Benelux forum 2014 - T2S

SWIFT Benelux Forum

How to get ready for T2S

Isabelle Olivier

Tanja Haase

Background of TARGET2-Securities (T2S)

Why does Europe need T2S?

Motives for the T2S-Project:

• Europe’s securities markets are too fragmented and inefficient

• There is a lack of competition in services related to settlement

• Europe needs a single pool of securities to stimulate competition

and harmonisation

• There is no other realistic Europe-wide approach to create this

single pool

Making Europe a better place to invest and trade

(in line with the Lisbon agenda)

T2S – Why?

EU-US settlement flows comparison

Source: « T2S – Settling Without Borders », European Central Bank, November 2009

TARGET 2 Securities (T2S) (as from June 2015)

TARGET2 (RTGS, live since November 2007)

• Customers connect

indirectly to T2S via CSDs

• Need to retain existing

relationships with multiple

service providers

• Minimizes the impact of T2S

on the established structures

and relationships

Customer

CSD

Sub-

Custodian

TARGET2-Securities

CSD CSD

Sub-

Custodian

direct te

chnic

al connectivity

Customer

CSD

TARGET2-Securities

CSD n

CSD 3

CSD 2

CSD 1

Customer

CSD

TARGET2-Securities

CSD n

CSD 3

CSD 2

CSD 1

direct te

chnic

al connectivity

• Customers connect directly

to T2S providing the most

proximity to the settlement

engine

• Requires substantial

investments

• Connection to CSDs is still

required for non-core

settlement services

• Customers connect indirectly

to T2S via a CSD, which may

replace existing links to agents,

custodians and local CSDs

• Significantly reduces operating

costs

• Considered as most optimized

solution for majority of

participants

* Graphic: European Central Bank presentation „T2S:

Settling without borders in Europe”, January 2012

Participants can communicate indirectly or directly

with T2S

T2S Migration plan and timeline

CSDs

• Euroclear ESES

(BE, FR, NL)

• Interbolsa

• NBB – SSS

• BOGS

• Depozitarul

Central Romania

• Malta Stock

Exchange

• Monte Titoli

• SIX SIS Ltd

• AS Eesti

Väärtpaberikeskus

• CDCP Slovakia

• Euroclear FI

• Iberclear

• KDD Slovenia

• CSDs of Lithuania

• & Latvia

• BNY Mellon CSD

9 months Wave 2

28/03/2016

Wave 3

12/09/2016

Wave 1

22/06/2015 6 months 5 months Wave 4

6/02/2017 Min 3 months

Contingency

Wave

• Clearstream Banking

• Keler Hungary

• LuxCSD

• OeKB

• VP Lux

• VP Securities

Confirmed DCPs in Wave 1 Wave 2

28/03/2016

Wave 3

12/09/2016

Wave 1

22/06/2015

Wave 4

6/02/2017

DCPs for securities and cash:

• ABN AMRO Clearing Bank NV

• BNP Paribas Securities Services

• Citi

• Clearstream Banking S.A. (CBL)

• Deutsche Bank

• European Central Counterparty

• Iccrea Banca S.p.A.

• Intesa Sanpaolo

• Istituto Centrale delle Banche Popolari

Italiane S.p.A.

• LCH.Clearnet SA

• Parel

• Société Générale Securities Services S.p.A.

• The Bank of New York Mellon SA/NV

DCPs on the cash side only: • Banca Popolare di Sondrio

• Banco Popolare Società Cooperativa

• Cassa Centrale Raiffeisen

dell’Alto Adige S.p.A.

• Commerzbank

• Kasbank

• Monte dei Paschi di Siena

• Morgan Stanley Bank

• Société Générale

• Unicredit S.p.A.

T2S Testing timeline

Q3 Q4 Q1 Q3 Q4 Q3

Connectivity

Bilateral I/O

Multilateral I/O

Community

Business Day

20152013 2014

T2S

Wav

e 1

Q2 Q1 Q2

Pilot Phase

Go Live

CSDs and Central Banks

• Participate in all testing stages

• Coordinate and support the testing

activities of their communities

CSD participants and Payment Banks

• DCPs participate in the Connectivity

testing stage

• DCPs and ICPs participate in the

Community and Business Day testing

stages

Key concerns of ICPs

What will my service providers’ offering be?

How will my current communication be

impacted by my provider’s requirements for

T2S?

What are the functional changes introduced

by T2S? What opportunities do they bring?

How can I leverage T2S opportunities without

going direct?

Who can help me assess the STP quality of

Corporate Actions, Collateral, Liquidity

communications from my different providers?

…

Getting ready for T2S

Familiarize with T2S

• Understanding T2S functionalities, flows and messages

• Training and knowledge transfer

Impact assessment

• Analyse impact on your messaging and processes

• Standards gap analysis

Design & Implementation

• Design revised message flows

• Implement changes &test with providers

T2S – ISO messages for

liquidity and collateral

management

Cash and Liquidity

management

Auto-collateralisation

(Central Bank/ Client

collateralisation, Limit

management, ...)

Bilateral collateral

management (Repo &

pledge, CCP scenario, …)

T2S – ISO messages for

securities settlement and

management

T2S message flows and

related services, illustrated

against a specified

business context and set of

actors

Case scenarios to illustrate

detailed message content

for settlement, liquidity

management, static data

T2S in 90 minutes

Impact of T2S on different

market players

T2S features: lifecycle

management and

matching, instruction

maintenance, settlement,

liquidity management,

accounting day

10

SWIFT Training for T2S

Understanding T2S-related messages and flows

ISO 20022

for S&R (and CA)

ISO 20022 for securities

in the settlement and

reconciliation (and

corporate actions)

lifecycles

Case scenarios to

illustrate detailed

message content

ISO 15022 enhanced

for ICPs

ISO 15022 enhanced

messages, the new

processes and flows behind

Case scenarios to illustrate

new guidelines and

implementation attention

points

BAH in

T2S environment

Use of BAH both for

securities and payments

ISO 20022 messages in

the settlement lifecycle

The chain and various

scenarios between

participants, CSDs and

the T2S platform

11

SWIFT Training for T2S – what’s next

Insight on future modules

UNDER DEVELOPMENT

ISO 20022

for S&R (and CA)

Analyse potential of ISO 20022

richness to upgrade your services

Apply your local practice or CSD

guidelines to ISO 20022

Build ISO 20022 scenarios and

communication flows customised

to your market/business

Map your current format with ISO

20022 and select the best options

to manage gaps

Document and implement your

new communication model (be it

translation from/to or direct

implementation of ISO 20022)

ISO 15022 enhanced

for ICPs

Apply your local practice or CSD

guidelines to ISO 15022 enhanced

Build ISO 15022 enhanced

scenarios and communication flows

customised to your market/business

Map your current format with ISO

15022 enhanced and select the best

options to manage gaps

Document and implement your new

communication model (be it

translation from/to or direct

implementation of ISO 15022

enhanced)

BAH in

T2S environment

Business workshop(s) to build

BAH scenarios in your specific

business model, considering your

role(s) in the settlement chain and

the data to be sent/received from

your service providers/customers

Technical workshop(s) to

understand the technical aspects

of implementing the BAH

signature

12

SWIFT Consulting for T2S – what’s next

Insight on future modules

A number of MT changes have been made to maintain compatibility with

ISO 20022 as it evolves to support the requirements of T2S.

Impact of T2S on financial messaging

Standards gap analysis

Domestic formats

ISO 15022 (enhanced)

ISO 20022

ICP

ISO 15022

ISO 20022

T2S

DiCoA Domestic

ISO 20022

Standards gap analysis

Example: New functionalities offered

sese.023

MT 543 to deliver out

a restricted balance

must be “enhanced”

i.e. refer to the

restriction reference.

ICP

T2S

DiCoA

MT 543

T2S will allow CSDs and NCBs to define their own restriction types.

Restriction types restrict the usage of a balance:

- blocking

- reservation

- earmarking

When a certain balance becomes restricted, T2S assigns a ‘restriction

reference’ to which all subsequent messages have to refer to.

MyStandards for T2S and CSD Communities

Easy access to your market guidelines and adaptation requirements

ISO 15022

ISO 20022

ICP

T2S

ISO 20022

DiCoA

Use MyStandards to

manage and publish

T2S specifications

Consume the T2S

specifications in

MyStandards

Enrich, compare,

manage and publish

their internal

specifications

Consume the specs of

service providers via

MyStandards.

Use the platform to

document current

capabilities and

compare.

ISO 15022 ISO 15022E ISO 15022E ISO 20022

Bridging the gap between ISO 15022 and ISO 20022 by introducing an intermediary

layer: ISO 15022 Enhanced

ISO 15022

ISO 20022

ICP

T2S

ISO 20022

DiCoA

Driven by your CSDs’/ agents’

specifications

MyStandards

Readiness Portal

for T2S

MyStandards

Readiness

Portal

Migrating to

new/ enhanced

messaging

Define scope of

Implementation

+ business scenarios

DiCoA flows with T2S

MyStandards and the Readiness Portal Simplifying T2S implementation

Getting Ready for T2S User Testing Execution

Coordinated testing services with SWIFT

Present at every step of the process (strategy, planning, design,

execution, quality)

In-depth expertise in T2S business and technical domains

Using best-in-class testing management tools

Unique integrated set of products to automate testing against T2S usage guidelines

Accompanying you till T2S connectivity testing over SWIFT VAN

Customer

resources

Test Manager

Business

&Technical

Experts

Getting ready for T2S

Familiarze with T2S

• Training courses on

• ISO messages for securities settlement, liquidity and collateral management

• ISO 15022 enhanced for ICPs

• Etc…

Impact assessment

• Business Consulting: Impact Assessment studies & project management

• Standards gap analysis

• Message usage guideline definition

• Etc…

Design & Implementation

• Technical consulting: functional and technical design

• Testing services

• Readiness Portal

• Etc….

Thank You