Kluczowe problemy poruszane na Advisory Group: Pricing, Future T2s Governance

Kluczowe problemy poruszane na Advisory Group: • Pricing,• Future T2s Governance • User Connectivity

Sławomir PanasiukWiceprezes Zarządu KDPW SA Warszawa 14 grudnia 2010

European Central Bank - T2S Programme Office www.ecb.europa.eu/t2s

T2S Pricing

EUROPEAN CENTRAL BANKT2S Programme Office

T2S costs

Development phase (total, from Jan. 2008 to Sep. 2014):4CB: € 256.4 millionECB: € 90.2 million

Migration and running phase (annual average, from Sep. 2014 to Sep 2022)4CB: € 51.0 millionECB: € 9.2 million

Capital cost over development and migration/running phase of eight years: € 88.9 million in total

Contingency provision during migration and running phase: € 41.1 million over eight years

Volume estimates for future years

Estimates of future annual growth rates based on March 2010 AG questionnaire: Expected annual growth

rates2011 +3.2%

until T2S go-live

+4.7%

after T2S go-live

+6.3%

(in million securities settlement transactions)Full 2010(projected)

1) all euro settlement of euro area CSDs 146.6

2) all euro settlement and Scandinavian non-euro business

185.5

3) all settlement from CSDs having signed the MoU

271.4

Changes to pricing proposal presented in September AG

The T2S Programme Board presented a range of prices to the September AG, depending on which non-euro currencies are in T2S the length of the cost recovery period

Depending on the scenario, the price ranged from 12 – 24 cents per DVP instruction.

Based on the feed-back of the AG, the T2S Programme Board modified several parameters : Proportion of revenue to be generated from information

services was increased from 20% to 25% One year extension of the cost recovery period to 7 years

of full operation (plus 1 year migration) De-linking of the price from participation of particular

non-euro currencies and instead targeting a certain volume share

N.B. no support for step-wise pricing

T2S pricing policy – I

Governing Council decided to fix the DvP price at 15 cent per instruction for the period Sep. 2014 to Dec. 2018

Commitment not to increase T2S fees by more than 10% per year between 2019 and the end of the cost recovery period, i.e. September 2022

This pricing policy is subject to the following conditions: i. in addition to the euro settlement volume, non-euro

currencies add at least 20% to the total volume; ii. the securities settlement volume in the EU is no more

than 10% lower than the volumes projected by the T2S Programme Office, which are based on information provided by market participants; and

iii. the tax authorities confirm that the Eurosystem will not be charged VAT for the T2S services it provides.

T2S pricing policy – II

For period Jan 2019 – September 2022: Still many unknowns, which make a price guarantee

difficultBUT Expected volume increases caused by dynamic effects Percentage of non-euro currencies likely to be higher

than 20%

The T2S Programme Board aims at further lowering settlement prices below 15 cents

Price list – I

Tariff items Price Explanation

Settlement services † Two instructions per transaction will be charged

Delivery versus payment 15 cents per instruction†

Free of payment 9 cents per instruction†

Payment free of delivery 9 cents per instruction†

Internal T2S liquidity transfer 9 cents per transfer

Account allocation 3 cents per instruction†

Matching 3 cents per instruction†

Intra-position movement 6 cents per transaction

Intra-balance movement 6 cents per transaction

Auto-collateralisation service with payment bank

15 cents for issue and return, charged to collateral provider

Intended settlement day failed transaction 15 cents surcharge per business day failed per instruction†

Daytime settlement process 3 cents surcharge per instruction†

Price list - II

Tariff items Price Explanation

Settlement services (continued) † Two instructions per transaction will be charged*Daytime congestion charge, from 2 - 4 p.m. Free additional surcharge per instruction†

*Auto-collateralisation service with NCB Free for issue and return, charged to the collateral provider*Instruction marked with ‘top or high priority’ Free surcharge per instruction†

*Cancellation Free per instruction†

*Settlement modification Free per instruction†

Information servicesA2A queries and reports 25% of

annual revenue

per business item in any report or query generated

U2A queries per executed search function

Message subscription services per message

Account management services*Securities account Free Fee options: a) monthly fee per ISIN in the account or

b) monthly fee per account*Fee per cash account Free Monthly

* These items will initially be set at a zero price, presuming that actual usage will be within an expected consumption pattern. However, should there be a stronger than expected use of the IT system resources which adversely affects T2S performance, it will be reconsidered to charge for these items. Such review will occur at regular intervals.

European Central Bank - T2S Programme Office www.ecb.europa.eu/t2s

Proposal for future T2S Governance

EUROPEAN CENTRAL BANKT2S Programme Office

Non-euro Currencies Steering Group(non-euro area NCBs that signed Currency Participation Agreement)

ECB Governing Council

Executive Board

CSD Steering Group

(CSDs that signed Framework Agreement)

Advisory Group

National UserGroups

Information Sessions with all Stakeholders

T2SBoard

Eurosystem Informal GroupESCB/ Eurosystem Committees

Non-euro central banks’governors / boards

Governors’ Forum

Proposed T2S Governance structure

Changes in the remit of the CSG

European Central Bank - T2S Programme Office www.ecb.europa.eu/t2s

User Connectivity for T2S

Update

EUROPEAN CENTRAL BANKT2S Programme Office

Status and plan

Formal launch of licensing of up to 3 providers (NSPs) at end of February 2011

Delayed by two months to take account of feedback from Technical Dialogue held on 25 October 2010

Licences to be awarded in Sep 2011 Proof of concept, to prove feasibility of each NSP’s

design, finishes Mar 2012 Acceptance testing of full scale solution, finishes

May 2013 Then up to 3 licensed solutions are available for

user testing by CSDs, DCPs and CBs. 14

Design objectives

The solutions should be compliant with the Giovannini protocol recommendations and in line with the URD requirements

There should be competition between NSPs in order to achieve low prices, both at the start of, and during the life of, T2S

To support low prices, we should achieve: As little value added service as possible

provided by the NSPs, while consistent with T2S requirements

As much re-use of existing NSP products as possible, to keep their costs low

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Key connectivity services

UR reference Description

Services provided by NSP

A2A - Store and forward T2S.12.260 Audit log of message or file; Guaranteed delivery of message or file; Delivery

once, and only once, of message or file

A2A - Real-time T2S.12.260 Channel for querying the T2S application

U2A T2S.11.440 Web access to the T2S application

PKI T2S.12.050 Public key infrastructure is delivered by network service provider

Time stamping T2S.12.050 Time stamping is ensured by T2S and network service provider

Confidentiality T2S.18.540; T2S.18.550 Confidentiality is ensured by network service provider on the network level

End-to-end

Integrity T2S.12.050 Integrity is ensured on the ISO 20022 protocol level (end-to-end)

Non-repudiation T2S.12.050 Non-repudiation of origin is ensured on the ISO 20022 protocol level (end-to-end)

Authentication T2S.11.440 Authentication is ensured on the ISO 20022 protocol level (end-to-end)

Safety

Achieving safety is not free of cost! NSPs must provide value-added security features These have been minimised

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Safety and operational disruptions

The level of operational risk rises very rapidly as the number of channels for incoming and outgoing traffic is increased. That is why we have limited the number to “up to 3” NSPs (as already explained to the AG).

T2S is “built on TARGET2” – which has only one such channel.

Each NSP thus provides an essential value added service because concentrates traffic from many Actors into one stream of data arriving at T2S (and vice versa for outbound).

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The interpretation of “direct lines” NSPs are acting as network traffic concentrators. UR [T2S.12.290] is interpreted ensuring that an

Actor can buy network capacity (bandwidth) rather than pay for each unit of traffic (message or file).

Each Actor can agree bilaterally on the level of service provided to him by the NSP.

And competition will ensure that the extra costs for the limited mandatory value added services will be recovered by the NSP via a fair economic price.

This interpretation is not new; it is inescapable in the context of the decision to limit the number of connections to up to 3, and has already been presented on several occasions.

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Interpretation of the “pull” service

The URD refers to Actors “pulling” data from T2S [T2S.12.260]

This business requirement is met on the technical level – as it is in many other systems – by Actors pushing a request to T2S which then pushes the data to the requestor.

This also simplifies the system build by Actors since they have only one operating model. 19

Approval

The AG is asked to approve the preceding interpretations.

The AG may wish to consider whether the URD need to be formally revised, after appropriate consideration.

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