T2S PROJECT Cross Border Settlement

T2S PROJECT Cross Border Settlement

Version 2.2

Cross Border Settlement

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1 Contents

2 Document Management ........................................................................................................................... 4

2.1 Document Distribution ...................................................................................................................... 4

2.2 Document History .............................................................................................................................. 4

2.3 Open Issues ........................................................................................................................................ 4

2.4 Definition, Acronyms and Abbreviations ........................................................................................... 4

2.5 References ......................................................................................................................................... 4

3 Introduction .............................................................................................................................................. 5

3.1 Purpose of the document .................................................................................................................. 5

3.2 Type of transactions supported ......................................................................................................... 5

3.3 CoSD functionality ............................................................................................................................. 5 3.3.1 On Cross-CSD Settlement ......................................................................................................... 5 3.3.2 On External-CSD Settlement ..................................................................................................... 5

3.4 Transaction Status Management ...................................................................................................... 6

3.5 Hold & Release .................................................................................................................................. 6 3.5.1 On Cross-CSD Settlement ......................................................................................................... 6 3.5.2 On External-CSD Settlement ..................................................................................................... 6

3.6 Partial Settlement .............................................................................................................................. 6 3.6.1 On Cross-CSD Settlement ......................................................................................................... 6 3.6.2 On External-CSD Settlement ..................................................................................................... 6

3.7 Functions and Messages .................................................................................................................... 7

4 Static Data Configuration .......................................................................................................................... 8

4.1 CSDs external T2S (MT as Investor CSD) ............................................................................................ 8

4.2 CSDs external T2S (MT as Issuer) ....................................................................................................... 8

4.3 CSDs internal T2S ............................................................................................................................... 9

5 External-CSD Settlement - Use Cases ..................................................................................................... 10

5.1 Overview .......................................................................................................................................... 10 5.1.1 Matching tolerance management ............................................................................................ 10 5.1.2 Settlement Parties ................................................................................................................... 11

5.2 Receive Instructions ........................................................................................................................ 12 5.2.1 Acquisition and Validation ........................................................................................................ 12 5.2.2 Provision .................................................................................................................................. 13 5.2.3 External Settlement ................................................................................................................. 14 5.2.4 Posting ..................................................................................................................................... 15


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5.3 Deliver Instructions.......................................................................................................................... 16 5.3.1 Acquisition and Validation ........................................................................................................ 16 5.3.2 Securities Provision ................................................................................................................. 16 5.3.3 External Settlement ................................................................................................................. 17 5.3.4 Cash Management .................................................................................................................. 17 5.3.5 Posting ..................................................................................................................................... 17

5.4 Allegement from CSDs ..................................................................................................................... 18

5.5 External-CSD – Cancellation ............................................................................................................ 19 5.5.1 Cancellation request by foreign counterparts .......................................................................... 19 5.5.2 Cancellation by participant ....................................................................................................... 19 5.5.3 Cancellation by CSDs .............................................................................................................. 20 5.5.4 Cancellation by Monte Titoli ..................................................................................................... 21

5.6 External-CSD – Partial Settlement ................................................................................................... 22 5.6.1 Unsettled part cancellation ...................................................................................................... 22

6 Cross-CSD Settlement - Use Cases .......................................................................................................... 23

6.1 Overview .......................................................................................................................................... 23

6.2 Deliver Instructions.......................................................................................................................... 23

6.3 Settlement Parties ........................................................................................................................... 23

6.4 Cross-CSD – Cancellation ................................................................................................................. 24 6.4.1 Cancellation request by ICP participant .................................................................................. 24 6.4.2 Cancellation request by foreign counterparts .......................................................................... 25 6.4.3 Cancellation of an instruction identified as CoSD .................................................................... 25

7 Annex ...................................................................................................................................................... 26

7.1 Validation Rules ............................................................................................................................... 26

7.2 T2S Messages Subscription.............................................................................................................. 26

7.3 X-TRM Messages Format ................................................................................................................. 27

7.4 T2S Messages Format ...................................................................................................................... 28

7.5 CSD Links .......................................................................................................................................... 30


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2 Document Management

2.1 Document Distribution IT NUG – Functional Sub Group Monte Titoli Participants Monte Titoli internal Users

2.2 Document History Date Version Details 15-10-2012 0.4 Initial version. 12-12-2012 0.5 Second version based on last meeting with participants (17-10-

2012) 25-01-2013 1.0 Final version 19-04-2013 2.1 Final version 30-06-2014 2.2 Integrated with additional information requested by

participants

2.3 Open Issues Section Description Date Owner Status

2.4 Definition, Acronyms and Abbreviations Name Description

2.5 References Reference Description

[1] T2S User Detailed Functional Specifications v2.0 [2] MT-T2S User Requirements v2.3


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3 Introduction

3.1 Purpose of the document This document describes, through use cases, the proposed management of Cross Border transactions in T2S. Concerning the External-CSD Settlement this document describes the service model accessible via an indirectly connected operative model. The use cases are the following:

• External-CSD Settlement: transactions instructed by a MT participant for settlement in an issuer CSD that is out of T2S.

• Cross-CSD Settlement: transactions instructed by a MT participant to settle in T2S with a counterpart that is a participant in another T2S CSD.

• Intra-CSD Settlement1: transactions instructed by a MT participant to settle in T2S Financial Instruments issued by MT itself with a counterpart that is a participant to a CSD that is out of T2S. The transaction will be processed as any other transaction between two MT participants hence this use case won't be described in the document.

3.2 Type of transactions supported - On Cross-CSD and Intra-CSD Settlement all transactions types supported in T2S : DVP, RVP, DWP,

RWP, DFP, RFP, PFOD; - On External-CSD Settlement the following types of transaction will be supported:

o DVP/RVP: delivering/receiving against payment; o DFP/RFP: delivering/receiving free of payment;

3.3 CoSD functionality T2S will provide the Conditional Settlement functionality (CoSD)2 for the Settlement of those transactions which require to pass trough processes outside T2S. This functionality permits the cash amount and/or securities blocking and it is activated for Matched transactions at Intended Settlement Date.

3.3.1 On Cross-CSD Settlement Conditional Settlement is not foreseen.

3.3.2 On External-CSD Settlement Monte Titoli will use the CoSD functionality to block securities for DVP transactions only. The CoSD is not applicable for RVP transactions: the mere cash amount blocking (Cash CoSD Blocking) is not sufficient for the settlement of this type of transaction as a real transfer of the cash to the foreign Settlement System is required. MT will therefore send T2S two linked settlement instructions: - “Cash leg”: a PFOD transaction for cash pre-funding - “Securities leg”: a FOP transaction for the securities transfer.

1 Monte Titoli will set up all counterpart investor CSDs that are outside of T2S as any other participant. 2 Refer to section 2.3.4.2 “Conditional Delivery /CoSD) Detection” of document [1]


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3.4 Transaction Status Management X-TRM will make available to MT participants all the transactions Settlement Status at the foreign CSD except from the non-matching reasons. The complete list of the status (and related reasons) will also be available trough the Web User Interface MT-X (X-TRM OnLine).

3.5 Hold & Release

3.5.1 On Cross-CSD Settlement The T2S’s Hold & Release functions will be supported.

3.5.2 On External-CSD Settlement The Hold and Release function made available by External CSDs will not to be supported.

3.6 Partial Settlement

3.6.1 On Cross-CSD Settlement The T2S’s Partial Settlement function will be supported.

3.6.2 On External-CSD Settlement Given that the Provision reserves Securities or Cash equivalent to the entire amount necessary for the Settlement of the whole transaction, the Partial Settlement is not foreseen. However the it might be “imposed” by the regulation of the Settlement at the counterparty CSD (i.e. Euroclear UK). In order for these cases to be supported, separate transactions will be sent to T2S (each one equivalent to one partial transaction) as replacements of the “entire” original transaction. It should be noted that the above described Partial Settlement isn’t to be considered the equivalent of the Partial Settlement Functionality offered by T2S.


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3.7 Functions and Messages The following table summarizes the technical interaction model with X-TRM. Table 1 – Mapping of Operational Functions and communication channels/standards

Operational Function

RNI SWIFT A2A MT-X (GUI) M.S. F.T. ISO 15022 ISO 20022

Transaction Acquisition G52 G50 MT540..3 Sese.023 X X

Transaction Amendment G52 G50 MT530 Sese.030 X X

Transaction Cancellation G52 G50 MT540..3 Sese.020 X X

Responses (Accept, Reject, Denied, Executed)

G53 G51 MT548 Sese.024

Allegement Notification n.a. n.a. MT578 Sese.028 X X

Allegement Removal n.a. n.a. MT578 Sese.029 X X

Allegement Cancellation n.a. n.a. MT578 Semt.020 X X

Status Advice n.a. n.a. MT548 Sese.024 X X Settlement Confirmation 71N n.a. MT544..7 Sese.025 X X

Counterpart Cancellation Request

n.a. n.a. MT548 Sese.024 X X

Cancellation Confirmation n.a. n.a. MT548 Sese.027 X X

Request Report G57 n.a. MT549 Semt.021 X Query

Reports (ACB) n.a. G56

MT536 MT537 MT586

Semt.017 Semt.018 semt.019

X Query Response

The messages content will be adapted in order to include the new information which are necessary for the Settlement of the transactions in T2S and/or at the Foreign Settlement Platform. DCPs will be allowed to send T2S only Cross-CSD Settlement transactions whilst External-CSD Settlement transactions shall be sent only through Monte Titoli infrastructure (therefore to X-TRM and through the channels described in Table 1 above).


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4 Static Data Configuration

4.1 CSDs external T2S (MT as Investor CSD) The diagram describes the configuration of the accounts for the management of CSDs external to T2S when Monte Titoli acts as Investor-CSD. Figure 1 – Static Data configuration for CSDs external to T2S (MT as Investor CSD)

Monte Titoli will configure the CSD, in T2S, as “External CSD”. MT will create on its own accounting position a mirror account which reflects the same account positions of the omnibus account that MT has opened at the External CSD. An inter-CSD account will be linked to the mirror account in order to manage the transfer of securities. The CSD operating as Securities Maintaining Entity will be in charge of the configuration and the management of the Financial instruments in T2S (in agreement with the CSDs internal to T2S).

4.2 CSDs external T2S (MT as Issuer) The diagram describes the configuration of the accounts for the management of CSDs external to T2S when Monte Titoli acts as Issuer-CSD. Figure 2 – Static Data configuration for CSDs external to T2S (MT as Issuer)

Monte Titoli will configure the CSD, in T2S, as a “CSD Participant” with its securities account (like any other participant): the counterpart CSD will have to realign its mirror account and its participant account.


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4.3 CSDs internal T2S The diagram describes the configuration of the accounts for the management of the link with CSDs internal to T2S ( Issuer CSD) when MT will has the role of investor CSD. Figure 3 – Static Data configuration for CSDs internal to T2S

Monte Titoli will create on its own accounting positions a mirror account and the issuer CSD (B) will configure Monte Titoli as a “CSD Participant” and the corresponding omnibus account will be created. The omnibus and mirror accounts will be linked (rif. eligible counterparts CSDs) in order allow T2S to automatically manage their updates via the T2S generated realignment Settlement Instructions.


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5 External-CSD Settlement - Use Cases

5.1 Overview The Settlement lifecycle of these transactions is processed through the following steps:

• Acquisition: the transmission models available for the participants (exclusively via X-TRM) are described in paragraph 3.7 ;

• Validation: the transactions pass trough the following processes: o MT Validation o T2S Business Validation

Only after passing both validation processes the transaction acquisition is confirmed to the participant. • Provision: this process is in charge of the securities (DVP and DFP) or the cash (RVP) reservation of

the underlying transactions. This is activated at the Intended Settlement Date and before MT’s settlement instructions are sent to the foreign settlement platform. External Settlement: This process manages the exchange of messages between Monte Titoli and the other involved CSDs in order to start and check the settlement of the transactions. This communication is managed trough Swift messages MT54n.

• Cash Management: this process manages the cash transfer, for the RVP transactions, to the accounts of the participants.

• Posting: in this process the T2S settlement instructions are released and the accounting positions of MT participants are updated.

• Cancellation: this process manages the request of cancellation sent by MT Participant, by the counterpart, by the foreign settlement system or by Monte Titoli itself.

5.1.1 Matching tolerance management As per the current service model the eventual difference between the cash amount blocked for provision purposes and the final settled amount will remain in charge of either Monte Titoli or the participant. No management of delta cash is going to be implemented.


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5.1.2 Settlement Parties The following table shows the information concerning the settlement counterparties which the participant should indicate in the Settlement Instruction message. The current identification for the international counterpart currently used in the X-TRM system in the «settlement account» field of the instruction apply the following format rules: E-C-00230-BNKADEPPXXX-235QR6-62222 In the Appendix an example on how to fill-in the message and its corresponding settlement instruction in T2S are described. Table 2 – Settlement Parties on External-CSD Settlement

Counterparty Description Old Value New Value External Settlement System

System where the instruction will be managed (Euroclear Bank in the example) E 14

CSD Code Place of Settlement in the external settlement system (Clearstram Lux in the example) C CEDE

Delivering/Receiving Agent Counterpart’s settlement agent’s BIC code -- BNKSAFRPPXXX

Safekeeping Account Counterpart’s settlement agent’s Securities Account 00230 00230

Client of Delivering/Receiving Agent

Counterpart’s beneficiary (buyer/seller) BNKAFRPPXXX BNKAFRPPXXX

Safekeeping Account of Client Counterpart’s beneficiary’s Securities Account 235QR6 235QR6


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5.2 Receive Instructions This use case describes the management of a RVP (Receive Versus Payment) and a RFP (Receive Free of Payment) transactions between a Monte Titoli participant (Part.A) and a Foreign Counterpart ( Part.B). Figure 4 – Scenario RVP

5.2.1 Acquisition and Validation Figure 5 – Schema RVP – Validation

MT participant (both ICPs and DCPs) instruct through X-TRM with the channels described in paragraph 3.7:

- RNI G50/G52; - Swift ISO15022 MT540 or MT541; - Swift ISO20022 Sese.023;

MT Validation: the transaction information is validated with respect to the counterparty CSD (CSD eligibility), the security, transaction type, etc.) are verified. The complete list of checks will be provided in the “Service Instructions”.

• In case of a negative validation outcome the transaction is rejected and a message is sent to the participant


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• In case of a positive validation MT forwards to T2S the settlement instruction. The transaction is sent to T2S as a FOP (Free of Payment) transaction with payment type valued with “FREE” the type of the original instruction (RVP or RFP) is not relevant.

T2S Business Validation : The Settlement Instruction is validated according to T2S validation rules. • In case of a negative validation outcome MT (after the receipt of the notification from T2S) rejects

the transaction to the participant as described above. • In case of a positive validation outcome the transaction is considered as “accepted” and MT sends

the Participant a G53 confirmation message (or its Swift equivalent) which contains the reference assigned by T2S (Market Infrastructure Transaction Identification);

Please note that the Validation check managed by MT (and T2S) can’t guarantee the transaction’s acceptance by the counterparty CSD which could in its turn reject the instruction. The rejection or the acceptance of the instruction is communicated to the participant through this messages:

- RNI G51/G53; - Swift ISO15022 MT548; - Swift ISO20022 Sese.024;

5.2.2 Provision At 07:00 on Intended Settlement Date (for the previously instructed transactions) and upon the receipt in T2S (for transactions with ISD = Current Business Date) the “Cash Provision” process is activated for Against Payment instructions. The purpose of this process is to reserve the necessary funds in order to allow the Settlement to occur at the Foreign platform. The “Cash Provision” process is managed in different ways, depending on the currency:

• Currency eligible for T2S: the cash provision is made in T2S debiting the Dedicated Cash Account of the participant and crediting MT Dedicated Cash Account;

• Currency managed by MT and not eligible for T2S: the cash provision is made in the Cash Correspondent Banks (CCB) debiting the Cash Account of the participant and crediting MT Account.

In case of lack of money the provision process remains active until the cancellation of the instruction requested by MT participant. The provision of cash is reversed in case of cancellation of the original transaction (refer to section 5.5). Figure 6 – Schema RVP – Cash Provision in T2S

Cash Provision in T2S: in T2S the provision is not managed through a blocking of cash amounts but, instead by cash transfer to MT’s DCA account. A Settlement Instruction PFOD is therefore sent to the T2S platform in order to transfer the cash from the participant’s to MT DCA. The participant’s DCA is the one associated to the participant’s Securities account stated in the original RVP instruction.


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The PFOD Instruction is linked to the original RVP instruction with the processing code INFO3. Once the cash has been transferred to MT DCA the cash amounts are further moved to MT’s RTGS account in Target2 and eventually from this account to MT’s account at the CSD (or to a corresponding bank). Figure 7 – Schema RVP – Cash Provision on Cash Correspondent Banks

Cash Provision outside T2S: for currencies (managed by MT) not eligible for T2S the cash amounts are transferred from the participant’s cash account to MT’s cash account using the message Swift Mt204.

5.2.3 External Settlement Figure 8 – Schema RVP – Settlement & Posting

External Settlement: the communication with the CSD, via Swift MT54n, is activated when the cash amount transfer has been done. Upon the receipt of Status Advice notification from the CSD (matching notification, settlement pending), MT updates the corresponding indicator in X-TRM, the same notifications are made available to the participants through the messages and reports described in section 3.7 and the MT548 notification messages are made available to the Participants, also, in the Web GUI of X-TRM. Note that unmatching reason codes are made available only through this latter interface.

3 This kind of linkage is for information purpose only and does not affect on the settlement process.


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5.2.4 Posting Upon Settlement of the transaction at the CSD the Posting process is activated: MT releases the Conditional Settlement Hold and the transactions are settled in T2S. Once settled MT will update the settlement status in X-TRM. The participant is notified trough the usual channels. Finally MT will align its own inter-CSD and Mirror accounts.


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5.3 Deliver Instructions This used case describes the management of a DVP (Deliver Against Payment) and DFP (Deliver Free of Payment) transaction between a Monte Titoli Participant (Part.A) and a Foreign Counterpart (Part.B). Figure 9 – Scenario DVP

5.3.1 Acquisition and Validation The same validation process described in paragraph 5.2 applies for Deliver Instructions but the settlement instruction is sent to T2S as Against Payment transaction (Payment type valued with APMT).

5.3.2 Securities Provision At the Intended Settlement Date (for the transaction previously instructed) and upon the receipt (for transactions with ISD = Current Business Date) the “Securities Provision” process is activated. Figure 10 – Schema DVP – Securities Provision

This functionality is managed by T2S via the “Securities CoSD Blocking” process. In case of insufficient securities (Provision failed) the participant is informed trough the messages or reports previously described. The “Securities CoSD Blocking” process will remain active, even during the following business days, until either the settlement quantity is reached or the participant cancels the transaction. Only once the COsD is activated and the Participant receives the notification via the messages indicated on the above diagram the instruction is sent to the External CSD.


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5.3.3 External Settlement This process is the same described in paragraph 5.2.3. Figure 11 – Schema DVP – Settlement, Cash Management & Posting

5.3.4 Cash Management Once the transaction has been settled at the foreign platform, MT transfers the funds from the CSD (or a correspondent bank) to the participant. This process is managed in different ways depending on the currency:

• Currency eligible for T2S: MT transfers the cash from its RTGS account in Target2 to its DCA Account in T2S and, afterwards, the participant will be credited at the settlement of the transaction (ref.Posting);

• Currency managed by MT and not eligible for T2S: MT transfers the cash from its account at the Cash Correspondent Banks (CCB) directly to the CCB account of the participant;

5.3.5 Posting At this point MT releases the Conditional Settlement Hold and the transactions are settled by T2S (including, for currencies eligible to T2S, the crediting of cash amounts to the participant). Once the transaction has been settled MT updates the settlement indicator in X-TRM. The participant is notified trough the usual channels. At the end of the process MT will align its own inter-CSD and Mirror accounts.


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5.4 Allegement from CSDs This use case deals with the management of swift message MT578 “Allegement” sent to Monte Titoli by the CSDs when a transaction has been instructed by a foreign participant and when one of MT participants is identified as the counterparty. The Foreign Participant should provide (on the MT54n messages) all the information which are necessary to univocally identify a participant of Monte Titoli (ABI code, CED code, BIC code and also Securities Account). Monte Titoli processes these messages and inserts the transaction in X-TRM where participants will find the Allegement information (transactions with matching indicator “2”) trough the messages and reports described at section 3.7 and via the User Interface MT-X. The figure below summarizes the messages: Figure 12 –Allegement


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5.5 External-CSD – Cancellation The cancellation of a transaction can be done by:

- Monte Titoli’s Participant; - The counterparty CSD; - Monte Titoli;

In all cases, when a cancelation occurs, MT should reverse the effect of the Provision process: - Securities: the blocked Securities will be made availble ; - Cash: the cash amount will be transferred back to the Participant account.

5.5.1 Cancellation request by foreign counterparts Monte Titoli is notified trough an MT548 message once a cancellation, for an already matched transaction, is requested by the foreign counterparty. This information is reported in X-TRM and the bilateral cancellation is activated. The participants will be able to instruct their own cancellation request according to the process described in the following paragraphs.

5.5.2 Cancellation by participant The participants will be able to send a cancellation request trough the messages described at section 3.7 and via the User Interface MT-X. If the transaction to be canceled has yet to be sent to the external CSD, MT, after validation of the request, executes the cancellation in X-TRM and in T2S. The participant receives the cancellation execution notification (or the cancellation request rejection in case the request is not validated). If the transaction has already been forwarded to the CSD, Monte Titoli forwards the cancellation request via the proper swift MT54n message and sends the participant a notification that the cancellation request has been forwarded. Upon the cancellation execution confirmation is received by the CSD the process continues as indicated in paragraph 5.5.3. The following diagram describes the above mentioned: Figure 13 – Cancellation by participant


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5.5.3 Cancellation by CSDs In cases of cancellation requests executed by the CSD (swift MT548 message), Monte Titoli shall reverse the effects of the Cash or Securities provision phase. The cancellation by CSD is described below: Figure 14 – Cancellation by CSDs

Deliver Instructions: for the deliver transactions the securities pre-funding was done via the CoSD functionality of T2S. MT will therefore send a CoSD cancellation which has the effect of cancelling the previously instructed Settlement Instruction consequently making the previously blocked securities available again. Receive Instructions: for the receive transactions, the return of cash amounts that were transferred on MT accounts is done via; Currency inside T2S: a PFOD Settlement Instruction sent to T2S which has the effect of returning the cash amount from MT DCA to the DCA of the participant. Currency outside T2S: a Financial Transfer (swift MT202) sent to CCB to transfer the cash amount from the account of MT back to the account of the participant. In both cases MT sends T2S the CoSD cancellation which has the effect of cancelling the previously instructed Settlement Instruction.


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5.5.4 Cancellation by Monte Titoli Settlement Instructions which have not yet been matched at 3 pm of Intended Settlement Date will be automatically cancelled by Monte Titoli. Figure 15 – Cancellation by Monte Titoli

The reverse of the effects of the provision phase is the same described in the above paragraph.


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5.6 External-CSD – Partial Settlement Currently this use case is only applicable for receive instructions done with Euroclear UK (CREST). Taking into consideration the management of this type of transactions described in paragraph Error! Reference source not found., the partially settled transactions received by the CSD are registered in T2S with transactions linked to the original transaction. Once the last partial transactions has been settled, MT sends a cancellation of the original transaction. Figure 16 – Partial Settlement

5.6.1 Unsettled part cancellation The cancellation management process applied to a partially settled settlement instructions is the same that described in paragraph 5.5.3 ( RVP Case). The only difference is the total cash amount returned to the participant, which is calculated as the difference between the amount of the original settlement instruction and the amount indicated on the partially settled transaction.


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6 Cross-CSD Settlement - Use Cases

6.1 Overview These transactions are entirely managed by T2S which regulates their Settlement and automatically updates the Mirror and Omnibus accounts of the CSDs involved (T2S generated realignment Settlement Instructions). The indirect participant instructs their transactions via X-TRM : the messages involved are described in paragraph 3.7. The Direct Connected Participant (DCP) can instruct their transactions directly to T2S : for the messages involved please refer to ECB’s document [1].

6.2 Deliver Instructions This used case describes the management of a Deliver Against Payment transaction between a Monte Titoli participant (Part.A) and a Foreign Counterpart ( Part.B) of a CSD inside T2S. Figure 17 – Scenario DVP

For the management scheme of the Settlement Instructions by T2S please refer to the documents [1] in chapter “2.3 Send Settlement Instructions”.

6.3 Settlement Parties In T2S the Settlement Parties are identified (for matching purpose) by:

- Depository; - Settlement Agent (alias Party1);

as mandatory matching fields and by: - Client of Settlement Agent (alias Party2)

as additional matching field.


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6.4 Cross-CSD – Cancellation The cancellation of a transaction is differentiated in:

• “Unmatched instruction” : the unmatched transactions can be unilaterally cancelled by the participant

• “Matched instruction” : the matched transactions require a bilateral cancellation, meaning that both participants should send their own cancellation request.

• “CoSD” : The cancellation of transactions subjected to Conditional Settlement can be cancelled only by the CSD who applied the condition (or by an authorized patrticipant).

For the cancellation request management in T2S please refer to the document [1] in Chapter “2.11 Send Cancellation Instruction of a Settlement Instruction”.

6.4.1 Cancellation request by ICP participant The participants will be able to send a cancellation request trough the messages described at section 3.7 and via the User Interface MT-X. Monte Titoli forwards the cancellation request to the T2S platform at which this is validated : in case of a rejection MT sends the G53 message (or its equivalent) to the participant. This message contains the reason of the rejection. If the transaction to be cancelled hasn’t yet been matched, T2S proceeds with the cancellation and MT sends a G53 message (or its equivalent) to the participant confirming the cancellation. If the transaction to be cancelled has been matched, T2S forwards the bilateral cancellation request to the foreign counterpart. MT sends a G53 message (or its equivalent) to the participant confirming the activation of the bilateral cancellation. Once the cancellation has been done in T2S, MT updates the cancellation indicator in X-TRM. The indirect participant will receive the notification via the messages or reports described at section 3.7 and via the User Interface MT-X. The above mentioned is described below: Figure 18 – Cancellation by indirect participant


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6.4.2 Cancellation request by foreign counterparts Monte Titoli is notified, trough a “Securities Settlement Transaction Status Advice” [sese.024], once a cancellation request for a matched transactions is sent by the foreign counterpart. This information is reported in X-TRM and the bilateral cancellation is activated. The participants will receive the notification via the messages or reports described at section 3.7 and via the User Interface MT-X. The participants will be able to send their own cancellation request as described in the previous paragraph.

6.4.3 Cancellation of an instruction identified as CoSD The cancellation of transactions subjected to the CoSD process is exclusively done via an administrative way with a specific request made by the participant and after a feasibility check by Monte Titoli. This feasibility check is also extended to the counterpart CSD when this is part of the CoSD activation.


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7 Annex

7.1 Validation Rules - T2S Business Validation

For the T2S validation checks information please refer to the below mentioned documents: o General Functional Specification (GFS) ; o User Detailed Functional Specification (UDFS) ;

- MT Business Validation

Monte Titoli will integrate the T2S validation checks with the below information : o The Participant should be adherent to the “External-CSD Settlement” Service ; o The counterpart CSD should be valid and should have a link with MT ; o The financial instrument which is object of the transaction should be congruent with the

counterpart CSD ; o The Currency used should be supported by the service. o The Intended Settlement Date is valid within the cut-off times for free or against payment

transaction.

7.2 T2S Messages Subscription In order to avoid the receipt from T2S of the messages related to “External-CSD” instructions (which according to the operative model described in this document shall be managed only through Monte Titoli infrastructure – X-TRM system), the Direct Connected Participant will have to set up the following subscription rules: RuleSet Name: NO_EXT_MSG Description: Avoid the receipt of messages related to External

Settlement Positive/Negative Set: Negative Interested Party (parent BIC): MOTIITMMXXX Interested Party (party BIC): BIC of DCP Rules Message Type: Sese.024, sese.025, ect..

(one rule for each message) Transaction Code: OWNE


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7.3 X-TRM Messages Format Table 3 – X-TRM Messages Format

Settlement Parties RNI MS A2A & RNI FT ISO 15022 ISO 20022 Settlement System GC0 Sistema di Liquidazione Settlement System Method Indicator

(E|22F:SETS) SettlementSystemMethod <SttlmSysMtd>

MT Participant GC2 Codice Emittente Delivering/Receiving Agent (E1|95a:DEAG/REAG)

Delivering/Receiving Party1 <Pty1>

Account of MT Participant GD2 Conto Titoli Emittente Safekeeping Account (C|97a:SAFE)

Safekeeping Account <SfkpgAcct>

Client of MT Participant (Beneficiary)

GT6 Codice BIC Party2 Emittente Buyer/Seller (E1|95a:BUYR/SELL)


Counterparty Depository G23 Codice CSD Controparte Place of Settlement

(E1|95a:PSET) Delivering/Receiving Depository <Dpstry>

Settlement Agent GC3 Codice Controparte Delivering/Receiving Agent (E1|95a:DEAG/REAG)


Account of S.A. G33 Conto Titoli Controparte Delivering/Receiving Safekeeping Account (E1|97a:SAFE)

Delivering/Receiving Party1 Safekeeping Account <SfkpgAcct>

Client of Settlement Agent GTL Codice BIC Party2 Controparte Buyer/Seller (E1|95a:BUYR/SELL)


Account of Client of S.A.4 GTP Dettagli Party2 Controparte Delivering/Receiving Party Narrative (E1|70C:PACO)

Delivering/Receiving Party2 Contact Details < PtyCtctDtls>

4 Supported only on External-CSD Settlement


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7.4 T2S Messages Format The table below describes how the information are fill in the Settlement Instructions (sese.023) sent to T2S for External-CSD Settlement. Table 4 – T2S Messages Format

Information Sese.023 fields Type of transaction DVP/DFP RVP/RFP Cash Provision (PFOD)

Settlement System Delivering/Receiving Depository <Dpstry>

This field contains the BIC code of the external CSDs. For CSDs that will migrate into T2S the Migration BIC code will be used.

Transaction Id <TxId> This field contains the reference assigned by MT to the Settlement Instruction. This reference will be reported in T2S in the field Account Servicer Transaction Id <AcctSvcrTxId>

X-TRM Reference Delivering/Receiving Party1 Processing Id <PrcgId>

This field contains the reference assigned by X-TRM to the transaction. This reference will be reported in T2S in the field Account Owner Transaction Id <AcctOwnrTxId>

Securities Transaction Type Securities Transaction Type <SttlmParams><SctiesTxTp>

OWNE (the use of this ISO code allow DCPs to set up specific message subscription rules)

Securities Movement Type <SctiesMvmntTp> DELI RECE DELI Payment Type <Pmt> APMT/FREE FREE/FREE APMT Credit Debit Indicator <CdtDbtInd> CRDT/none DBIT/none DBIT Matching Status <MtchgSts> MACH MACH MACH Partial Settlement <PrtlSttlmInd> NPAR NPAR NPAR Linkages <Lnkgs> none none INFO with the original

RVP transaction MT Participant Delivering/Receiving Party1

<Pty1> X X X

Account of MT Participant Safekeeping Account <SfkpgAcct>

X X X

Client of MT Participant (Beneficiary)


X X X

Counterparty


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Information Sese.023 fields Type of transaction Depository Not mapped -- -- -- Settlement Agent Delivering/Receiving Party1

<Pty1> X X X

Account of S.A. Delivering/Receiving Party1 Safekeeping Account <SfkpgAcct>

X X X

Client of Settlement Agent Delivering/Receiving Party2 <Pty2>

X X X

Account of Client of S.A. Delivering/Receiving Party2 Contact Details < PtyCtctDtls>

X X X


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7.5 CSD Links Table 5 shows the current and prospect links MT will have when entering T2S in wave 1. Further details are available in the corresponding Tablemats published on Monte Titoli Web Site. Table 5 – CSD links on wave 1

Market MT Account CSD Code BIC Settlement System

Type of Settlement

Type of Transaction Currencies

Austria 244200 OEKO OEKOATWWXXX 07 External DVP/DFP RVP/RFP EUR

Belgium (NBB) 9004 NBBE NBBEBEBB216 23 External DVP/DFP RVP/RFP EUR

Germany 7581 DAKV DAKVDEFFDOM 09 External DVP/DFP RVP/RFP EUR

Greece tbd BNGR BNGRGRAAXXX 60 Cross CSD All EUR United Kingdom & Ireland FIQAQ CRST CRSTGB22XXX 05 External DVP/DFP

RVP/RFP EUR

Luxembourg VP Lux 25200 VPLU VPLULULLXXX 26 External DVP/DFP

RVP/RFP EUR

Spain (CADE) 1953 CADE IBRCESMMCDE 21 External FOP -- Spain (SCLV) 7010 SCLV IBRCESMMSCL 22 External FOP -- Switzerland tbd INSE INSECHZZXXX 60 Cross CSD All EUR United States 00002008 DTCC DTCCUS33XXX 06 External FOP -- Clearstream Banking Luxembourg

85077 CEDE CEDELULLXXX 19 External DVP/DFP RVP/RFP EUR

Markets through ESES Settlement Platform

Belgium 620 CIKB CIKBBEBBCLR 10 External DVP/DFP RVP/RFP EUR

France 620 SICV SICVFRPPXXX 10 External DVP/DFP RVP/RFP EUR


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Market MT Account CSD Code BIC Settlement System

Type of Settlement

Type of Transaction Currencies

The Netherlands 620 NECI NECINL2AXXX 10 External DVP/DFP RVP/RFP EUR

Markets through Euroclear Bank (ICSD)

Euroclear Bank 21891 MGTC MGTCBEBEECL 18 External DVP/DFP RVP/RFP EUR

Finland 21891 APKE APKEFIHHXXX 18 External DVP/DFP RVP/RFP EUR

Portugal 21891 IBLS IBLSPTPPXXX 18 External DVP/DFP RVP/RFP EUR

Slovak Republic 21891 CSDS CSDSSKBAXXX 18 External DVP/DFP RVP/RFP EUR

Slovenia 21891 (not yet available) (not yet available) 18 External DVP/DFP

RVP/RFP EUR

Sweden 21891 (not yet available) (not yet available) 18 External DVP/DFP

RVP/RFP EUR


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This document has not to be considered complete and it is meant for information and discussion purposes only. Monte Titoli accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this documents. This document is subject to the confidentiality obligations set forth in article 5 of the General Terms and Conditions – Part 1. Trademarks Monte Titoli, X-TRM and MT-X are owned by Monte Titoli S.p.A. London Stock Exchange, the coat of arms device and AIM are a registered trade mark of London Stock Exchange plc. The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership of the same. Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd – Italian branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. 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. © March 2013 Monte Titoli S.p.A. All rights reserved. All rights to reproduce, adapt in whole or in part as well as to memorize in any form or by any means, electronic or otherwise, are reserved in all Countries.

T2S PROJECT Cross Border Settlement

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