Top Banner
August 2016 IMPLEMENTING TARGET2 SECURITIES ( T2S ) Wave 3 August 2016
10

IMPLEMENTING TARGET2 SECURITIES T2S · 2019-06-19 · Implementing TARGET2-Securities (T2S) August 2016 5 Feature Description T2S Optional/ Mandatory Additional Comments Auto-partial

Jun 22, 2020

Download

Documents

dariahiddleston
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
  • August 2016

    IMPLEMENTING TARGET2‐SECURITIES (T2S) Wave 3

    August 2016

  • 2Implementing TARGET2-Securities (T2S) August 2016

    T2S Explained .............................................................................................3

    Key Features of T2S ....................................................................................4

    T2S Matching Standards .............................................................................6

    Goldman Sachs Standard Settlement Instructions .....................................7

    Frequently Asked Questions .......................................................................8

    Contact Details ......................................................................................... 10

    TABLE OF CONTENTS

  • 3Implementing TARGET2-Securities (T2S) August 2016

    INTRODUCTION

    The purpose of this document is to provide our clients and counterparties with information regarding TARGET2-Securities (T2S) and the settlement of securities transactions with Goldman Sachs (GS); within the respective markets impacted in Wave 3. This document also includes Goldman Sachs' Standard Settlement Instructions (SSIs) for Wave 3. T2S is intended to create opportunities for

    European post-trade harmonization, efficiency and enhanced settlement processing.

    SUMMARY OF T2S• T2S is a European Central Bank (ECB) led initiative to create a harmonized securities settlement

    platform for the Euro markets

    • T2S provides settlement in Euro central bank money for the majority of securities across Europe

    • T2S is a technical platform that connects existing European Central Securities Depositories (CSD) and performs the settlement processing function

    T2S MIGRATION SCHEDULE

    T2S is being implemented in 5 Waves from June 2015 until September 2017. Wave 1 went live in two stages in June and August 2015, Wave 2 went live in March 2016. Wave 3 is scheduled to go live on September 12, 2016 subject to ECB and respective CSD readiness. The overall schedule for the T2S program is as follows:

    T2S EXPLAINED Harmonized Settlement in Europe

    * GS has no local CSD presence

    ** Euro denominated settlement only

    BOGS GREECEMALTA STOCK EXCHANGE*

    DEPOZITARUL CENTRAL ROMANIA**SIX SIS SWITZERLAND**

    2015 2016 2017

    NATIONAL BANK OF BELGIUMINTERBOLSA PORTUGAL

    CBF GERMANYOEKB AUSTRIA

    CDCP SLOVAKIA*KDD SLOVENIA*

    KELER HUNGARY** LUXCSD LUXEMBOURG*

    WAVE 1A

    JUNE 22, 2015

    WAVE 2

    MARCH 29, 2016

    WAVE 4

    FEBRUARY 6, 2017

    WAVE 1B

    AUGUST 31, 2015

    WAVE 3

    SEPTEMBER 12, 2016

    FINAL WAVE

    SEPTEMBER 18, 2017

    MONTE TITOLI ITALY EUROCLEAR ESES BELGIUM EUROCLEAR ESES FRANCE

    EUROCLEAR ESES NETHERLANDS VP SECURITIES DENMARK**

    VP LUX LUXEMBOURG*

    EUROCLEAR FINLAND IBERCLEAR SPAIN

    EVK ESTONIA* LCD LATVIA*

    LCVPD LITHUANIA*

  • 4Implementing TARGET2-Securities (T2S) August 2016

    KEY FEATURES OF T2S & GOLDMAN SACHS' APPROACH

    T2S has introduced a set of harmonized settlement features, which will replace the existing market features as each Wave is implemented. There are a range of mandatory and optional features to manage settlement in T2S.

    The table below provides a description of the key features and outlines the approach that Goldman Sachs is taking for each. For further information, please refer to the Frequently Asked Questions on pages 8 & 9.

    Feature Description T2S Optional/Mandatory

    Additional Comments

    Settlement Day Schedule

    Two standardized settlement windows (times in CET):

    • Night-time: 20:00 (SD-1) – 03:00 (SD)

    • Real-time: 05:00 – 16:00 (DVP)/18:00 (FOP) (SD)

    Mandatory Settlement instructions must be matched in T2S by 18:45 (SD-1) to be eligible for Night-time settlement.

    CET: Central European Time

    SD: Settlement Date

    DVP: Delivery-versus-Payment

    FOP: Free-of-Payment

    Cash Tolerance

    Two-tiered cash matching tolerance:

    • €25 for transactions with cash counter value > €100,000

    • €2 for transactions with cash counter value ≤ €100,000

    Mandatory GS will adopt this new standard.

    Recycling Recycling of an instruction is dependent on its state:

    • Matched instructions are auto-recycled indefinitely unless bilaterally canceled

    • Unmatched instructions are canceled 20 T2S business days after the intended settlement date or the date of the last status change

    Mandatory GS will adopt this new standard.

    Bilateral Cancelation

    Cancelation of an instruction is dependent on its state:

    • Matched instructions must be canceled bilaterally by both counterparties

    • Unmatched instructions can be canceled unilaterally by the party who placed the instruction at any time or until canceled by T2S

    Mandatory GS will adopt this new standard.

    BIC11 T2S mandates the use of 11-digit BIC codes for messaging, including Standard Settlement Instructions (SSI)

    Mandatory Clients and counterparties are required to provide BIC11 compliant SSIs.

    BIC: Bank Identifier Code

    Place of Settlement & Place of Safekeeping

    T2S allows for simplified cross-border settlement and supports the Investor CSD model. Where the Investor CSD model is used, settlement instructions are required to include both the Place of Settlement and Place of Safekeeping BIC11 codes.

    Mandatory Clients and counterparties are required to provide BIC11 compliant SSIs, including Place of Settlement and Place of Safekeeping details.

    Standard Settlement Instructions

    New Party 1 BIC11 codes (CSD participant), Party 2 BIC11 codes (client of CSD participant) and Securities Account (SAC) numbers may be required for participants migrating to T2S.

    Mandatory Clients and counterparties are required to provide BIC11 compliant SSIs in advance of any changes.

    KEY FEATURES OF T2SUnderstanding the Impacts

  • 5Implementing TARGET2-Securities (T2S) August 2016

    Feature Description T2S Optional/Mandatory

    Additional Comments

    Auto-partial Automatic partial settlement of matched instructions, using available inventory to reduce risk and increase settlement liquidity. The four options for auto-partial are:

    • Auto-partial not allowed

    • Auto-partial allowed, with cash threshold

    • Auto-partial allowed, with quantity threshold

    • Auto-partial allowed, no threshold

    Optional Instructions will only be in eligible for auto-partial settlement if both parties have opted-in. GS will opt-in for auto-partial settlement with quantity threshold of 1, except for Securities Lending activity.

    Prioritization Four levels for prioritization of settlement instructions:

    • Level 1: CSD/National Central Bank operations only

    • Level 2: Trading Platform/Central Counterparty activity only

    • Level 3: High priority (defined by participant)

    • Level 4: Default priority (defined by participant)

    Optional GS will adopt this new standard.

    Hold & Release Hold & Release in T2S has two behaviors:

    • Hold: A function to send a settlement instruction to T2S for matching but preventing settlement

    • Release: A function to send a settlement instruction to T2S for matching and settlement

    Optional GS will not use Hold & Release directly, however our local agent banks may manage this process on our behalf. GS will send all instructions in ‘release’ status to its agent banks GS will not offer Hold & Release capabilities to clients.

    Linking The Linking functionality allows for interdependencies between two or more settlement instructions. This can based on (but not limited to):

    • Nature (i.e. before, after, with and pool reference)

    • Origin (i.e. re-alignment and substitution)

    • Multiplicity (i.e. 1-to-1, 1-to-Many, Many-to-Many)

    • Other references (i.e. common identification, reference to related message)

    Optional GS will not be linking settlement instructions.

    Additional Matching Fields

    Additional matching fields will be used to indicate corporate action attributes on an instruction:

    • Opt-out ISO transaction condition indicator

    • CUM/EX indicator

    Optional See page 6 for further details.

    Optional Matching Fields

    Optional matching fields provide new matching criteria for instruction matching:

    • Common trade reference

    • Client of delivering CSD participant

    • Client of receiving CSD participant

    • Securities account of delivering party

    • Securities account of receiving party

    Optional See page 6 for further details.

    KEY FEATURES OF T2SUnderstanding the Impacts - Continued

  • 6Implementing TARGET2-Securities (T2S) August 2016

    T2S MATCHING FIELDS

    Further to the existing mandatory matching fields, T2S will be introducing two new types of matching fields, additional and optional. Additional matching fields are used to indicate corporate action attributes, whilst the optional matching fields provide extended matching criteria. Neither types of fields are mandatory but have different behaviors. The approach taken by Goldman Sachs for these matching fields is outlined below.

    ADDITIONAL MATCHING FIELDS

    The use and matching of the Opt-out ISO transaction condition indicator results in the exclusion of an instruction from automatic market claims. The CUM/EX indicator specifies the income entitlement due on a transaction. In order to maintain matching consistency, Goldman Sachs will not be instructing any of the additional matching fields. These fields will remain blank in Goldman Sachs' settlement instructions.

    OPTIONAL MATCHING FIELDS

    The optional matching fields provide extended criteria for market participants to use in the matching process if required. The optional matching fields will remain blank by default in Goldman Sachs' settlement instructions, unless specifically provided by the client. If provided, Goldman Sachs will instruct the 'client of delivering/receiving CSD participant' (also known as Party 2), for matching accuracy. The 'common trade reference' will not be supported.

    Matching Criteria

    The additional matching fields only become a matching criterial if at least one party

    instructs a value:

    Value 1 + Value 1 = Match Blank + Blank = Match

    Value 1 + Blank = No Match Value 1 + Value 2 = No Match

    GS Approach

    GS will not be instructing these additional matching fields in line with expected

    market practice

    Field

    Opt-out ISO transaction condition indicator

    CUM/EX indicator

    Matching Criteria

    The optional matching fields only become a matching criteria if both parties instruct a value:

    Value 1 + Value 1 = Match Blank + Blank = Match

    Value 1 + Blank = Match Value 1 + Value 2 = No Match

    GS ApproachGS will instruct the 'client of

    delivering/receiving CSD participant', all other optional matching fields

    will remain blank by default

    Field

    Common trade reference

    Client of delivering CSD participant

    Client of receiving CSD participant

    Securities account of delivering party

    Securities account of receiving party

    T2S MATCHING STANDARDSGoldman Sachs' Approach

  • 7Implementing TARGET2-Securities (T2S) August 2016

    REVISED STANDARD SETTLEMENT INSTRUCTIONS FOR WAVE 3 MARKETS

    To comply with the BIC11 format and changes to CSD infrastructures, Goldman Sachs has provided revised SSIs for the T2S Wave 3 markets below.

    Market/Effective Settlement Date

    Goldman SachsInternational

    Goldman Sachs & Co

    Goldman Sachs International Bank

    Goldman SachsBank USA

    Belgium Equity

    September 12, 2016

    AG: PARBFRPPXXXCL: GSILGB2XXXXAC: 48233EPS: CIKBBEBBXXXT2S SAC: CIKBPARBFRPPXXX000L10

    AG: PARBFRPPXXXCL: GOLDUS33XXXAC: 48248LPS: CIKBBEBBXXXT2S SAC: CIKBPARBFRPPXXX000L10

    N/A N/A

    France Equity

    September 12, 2016

    AG: PARBFRPPXXXCL: GSILGB2XXXXAC: 46450UPS: SICVFRPPXXXT2S SAC: SICVPARBFRPPXXX000L10

    AG: PARBFRPPXXXCL: GOLDUS33XXXAC: 46443KPS: SICVFRPPXXXT2S SAC: SICVPARBFRPPXXX000L10

    N/A N/A

    France Fixed Income

    September 12, 2016

    AG: MGTCBEBEECLCL: GSILGB2XXXXAC: 94589PS: SICVFRPPXXXT2S SAC: SICVMGTCBEBEECL000LM94589

    AG: MGTCBEBEECLCL: GOLDUS33XXXAC: 90004PS: SICVFRPPXXXT2S SAC: SICVMGTCBEBEECL000L10

    AG: MGTCBEBEECLCL: GOSNGB2LXXXAC: 18814PS: SICVFRPPXXXT2S SAC: SICVMGTCBEBEECL000LM18814

    AG: MGTCBEBEECLCL: GSTRUS33XXXAC: 96266PS: SICVFRPPXXXT2S SAC: SICVMGTCBEBEECL000L10

    Netherlands Equity

    September 12, 2016

    AG: CITTGB2LXXXCL: GSILGB2XXXXAC: 0000711796PS: NECINL2AXXXT2S SAC: NECICITTGB2LXXX000LM0000711796

    AG: CITTGB2LXXXCL: GOLDUS33XXXAC: 0000711801PS: NECINL2AXXXT2S SAC: NECICITTGB2LXXX000L10

    N/A N/A

    Netherlands Fixed Income

    September 12, 2016

    AG: CITTGB2LXXXCL: GSILGB2XXXXAC: 0000711797PS: NECINL2AXXXT2S SAC: NECICITTGB2LXXX000L10

    AG: CITTGB2LXXXCL: GOLDUS33XXXAC: 0000711802PS: NECINL2AXXXT2S SAC: NECICITTGB2LXXX000L10

    N/A AG: CITTGB2LXXXCL: GSTRUS33XXXAC: 0000711794PS: NECINL2AXXXT2S SAC: NECICITTGB2LXXX000L10

    Denmark Equity & Fixed Income (Euro denominated settlement only)

    September 12, 2016

    N/A N/A N/A N/A

    Luxembourg Equity & Fixed Income (VP Lux only)

    September 12, 2016

    N/A N/A N/A N/A

    GOLDMAN SACHS STANDARD SETTLEMENT INSTRUCTIONS T2S Wave 3 Markets

  • 8Implementing TARGET2-Securities (T2S) August 2016

    AUTO-PARTIAL

    1. Will GS subscribe to auto-partialling?

    Yes, GS has opted-in for auto-partialling for both receipts and deliveries. The only two exceptions will be Greek Fixed Income securities and all Securities Lending activity (both in line with expected market practice).

    2. How can we ensure our instructions with GS are auto-partialled?

    Both parties need to opt-in for auto-partial for the process to work. If one party does not then the instruction will not auto-partial.

    STANDARD SETTLEMENT INSTRUCTIONS (SSI)

    3. Will GS be adopting the new BIC11 format?

    Yes, GS will be adopting BIC11 in SWIFT instructions and will be updating the appropriate SSI channels accordingly.

    4. What methodology is GS using to convert BIC8 to BIC11?

    Unless a client or counterparty notifies us otherwise, we will take the default approach of appending “XXX” at the end of the BIC8 to make it BIC11 compliant.

    5. What will be the impact to the GS SSIs for the Wave 3 markets post go-live?

    GS is maintaining its existing sub-custody network for Wave 3, therefore we do not anticipate any significant changes to our SSIs or place of settlement details. For full details, please see revised SSIs on page 7 of this document.

    6. What is the T2S SAC number and is it a required matching criteria?

    The Settlement Account (SAC) is the designated T2S account number for each CSD participant. The SAC number is not a required matching criteria and GS will not be instructing with SAC numbers. GS has provided this for informational purposes only, should your agent bank or custodian require it for matching.

    7. Will GS be updating its SSI records in DTCC Omgeo ALERT for the Wave 3 markets?

    Yes, these will be updated from the go-live date of September 12, 2016.

    8. Will GS be using different Place of Settlement BICs for the Wave 3 markets?

    No, GS will continue to use existing Place of Settlement details.

    9. When does our organization have to make any changes with respect to Wave 3 SSIs with GS?

    The Wave 3 SSIs provided by GS will be effective from settlement date September 12, 2016, which is the date of the Wave 3 scheduled migration to T2S. Prior to this date, GS will continue to use its existing SSIs.

    FREQUENTLY ASKED QUESTIONSKey Points for Consideration

  • 9Implementing TARGET2-Securities (T2S) August 2016

    ADDITIONAL & OPTIONAL MATCHING FIELDS

    10. Will GS instruct any of the new additional matching fields?

    No, GS will leave the additional matching fields blank. Therefore, we will not instruct either the Opt-out ISO transaction condition or CUM/EX indicators. This is in line with expected market practice.

    12.Will GS instruct any of the new optional matching fields?

    Yes, GS will instruct the 'client of delivering/receiving CSD participant', however, all other optional matching fields will remain blank by default. This is in line with expected market practice.

    MISCELLANEOUS

    13. Will GS make use of the Hold and Release functionality in T2S?

    No, GS will not use Hold & Release directly, however our local agent banks may manage this process on our behalf. GS will send all instructions in ‘release’ status to its agent banks. GS will not offer Hold & Release capabilities to clients.

    14. Will GS make use of the Prioritization functionality in T2S?

    Yes, GS will prioritize instructions where required.

    15. How does T2S relate to the T+2 settlement cycle change?

    Whilst both T2S and T+2 provide post-trade harmonization across Europe, they are separate initiatives. T2S is a technical settlement platform created by the ECB for Euro-settling markets, whereas T+2 is a settlement cycle change, which came into effect under the Central Securities Depository Regulation (CSDR) on October 6, 2014 for markets within the European Union.

    FREQUENTLY ASKED QUESTIONSKey Points for Consideration

  • August 2016

    DISCLAIMER

    This message has been prepared by personnel in the Operations Departments of one or more affiliates of The Goldman Sachs Group, Inc. ("Goldman Sachs") and is not the product of the Global Investment Research Department or Fixed Income Research. It is not a research report and is not intended as such.

    Goldman Sachs has made available to you this as a courtesy for your information only. Goldman Sachs is under no obligation to notify you or seek your consent prior to changing any of the content and as a result the information contained in this document may change from time to time without prior notice to you. This material contains information provided by third parties, which may be indicative and subject to change and may not be complete, accurate or current and Goldman Sachs has no liability with respect thereto. Goldman Sachs takes no responsibility for keeping the information up to date. The information is confidential and must not be distributed to a third party or within your organisation without our prior written consent. Goldman Sachs accepts no liability whatsoever from the use of the information contained in the attached document. It does not amend or supplement any agreement governing your relations with Goldman Sachs. Nothing contained in this document is intended, nor should be construed in any way as, legal, tax or accounting advice. You should perform such due diligence as you deem fit, including consulting your own independent legal, tax, accountancy and other professional advisors, as necessary or appropriate.

    Contact Details

    For any questions or queries please contact the Goldman Sachs T2S Project Team at gs-t2s-info@gs.com.

    mailto:gs-t2s-info%40gs.com?subject=T2S%20Project%20Team%20question