0 T2S: Planning – Pricing - Harmonisation NBB-SSS, 23 April 2012 Annemieke Bax - T2S Programme Office European Central Bank
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0
T2S: Planning – Pricing - Harmonisation
NBB-SSS, 23 April 2012
Annemieke Bax - T2S Programme Office European Central Bank
1
T2S Introduction Purpose and Benefits of T2S
A Service offered to CSDs for Settlement only
Notary Function
Custody and asset-servicing
Function Banking
Function*
Settlement Function
Notary Function
Custody/ asset-servicing
Function Banking Function
Settlement Function
Registration of issuer indebtedness and investor
holdings
e.g. coupon payments, redemptions, stock
splits
Change of ownership among investors
e.g. lending and borrowing only in some
(I)CSDs
2
T2S Introduction
Settlement in central bank money
Commitment to EU-integrated and efficient financial markets
Neutrality as a supranational organisation
No economic interest, due to cost recovery principle
Facilitator to balance different requirements
Experiences in successfully establishing EU-wide infrastructures (i.e. TARGET and TARGET2)
Purpose and Benefits of T2S
3
Table of Contents
Harmonisation 3
Pricing 2
Planning 1
T2S: Planning – Pricing - Harmonisation
4
2012 2013 2014 2015 2016 2017
SP16-T2S Go-Live
User Testing Phase
Phased Go-Live
Planning Overview of T2S Timeline
EAT
CSD/CB
Feasibility Assessment
Development Phase
CSD/CB proposal for migration
waves
Agreement on migration waves
SP2-Feasibility Confirmation
by CSD/CB
SP3-T2S Programme Plan
Comprehensiveness
SP8-Start Bilateral
Interoperability Testing
SP5-Start of Eurosystem Acceptance
Test
5
2015 2016 2017
1ST Wave
pre-migration activities
and migration
Pre-migration activities and migration of remaining waves
T2S Go-Live of contingency wave
Planning Migration Phase
SP16-T2S Go-Live of 1ST wave
6
Table of Contents
Harmonisation 3
Pricing 2
Planning 1
T2S: Planning – Pricing - Harmonisation
7
Pricing
Tariff Structure
Investment cost
Running costs
Prices
PLUS TIMES
Volume estimates
Financial Equilibrium in T2S
8
Pricing T2S Pricing Policy
DVP price fixed at 15 cent per instruction until the end of 2018 A financial incentive package offered to CSDs that sign the
Framework Agreement with the Eurosystem early Commitment to not increase fees by more than 10% per year
from 2019 until the end of the cost recovery period Conditions of T2S pricing policy;
- Non-euro currencies add at least 20% to total settlement volumes - EU settlement volumes are not more than 10% lower than those
projected by market participants and the T2S Programme Board
9
Pricing
Price 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
10
Pricing
Price Items Price Explanation
Settlement Services (cont.) * Two instructions per transaction will be charged
**Daytime congestion charge, from 2 - 4 p.m. 0 cents additional surcharge per instruction*
**Auto-collateralisation service with NCB 0 cents for issue and return, charged to the collateral provider
**Instruction marked with ‘top or high priority’ 0 cents surcharge per instruction*
**Cancellation 0 cents per instruction*
**Settlement modification 0 cents per instruction*
Information Services
A2A 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 0 cents Fee options: a) monthly fee per ISIN in the account or b) monthly fee per account
**Fee per cash account 0 cents Monthly
** These items will initially be set at a zero price, presuming that actual usage will be within an expected consumption pattern. Reviews, however, occur at regular intervals to identify any stronger than expected usage and thus reconsider zero pricing.
Price List (ii)
11
Pricing
CSD
Custody
Others…
Reporting Lending
Coll. Mgmt.
T2S
Settlement
CSD Reshaping to T2S
CSD infrastructures require adaptations to integrate with T2S
12
Pricing CSD Reshaping to T2S (ii)
A set of functionalities for CSDs to individually design T2S interaction schemes according to business or legal needs
Reshaping options; - Data replication: entirely or partially by real-time messages (push mode) - No data replication: outsourcing to use functionalities on request (pull
mode) - A combination: some data are replicated and others are queried
Data replication requires redundant storage of T2S data through quality and reconciliation controls
Maximisation of future savings, in case of outsourcing to T2S
Minimizing adaptation costs now leads to higher running costs in the future
13 13
costs
time
T2S with Reshaping
PresentCost Level
T2S without Reshaping
today
Pricing CSD Reshaping to T2S (iii)
14
Table of Contents
Harmonisation 3
Pricing 2
Planning 1
T2S: Planning – Pricing - Harmonisation
15
Harmonisation in T2S
T2S harmonises settlement and thus indirectly fosters further alignments of EU market practices
Progress is defined in line with T2S stakeholders and other market initiatives
The Eurosystem co-operates with market participants and public authorities to align the harmonisation process (e.g. CSD regulation, Joint Initiative on Market Infrastructures – JIMI Steering Group)
T2S is a unique opportunity to remove Giovannini barriers by harmonising EU post-trading
16
Harmonisation in T2S (ii)
AG sub-structures deal with harmonisation issues - Corporate actions - Messages - Cross-CSD settlement (TFAX)
In addition, enhancement of T2S’ role in harmonisation;
- Harmonisation Steering Group to exclusively steer T2S alignments o Composed of Programme Board and AG senior members o Supported by the T2S Programme Office and NUGs o Reporting to the AG
Status-quo of T2S
17
T2S Harmonisation List Activities status 27/03/2012
ACTIVITIES - HIGH PRIORITY
DEFIN
ITION
MO
NITO
R
IMPLEM
ENT
1. T2S MESSAGES 1.1 T2S ISO 20022 messages G G x 1.2 T2S matching fields G G x
2. SCHEDULE OF SETTLEMENT DAY G G x
3. CROSS-CSD SETTLEMENT TFAX Y x x
4. T2S CORPORATE ACTIONS STANDARDS G G R
5. LEGAL HARMONISATION
5.1 Settlement finality I (moment of entry) Y x x 5.2 Settlement finality II (irrevocability of transfer order) G G Y 5.3 Settlement finality III (irrevocability of transfers) G G x 5.4 Location of securities accounts (Law applicable) Y x x 5.5 Outsourcing IT Y x x
18
T2S Harmonisation List Activities status 27/03/2012
ACTIVITIES - HIGH PRIORITY
DEFIN
ITION
MO
NITO
R
IMPLEM
ENT
6. SETTLEMENT DISCIPLINE REGIME Y x x
7. SETTLEMENT CYCLES Y x x
8. OMNIBUS ACCOUNTS G G Y
9. REGISTRATION PROCEDURES Y x x
19
T2S Harmonisation List Activities status 27/03/2012
ACTIVITIES - LOW PRIORITY
DEFIN
ITION
MO
NITO
R
IMPLEM
ENT
10. CORPORATE ACTIONS MARKET STANDARDS CA market (CAJWG) standards G G R
11. PLACE OF ISSUANCE Y x x
12. TAX PROCEDURES 12.1 Withholding tax procedures G Y x 12.2 Transaction tax procedures G Y x
13. CROSS-BORDER SHAREHOLDER TRANSPARENCY Y x x
14. INVESTMENT FUNDS SETTLEMENT R x x 15. MARKET ACCESS Y x x 16. CSD ANCILLARY SERVICES Y x x 17. SECURITIES AMOUNT DATA G G Y
20
T2S Harmonisation List Activities Colour Index
Colour Description
Green Harmonisation Activity/Deliverable is within the required scope and quality and is on time (NOTE: not necessarily completed) Green in implementation process indicates that the standard has either been implemented or that there is low risk of non-compliance prior to T2S launch.
Yellow Harmonisation Activity/Deliverable will not have the required scope, will be/is delayed and/or not of the required quality if no corrective measures are taken. Yellow in implementation process indicates that the standard has either been partly implemented or that there is medium risk of non-compliance prior to T2S launch.
Red Corrective measures have not delivered the expected effect or no corrective measures are possible. Deliverable/Activity will be delayed to achieve the required quality or scope if no extraordinary action is taken and requires escalation. Red in implementation process indicates that that there is high risk of non-compliance prior to T2S launch.
T2S Harmonisation Task Force on Adaptation to Cross-CSD Settlement
The TFAX was established with the aim to propose common best practices to selected issues hampering cross-CSD settlement in the post-T2S environment.
- Focus of the TFAX is on the process-based and technical aspects of adapting to T2S. - The common best practices will assist CSDs and other market participants to adapt to
T2S in a harmonised manner.
A mini-consultation was distributed via the NUGS which is running until the end of April. Its aim is to verify the drafted solution papers:
- Topic 1: Registration processing; - Topic 2: Tax processing; - Topic 3: CSD ancillary services; - Topic 4: Portfolio transfers / Bond stripping and reconstitution / Account segregation by
currency.
http://www.ecb.int/paym/t2s/governance/ag/html/subadapt/index.en.html#minicon
22
Wrap-up and Information on T2S www.t2s.eu
T2S on the web - Publication of all relevant information
and key documents - Access to documents of all T2S working
groups - ‘Spotlight‘ on latest information on the
project - Insights on project plan, governance,
pricing, harmonisation - Ad hoc sections dedicated to all
stakeholder categories (CSDs, banks, NCBs, others)
- Publication of quarterly newsletter ‘T2S OnLine‘
Thank you for your attention
www.t2s.eu
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