Monte Titoli for T2S: User Requirements - MTS · PDF fileMonte Titoli for T2S: User Requirements Webinar ... T2S Development of ISO 20022 ... Target2 •SWIFT ISO15022

Monte Titoli for T2S:

User Requirements

Webinar

30th June 2014

London Stock Exchange Group Page 1

User Requirements


Overview onT2S

T2S is the Eurozone’s

project for a single

platform for securities

settlement

Real time DVP settlement

in CBM

An integrated system:

securities and cash

Multicurrency

Webinar series "Monte Titoli in T2S" http://www.montetitoli.com/t2s/t2s.en.htm

Overcoming borders in

post-trade services


User Requirements: impact areas

Pre-settlement & Settlement

Outsourced on T2S platform

New features in Monte Titoli via X-

TRM

Cross-border

settlement

Only through X-TRM

New extra-T2S links

Custody

Some functionalities not

included in T2S will be

accessible only via Monte

Titoli

Liquidity and Collateral

New functionalities introduced by T2S and

Monte Titoli

Asset Servicing

Some services not provided

by T2S will be accessible only

via Monte Titoli

Reporting

Further functionalities on

ICP mode

Monte Titoli’s User Requirements include all the adjustments needed to integrate T2S

with the current systems. T2S will impact on different operative business areas.

UR (2.3 version) can be downloaded from MT-X documentation


Monte Titoli’s principles for UR

• Minimisation of operative and technological impacts

• Same services offering for DCP and ICP

• Possibility to develop tailored DCP/ICP solutions to access all functionalities required

by the participant’s actual needs and structure

ICP DCP

Limited operative impact;

technical impacts absorbed by

Monte Titoli

Messaging through SWIFT

15022 communication channel

Complete range of services

offered by T2S platform, plus

Monte Titoli’s additional

functionalities

Operative and technical impacts

aimed at a directly interact with

T2S

Development of ISO 20022

messaging system

Limited impacts on Monte Titoli’s

services not provided by T2S


Operative Flow in T2S

Bank (ICP)

Markets

T2S

X-TRM (MT’s pre-

settlement

engine)

CC&G

Settlement instruction

Custody MT

Margins

Custody info

SWIFT 15022, MT-X

Target2

• SWIFT ISO15022 on settlement and custody

• U2A proprietary Web tools (X-TRM on line for settlement and MT-X for custody)

• Use of same cash and securities accounts

• SWIFT message layouts are accessible via MyStandards

Contracts OTC

Settlement

Clearing

Custody

& cash

Trading

Contracts


Settlement info SWIFT

15022, X-TRM on line

Net settlement

Impact analysis

Pre-Settlement

Settlement

Cross Border

Settlement

Reporting

Liquidity and

Collateral

New functionalities and limited impacts on current operative processes

Cost reduction and improvement of operative processes

Access to new markets

Rationalised reporting functionalities to integrate T2S processes

New functionalities for the optimisation of cash management operations

Custody &

Corporate Actions Harmonisation of processes at European level

Implementation of User Requirements will allow Monte Titoli’s participants to benefit from

enhanced services, while optimising operative processes


Customers will be able to maintain current counterparty and account codes

Static data and account

structure

Static Data

Data upload

DCA

Monte Titoli will convert current codes so that they are recognised by T2S

Monte Titoli will be in charge for static data upload in T2S

(Limited) missing information required in T2S will be filled by participants through a dedicated web tool

Cash account introduced by T2S, linked to RTGS account in T2

Automatic liquidity transfer DCA RTGS at the end of the day

Possibility to open DCA accounts in foreign currencies

SAC

Securities account in T2S, always linked to a DCA

CSD Participant Account (for settlement activities) and Issuance Account

DCA

RTGS

SAC SAC

SAC


T2S Period XTRM/EX2 XTRM/T2S Description

Start of day N/A 18.45 -19.30 Business day management

Night time

settlement 19.45 -07.00 19.30 - 03.00 Settlement process

Maintenance

window 22.30-07.00

XTRM: 03.00 - 07.00

T2S: 03.00 - 05.00 Maintenance activity

Real time

settlement

Net 9.30 -13.00 Gross XTRM: 7.00 -18.00

Gross T2S: 05.00 -18.00 Settlement process

Gross 8.00 -18.00

Pre-settlement 7.00 -22.30 7.00 - 03.00 Acquisition, matching and

reporting

End of day N/A 18.00 -18.45 Controls and management of

pending instructions

• As today, if at 16.00 cut-off time trades are not settled, they will be sent to the next settlement day • Unlike today, fails are sent to the night batch cycle

• Time schedule similar to the current settlement day

• Settlement cut-offs are the same of T2S

• No cut-off by MT for sending instructions to T2S

Settlement Day – changes


Start of Day (SOD)

Night-time Settlement

(NTS)

Maintenance Window

Real-Time Settlement

(RTS)

End of Day Procedures

(EOD)

• Change of business date in T2S

• Preparation for night-time settlement • Revalidation of Settlement Instructions/ Restrictions, etc..

• Consistency control on securities exposure.

• Cancellation of operations that are still pending and are at end of validity period

• Sending of end of the day reporting

Two distinct settlement cycles:

• First night-time settlement: sequences for cash sweeps T2T2S, cash settlement restrictions, CA on stock, liquidity transfers,

FOP/DVP, CBO, new liquidity transfer • Last Night-time settlement: sequences for DVP, partial settlement,

liquidity transfers, CA on flow

18:45

19:30

03:00

05:00

18:00

18:45

Settlement Day - detail


• Real-Time Settlement Period: execution of all types of Instruxtions;

two dedicated partial settlement windows • Real-Time Settlement Close Period: DVP cut off h16.00; Automatic

Cash Sweep between T2ST2; FOP cut-off h18.00

Pre-settlement – Acquisition and

Validation

Instructions

acquisition

Monte Titoli will automatically convert instructions according to T2S standards by activating, if necessary, enrichment solutions (e.g., PCT,CVT,CTC)

FoP instructions will require matching and thus RNI msg.710 (allowing for unmatched FoP) will be dismissed


T2S has a more comprehensive settlement fields set (partial settlement, links, etc..)

Validation Adjustment of current validation process to T2S standards

Pre-settlement – Matching

Matching

New mapping of compulsory/optional/additional fields

Other fields not admitted by T2S will still be managed by X-TRM

(Additional) fields introduced by T2S are included at the end of tracked messages, in order to limit technological impacts


• Payment Type • Securities Movement Type • ISIN Code • Intended Settlement Date • Settlement Quantity • Receiving Party BIC • Delivering Party BIC • CSD of the Delivering Party • CSD of the Receiving Party • Trade Date

Mandatory Additional

• Opt Out ISO Transaction Condition Indicator

• CUM/EX Indicator

It is a matching field if it is valued by at least one

counterparty

Optional

• Common Trade Reference • Client of receiving CSD

Participant • Client of delivering CSD

Participant • Securities account of the

delivering party • Securities account of the

receiving party

It is a matching field only if it is valued by both counterparties It is always a matching field

Pre-settlement – Other

processes

Partialisation

Cancellation

Allegement

Unchanged rules for unilateral, bilateral, and automatic cancellation

Matched but unsettled transactions are recycled in T2S until settlement is achieved, unless the parties input bilateral cancellation instructions

Unmatched transactions are recycled in T2S for the following 20 days

Possible partialisation for all transactions (guaranteed and not guaranteed)

Partialisation in T2S includes updating of settled and pending quantities (currently managed through two separate instructions)

Amendment

Only modifiable fields: Partial Settlement Indicator, Priority, Linkages Block

In order to modify all other fields, it will be necessary to cancel and re-instruct

X-TRM process adjustment to T2S standards


Pre-settlement – Enrichment

and Hold&Release

Enrichment

Hold &

Release

Not offered in T2S, it will be provided in ICP mode through X-TRM

Functionality already introduced by Monte Titoli in 2013

It will still be possible to use simple procedures for creating all types of operations that are currently supported in Monte Titoli’s systems, regardless to the different

messages used by T2S

The Enrichment information will be retrieved from Monte Titoli’s database and the instructions will be managed with intuitive procedures

Necessity to align the current procedure to T2S process

In T2S the H&R indicator will have 4 modes, applicable at securities account level


Monte Titoli allows to see the counterpart’s H/R status information before ISD, if the Instruction is entered in ICP mode (in T2S not feasible)

Party Hold

CSD Hold

CSD Validation Hold

CoSD Hold

MT will allow to automatically complement information available in settlement instruction with the aim to: Assign securities settlement accounts/parties, Compute

interest ratio, Build start and end legs of repo transactions

End of the day fail recycle

T2S

Settlement type

Benefits

Fails are sent to next day RTGS cycle

Continuous settlement Easier settlement and lower number of fails

Net for night and day cycles and gross for

RTGS phase

Gross with optimisation mechanisms (i.e., technical netting)

Posting entry for each settlement Instruction

and not for the net amounts

Partial settlement

Only for CCP guaranteed operations

Possible for all operations

Dedicated windows at night and

real time settlement cycles Easier settlement

Settlement – functional analysis


Operative day

sequence

Two batch cycles (nigh time and daytime) + one

real time day cycle

Night batch cycle and real time day cycle

T2S settlement day very similar to current one

Express2 (MT’s settlement platform)

1. Send settlement instruction

Settlement - Intra and Cross

CSD

Intra-CSD

Transactions between counterparties

both participating to Monte Titoli

ICP DCP

Monte Titoli

X-TRM

2. Send Instruction

Hold

3. Settlement Information





ICP

Monte Titoli

X-TRM

2. Send Instruction

Hold





DCP

Cross-CSD

Transactions between a participant of Monte

Titoli and a counterparty of a different CSD in T2S


Monte Titoli

X-TRM


2. Settl. Inst. Hold and

Positioning (prefunding

cash or securities)



3. Prefunding confirmation

4. Prefunding confirmation

Settlement - External CSD

T2S


5. Settlement


7. Release and Settlement

Instruction for realignment


The other CSD is identified as MT

participant; transactions are

managed as Intra-CSD settlement

External-CSD

Transactions between a participant of Monte Titoli and a

counterparty of a different CSD outside T2S

ICP Participant of

external settlement system

Monte Titoli is the Issuer CSD

The other CSD is identified as

External CSD; transactions are

managed through Monte Titoli in

ICP mode

Monte Titoli is the Investor CSD

External settlement Transactions

are managed with the Conditional

Settlement (CoSD) functionality,

which is used for securities/cash

provision and for interaction with

the external CSD

External settlement

system


Liquidity in T2S: key principles

For bonds and stocks payments there is full flexibility for paying agents and intermediaries

regarding the account (RTGS of T2 or DCA in T2S) in which to manage payments

However, payments for Italian Government Bonds will always be carried out in a DCA

account


DCA

DE YYY

IT XXX

FR ZZZ

RTGS

T2 cash T2S cash T2S

securities Introduction of cash account in T2S (DCA) always linked

to an account in T2 for automatic sweep functionalities

The DCA account is managed at Central Bank level

Cash on the DCA can be employed in real time at every

moment of the operative day, also through the T2

interface

Automatic transfer of liquidity T2ST2 at end of day

Availability on DCA accounts for Regulatory capital calculation purposes

Auto collateral with Central bank

Express2 (MT’s settlement platform)

T2S

Limits management

Benefits

Self + firm collateral (versus Bank of Italy)

Equivalent (change of denomination - Coll. on

stock and on flow)

Possibility to automatically substitute securities Closing Operations

automatically generated

Caps management by payment bank (only for segregated accounts)

Credit Memorandum Balance for each SAC with possibility of autocollateral

Increased flexibility (3 levels); possibility to use

client collateralisation

Closure of operation

To be managed by the customer at an

administrative level

Closing operation automatically generated

Reduced administrative duties

Position management

Use of Instructions and Restrictions for Blocking

and Reservation New Earmarking function

Possibility to block securities for a specific operation or process

inside a SAC

Collateral – new functionalities


Earmarking for auto-coll.: in use for T2S automatic auto-collateralisation processes

Earmarking: in use for other business purposes decided by T2S Actors; set by a CSD Earmarking

Position management

Blocking

Reservation

Adjustment of messaging system in order to use T2S Blocking function

Used to block a certain amount of securities in a SAC; if the instructed quantity is above available balance amount, the Instruction is not settled but recycled

until enough securities are received

Used to block a certain amount of securities in a SAC; if the instructed quantity is above the available account balance, the Instruction is partially settled and

recycled until enough securities are available

Adjustment of messaging system in order to use T2S Reservation function


Reporting

Customer Monte Titoli

XTRM Monte Titoli

T2S

OTC

CCP

No CCP

Informative flow in T2S is unchanged

MT 536

MT 540/1/2/3

MT 544/5/6/7

Post-T2S Markets


Message Information Method Timing

MT535 Daily/Monthly Statement of Holdings Push End of day

MT535 Intraday Statement of Holdings Pull Real Time

MT 536/7 Statement of transactions/pending transactions Push/ Pull

End of Sett. Cycles (5am, 6pm) Real time

MT586 Statement of Allegment Pull Real Time

MT549 Request for Statement of Holding/Transact./Allegm. Pull Real Time

Transaction acquisition

Settlement confirmation Statement of transactions

Comprehensive Reports

T2S core functionalities

Monte Titoli will use its current infrastructure in order to provide an enhanced range of

functionalities and information with respect to what is offered by T2S

Functionalities inside and

outside T2S

Validation, Enrichment, Market Specific Attributes

Pre-settlement

Settlement Intra-CSD, Cross-CSD External-CSD settlement

Reporting

Cash & Collateral

management

Pre-settlement & Settlement reporting

Autocollateral: Client & Central Bank collateralization, Earmarking

On exchange trades,

H&R indicator

Cash Forecasting Tool

Additional and integrated functionalities available via Monte Titoli

Validation, Modification, Cancellation, Links, Hold &

Release, Matching, etc

Custody Mark-down, Position Management

Issuance, Corporate Actions management


Thanks for

your attention


Q&A


This presentation contains text, data, graphics, photographs, illustrations, artwork, names, logos, trade marks, service marks and information (“Information”) connected with 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 presentation may or may not have been prepared by Monte Titoli but is made available without responsibility on the part of Monte Titoli. The Company does not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of the presentation 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 presentation.

No action should be taken or omitted to be taken in reliance upon Information in this presentation. We accept no liability for the results of any action taken on the basis of the Information.

Monte Titoli promotes and offers the post-trading services in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities.

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

Monte Titoli for T2S: User Requirements - MTS · PDF fileMonte Titoli for T2S: User Requirements Webinar ... T2S Development of ISO 20022 ... Target2 •SWIFT ISO15022

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