Monte Titoli for T2S: Project structure and major opportunities Webinar session 14 th April 2014
Monte Titoli for T2S:
Project structure and
major opportunities
Webinar session
14th April 2014
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Agenda
1. Target2-Securities: Project Overview
2. Monte Titoli in T2S
3. Italian market harmonisation process
4. T2S Status Update
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1. Target2-Securities:
Project Overview
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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?
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T2S Structure
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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)
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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
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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
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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
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31/03/14 Start of EAT
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2. Monte Titoli in T2S
Introduction to Monte Titoli
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• 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
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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
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• 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
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Custody
Asset servicing
Liquidity
Reporting
T2S markets
Monte Titoli integrated offer for T2S
Connectivity
Settlement
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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
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Workshops
T2S events
Webinars
Bilateral meetings
MyStandards
T2S community
Main informative flows
MT Training & Communication Plan
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3. Italian market
harmonisation process
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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:
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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
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• 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
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4. T2S Status Update
Project Status
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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
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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
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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
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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
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