Monte Titoli for T2S: Project structure and major ... · PDF fileProject structure and major opportunities ... Target2-Securities: Project Overview 2. ... for T2S Technical development

Monte Titoli for T2S:

Project structure and

major opportunities

Webinar session

14th April 2014

London Stock Exchange Group Page 2

Agenda

1. Target2-Securities: Project Overview

2. Monte Titoli in T2S

3. Italian market harmonisation process

4. T2S Status Update


1. Target2-Securities:

Project Overview


T2S is a centralised settlement platform designed by the ECB which aims

to provide CSDs across the European Union with a harmonised settlement

service

• T2S will foster competition, open new business opportunities and remove current barriers and inefficiencies in the European post-trade industry

• General reduction of costs for settlement, including cross-settlement Efficient

• Real-time DvP in central bank money and settlement across borders

• Both cash (Target2) and securities (CSDs) integrated onto a single IT platform

Integrated model

• T2S will achieve a harmonised and commoditised settlement in Central Bank Money (CeBM) in Euro and other eligible currencies for most of securities Multicurrency

What is Target2-Securities?


T2S Structure


Connectivity to T2S

• The Eurosystem has defined two modes of connectivity to interact with the platform:

Direct Connection or Indirect Connection

• Independently from the connectivity chosen, all participants will maintain their

contractual and business relationship exclusively with the CSD

• Direct connection with the platform

• Implementation of ISO20022 message standards

• Access to all functionalities provided by T2S

• DCPs need to be technically certified by the ECB through specific tests

• DCPs need to be authorised by the CSD in order to prove their business compliance with the rules

Direct Connected Participants

(DCPs)

• ICPs interact with T2S through a CSD as intermediary

• ICPs will adopt CSD’s connectivity configurations

• ICPs will send their messages to T2S via the CSD’s systems and receive related reporting from the CSD itself

• This modality will entail minimal connectivity impact on ICPs

Indirect Connected Participants

(ICPs)


For Users For Markets

• Same processing and reduced settlement fees for domestic/cross-border transactions

• Higher level of competition in post-trade industry

• Possibility to access all securities in T2S from one account in only one CSD

• A Single Market for financial services in Europe through harmonised clearing and settlement

• Potential to optimise collateral and liquidity management

• Reduced settlement risks on cross-border transactions to positively affect financial stability

• Reduced back-office costs by centralising settlement and thus streamlining interfaces

• Reduced costs of capital for firms lead to economic growth

• Investors/issuers can more easily diversify their portfolios/investments

• Integrated use of collateral allows for more capital resources to be released in the financial system

T2S Benefits

T2S European Governance


T2S Community

T2S project milestones

• At present, 24 CSDs have committed to migrate to T2S by 2017

• For a smooth transition, the migration will be managed in 4 Waves


SP= Synchronisation Point; point in time at which the T2S Programme is to reach a specific objective

High-level T2S Programme Plan

The main phases that articulate the T2S Programme Plan, as established by the ECB, are:

Start Mon 17/07/06

SP17 SP13

SP6 SP5

SP4

SP3

SP2

SP1

T2S Go-Live

Migration Phase (SP14 -

16)

User Testing Phase (SP7-12)

EAT Development & Testing Phase

Specification Phase

Preparation Phase

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

We are here

Finish Tue 31/07/17

Page 10 London Stock Exchange Group

31/03/14 Start of EAT


2. Monte Titoli in T2S

Introduction to Monte Titoli


• Monte Titoli is the 3rd Central Securities Depository in Europe with

more than € 3,200 billions of assets under custody

• Client base:

• More than 400 banks and brokers (40% international)

• Infrastructures: 9 trading platforms, 7 CCPs, 9 CSD/ICSD

• 42,000 financial securities under custody

• More than di 2,200 issuers

• Rating AA by Thomas Murray in 2012, the highest rank assigned to a CSD

• Comprehensive service offer towards multiple post-trade services at each

stage of securities lifecycle

• International role as part of the London Stock Exchange Group and beyond

Issuer services

Pre-Settlement

Settlement Custody Asset

servicing


T2S

Kick-off

22 June

2015

Monte Titoli

for T2S

Technical development

Operative development

Client involvement and readiness

• Monte Titoli is migrating to T2S in Wave 1 (Go-Live: 22 June 2015)

• As a frontline actor in Wave 1, Monte Titoli wants to lead its community of customers by

providing:

Monte Titoli in T2S

Monte Titoli Governance for T2S

Monte Titoli manages with the IT National User Group (IT-NUG) the internal and external

processes which stands behind T2S migration, implementation and ongoing use

IT NUG

Market operators

Authorities (Consob, Bank

of Italy)

Market infrastructure

Associations


• Monte Titoli will offer one single point of

access to all T2S markets

• The offer for those markets will include

complete servicing for settlement,

safekeeping, asset servicing (inclusive of

extensive income processing, corporate

actions and fiscal services) and collateral

management

• Monte Titoli will also offer pre-settlement

services in order to integrate T2S while

maintaining flexibility and ensuring minimum

impact on clients


Custody

Asset servicing

Liquidity

Reporting

T2S markets

Monte Titoli integrated offer for T2S

Connectivity

Settlement


Monte Titoli/T2S pricing

• Until end of Wave 1: commitment to maintain the cost

for domestic settlement as it is (€ 0,475) inclusive of

current services for ICP and DCP

• Starting from Wave 2 Monte Titoli will:

introduce a lower fee for markets in T2S. Fee to be

applied to other markets when the relevant Issuer

CSD joins T2S

apply a differentiated fee for ICP and DCP, in order

to guarantee participants a transparent and tailored

pricing, according to their specific needs

• Custody fees for Italian instruments will not be

increased. As investor CSD, Monte Titoli can benefit

from the opening of a direct link with other CSDs and

pass the savings to its clients

Scope

• To foster and monitor client readiness, to

detect early problems, constraints and

roadblocks

• To keep our clients updated on the main

developments of the T2S project in Monte

Titoli and the harmonisation status of the

Italian market

Recent and forthcoming events

• T2S Workshops on Testing & Migration

dedicated to the Italian community

• Planned webinars on specific topics (UR,

Testing, Migration) in 2Q ‘14


Workshops

T2S events

Webinars

Bilateral meetings

MyStandards

T2S community

Main informative flows

MT Training & Communication Plan


3. Italian market

harmonisation process


European Post-trade harmonisation

Post-trade harmonisation is a key objective of T2S because it will enable T2S to realise

its full potential to benefit different groups and stakeholders in the EU financial market

Eurosystem

Market participants

Issuers T2S Team

CSDs

The main goals of the T2S harmonisation are:

• To foster the creation of a single rulebook for

post-trade processes in the T2S Community

• To protect the ‘lean T2S’ concept,

with the exclusion of national

specificities from the T2S

operational blueprint

• To contribute to the financial integration in

Europe

24 T2S Harmonisation activities have

been identified. These activities are

managed under the Guidance of the HSG

Together with the integration process in T2S, MT and its clients have been carrying out an

important process of compliance with the European standards which includes:


Monte Titoli harmonisation process

• Hold/release functionality, bilateral cancellation and second layer matching implemented

• New market practice on the second layer matching (BIC11)

Matching Standard

• Harmonisation custody phase 1

• Corporate Action Cash Payments will be paid in T2 instead of Bi-comp

• New procedure to manage Reorganisations

• Suffix removal

CA on Stocks

• New rules for the management of claims, compensations and transformations (Corporate Actions Sub Group)

CA on Flows

• 710msg for FoP instructions (without matching)

• Matched FoP instructions in X-TRM

• Management of Portfolio Transfer in T2S messages

FoP transactions

• Settlement date shall occur no later than on the 2nd business day after the trading takes place T+2

Apr ‘14

10 Mar’14

2Q’14

TBD

T2S Go Live

T2S Go Live

6 Oct’14

2nd Layer Matching: Italian Mkt Practice


• MT implements a new functionality which allows matching of the client of the CSD participant into the Italian matching platform (X-TRM)

September 2012

• MT introduces the Hold & Release functionality as additional optional feature that complements the benefit of the ‘Second Layer Matching’ (SLM) to fully automate the STP during the settlement and guarantees an early and accurate matching

September 2013

• The Italian financial community implements a Market Practice in order to comply with T2S requirements and promote the use of BIC11 as a preferred international standard identifier for the clients of the CSD participants (ICSD account code identifier as only exception accepted)

February 2014

• The Market Practice enters into force. Participants have to comply with it April 2014

The SLM refers to the 2 new matching fields of the clients of the CSD Participants; as

required by T2S, the SLM is an optional field

• The Migration to T+2 is part of the harmonisation process in view of T2S in order to reduce

barriers to cross-border settlement

• MT will migrate to the T+2 settlement starting from 6th October 2014

• The Central Securities Depository Regulation (CSDR) will state that for the transactions

executed on trading venues, the intended settlement date shall occur no later than on the

second business day after the trading takes place

• As per communication of MT published on 6 February, the T+2 migration will include all

contracts concluded on the following financial instruments:

o Shares, pre-emptive rights, warrants, convertible bonds, closed-end funds

o Government securities and supranational bonds

o Corporate bonds and other debt securities

o Securitized derivatives (certificated and covered warrants)

o ETFs and ETCs/ETNs

• Derivative contracts that provide the delivery of the shares underlying the future and option

contracts will also be harmonised to T+2

Migration to T+2



4. T2S Status Update

Project Status


Major Deliveries

• Functional requirements have been consolidated:

o Publication of Monte Titoli’s User Requirements and User Standards for

Custody and Corporate Actions in T2S

• Messages Specifications have been published in SWIFT, RNI and A2A

o Activation MT Group in MyStandard to foster ISO messages

implementation in T2S

o Publication of X-TRM Message layouts

• Binding Declaration from 13 entities to become DCP with MT in W1

• Monitoring process of the Italian community has started in cooperation with

BoI

Current focus

• Some open points to be addressed (see ‘next steps’)

• Ongoing integration of the new functionality for MT Cash Forecasting

• Contractual framework under review

Delivery

Mar 2014

Jan 2014

Jan 2014

Jan 2014

May 2013

Feb 2014

• The Framework Agreement commits each CSD to specific responsibilities on the

monitoring of the migration activities of its "critical participants"

• The Italian NUG has started a monitoring activity through the proposal of quarterly self-

assessment questionnaires

T2S client readiness


First questionnaire (January 2014):

- to identify operators involved in the migration phase and T2S project managers

- to map the chosen participation modes and IT solutions for connectivity and account setup

- to monitor activities for the forthcoming months

- to identify possible risks related to the migration phase

- most banks are aligned with the project status; nevertheless, in some cases relevant activities haven’t started yet

- account setting will likely be in line with current setups (House and Client account for securities and one cash account)

Objectives Feedbacks

DCPs in Monte Titoli


DCP Binding Declaration

• 13 entities have stipulated a contractual arrangement with Monte Titoli by which they commit to work in close contact with Monte Titoli to join the 1st Wave as DCPs

• The vast majority of these partners and primary international banks and financial intermediaries

• 3 entities are new clients, who have specifically appointed Monte Titoli to exploit the advantages of direct connectivity of T2S since its inception

DCP Communication

• Monte Titoli has set up a direct communication channel to DCPs for a smooth migration to the new platform through a dedicated DCP Workshop

• Main objectives are:

• identify potential issues, constraints, roadblocks or needs

• propose solutions

• escalate to NUG issues recommended corrective action(s)

• monitor progress of resolution activities

Next Steps


Technical

Client involvement and readiness

Organizational

• Message Specifications (ISO 15022, 20022, RNI). Developments: phase-based release from 2014, completion by Q1 2015

• Finalization of the Data migration procedures and tools

• Definition of the contractual arrangement with participants (First Draft)

• Consolidation of Testing and Migration planning

• Review of operational procedures (based on ‘T2S Manual of Procedure’)

• Publication of guidelines for different connectivity modalities (DCP, ICP, Easy Access)

• Ongoing communication plan and training scheduling

• Cooperation with domestic and international authorities to monitor internal and participants’ project status

Delivery

Q4 2014

Q2 2014

Q2 2014

Q4 2014

Q2 2014

2014-2015

2014-2015

Q1 2015

Functional

• MT-T2S User Requirements version 2.3 and User Standards latest version release

Mid Apr 14

Thank you!

Q&A


This publication contains text, data, graphics, photographs, illustrations, artwork, names, logos, trade marks, service

marks and information (“Information”) connected with Monte Titoli S.p.A. (“Monte Titoli”). Monte Titoli attempts to ensure

Information is accurate, however Information is provided “AS IS” and on an “AS AVAILABLE” basis and may not be

accurate or up to date. Information in this publication may or may not have been prepared by Monte Titoli but is made

available without responsibility on the part of Monte Titoli. Monte Titoli does not guarantee the accuracy, timeliness,

completeness, performance or fitness for a particular purpose of the publication or any of the Information. No

responsibility is accepted by or on behalf of Monte Titoli for any errors, omissions, or inaccurate Information in this

publication. This publication does not represent solicitation, by Monte Titoli, of public saving and is not to be considered as

a recommendation by Monte Titoli as to the suitability of the investment, if any, herein described. No action should be

taken or omitted to be taken in reliance upon Information in this publication. We accept no liability for the results of any

action taken on the basis of the Information.

© March 2014 – Monte Titoli S.p.A. – London Stock Exchange Group

All rights reserved

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