
Belgium and registered in the RPM Brussels
(Company n˚ 0429 875 591) with registered
address at 1 Boulevard du Roi Albert II,
1210 Brussels, Belgium.
© Euroclear Belgium is the commercial name
of Caisse Interprofessionnelle de Dépôts et
de Virements de Titres SA/Interprofessionnelle
Effectendepositen Girokas NV (C.I.K.)
incorporated in Belgium and registered in the
RPM Brussels (Company n˚ 0403 206 432) with
registered address at 1 Boulevard du Roi Albert II,
1210 Brussels, Belgium.
© Euroclear Nederland is the commercial
name of Nederlands Centraal Instituut
voor Giraal Effectenverkeer B.V. (NECIGEF)
incorporated in the Netherlands and registered
in Amsterdam at the Chamber of Commerce
(Company n˚33 149 445) with registered
address at Herengracht 459-469, 1017 BS
Amsterdam, The Netherlands.
© Euroclear France SA is incorporated
in France and registered in the RCS Paris
(Company n° B 542 058 086) with registered
address at 66 rue de la Victoire 75009
Paris, France.
© Euroclear UK & Ireland Limited is incorporated
in England and Wales (Companies House
n° 2878738), with registered address at Watling
House, 33 Cannon Street, London EC4M 5SB,
United Kingdom.
© Euroclear Sweden AB is incorporated
in Sweden (Company n° 556112-8074)
with registered address at PO Box 7822,
Regeringsgatan 65, 103 97 Stockholm, Sweden.
© Euroclear Finland Oy is incorporated
in Finland (Company n° 654 686) (business
identity code 1061446-0), with registered
mailing address at PO Box 1110, 00101
Euroclear is a carbon neutral company
PAS2060 certified in 2013
Helsinki, Finland, and office address Urho
Kekkosen katu 5 C, 00100 Helsinki, Finland.