The TARGET2-Securities Securities (T2S) project - bnr.ro si prezentari/The TARGET2... · The TARGET2-Securities Securities (T2S) project Bucarest, ... The future landscape with T2S.

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The TARGET2The TARGET2--SecuritiesSecurities (T2S) project(T2S) project

Bucarest, 2 Bucarest, 2 OctoberOctober 20020099

JeanJean--Michel GodeffroyMichel GodeffroyDirector GeneralDirector General

Chairman of the T2S Programme BoardChairman of the T2S Programme BoardEuropean Central BankEuropean Central Bank

1

Table Table of contentof contentss

I. Why does Europe need T2S?

II. What is T2S

III. Current status of the project

IV. What are the challenges ahead?

V. Benefits for the Romanian Stakeholders

2

Why does Europe need T2S?Why does Europe need T2S?

Europes securities markets are too fragmented and inefficient.

Europe needs a single pool of securities to stimulate competition and harmonisation.

There is no other realistic Europe-wide approach to creating this single pool.

Making Europe a better place to invest and trade (in line with the Lisbon agenda)

NYSE

Trading

Clearing

Cashsettlement

Asset servicing

EURO-NEXT

PT, BE, FR, NL

LCH. CLEARNET SA

LondonStock

ExchangeBorsa

Italiana

MonteTitoli

CassaDi

Comp

NasdaqOMX

DK,SE,FI,IS,

EE,LT,LV

VP

VPC

APK

.

.

.

Securities settlement

SWXGroup

SIS-XClear

SIS

Comparison of the US and Comparison of the US and European post trading landscapeEuropean post trading landscape

BMEGroup

Iberclear

BdE BNBBdF DNB BoE BoI DN SR SP...

SNB

EMCF

MTFs egChi-x/Turquoise

NCBi

UK&IE

EUROCLEARInterBol-sa

FR BE NL

BdPCBIre

NSCC FICC

DTC

FED

NasdaqMTFs

EgBATS

LCH. CLEARNET Ltd

Euro-CCP

CSDi

DeutscheBrse

EurexClearing

Clearstream

Banking Frankfurt

BuBa

Clearstream

Banking Luxemb.

BCL

LUS.E.

4

The The current current landscape of EU settlementlandscape of EU settlement

CSD A

No integrated cross-border settlement process

Market participants

CSD B

CSD C

CSD D

CSD E

CSD x

Custodians

links 19 CSDs in Euro Area 2 ICSDs 16 Other EU CSDs

Custodian s

5

The The future future landscape landscape with T2Swith T2S

TARGET2-Securities

Market participants

Custodians

CSD A CSD B CSD C CSD x

One integrated settlement process (domestic and cross- border)

One technical platform used by CSDs for securities settlement

dire

ct a

cces

s

6

Settlement in central bank money one of its core functions

Commitment of the Eurosystem to efficient and integrated financial markets in the EU

Neutrality of the Eurosystem as a supranational organisation

Possible facilitator in balancing different requirements

No own economic interest, cost recovery principle

TARGET and TARGET2 experience in successfully designing and implementing Europe-wide infrastructures

Why Why isis the the EurosystemEurosystem suited to run T2S?suited to run T2S?

7

Table Table of contentof contentss

I. Why does Europe need T2S?

II. What is T2S

III. Current status of the project

IV. What are the challenges ahead?

V. Benefits for the Romanian Stakeholders

8

What is What is T2ST2S?? -- A cooperation A cooperation between CSDs and NCBsbetween CSDs and NCBs

TARGET2CENTRAL BANK

MONEY

VALIDATION and MATCHING

SECURITIES

OPTIMISATIONof

SETTLEMENT

SETTLEMENTand

REALIGNMENT

T2S

CENTRAL BANK MONEY

CSD A

CSD B

CSD C

NCB A

NCB BNCB B ACCOUNTS

NCB A ACCOUNTS

NCB CCENTRAL BANK

MONEY

NCB A ACCOUNTS

Other RTGS

TARGET2VALIDATION and MATCHING

SECURITIES

OPTIMISATIONof

SETTLEMENT

SETTLEMENTand

REALIGNMENT

CENTRAL BANK MONEYSECURITIES

OPTIMISATIONof

SETTLEMENT

SETTLEMENTand

REALIGNMENT

SECURITIES

OPTIMISATIONof

SETTLEMENT

SETTLEMENTand

REALIGNMENT

CENTRAL BANK MONEY

CENTRAL BANK MONEY

NCB B ACCOUNTS

NCB A ACCOUNTSCSD A

CSD B

CSD C

CSD A

CSD B

CSD C

CSD A ACCOUNTS

CSD C ACCOUNTS

CSD B ACCOUNTS

NCB A

NCB B

NCB A

NCB BNCB B ACCOUNTS

NCB A ACCOUNTS

NCB CCENTRAL BANK

MONEY

NCB A ACCOUNTS

Other RTGS

NCB C ACCOUNTS NCB CNCB C ACCOUNTS

Other RTGS

CENTRAL BANK MONEY

CENTRAL BANK MONEY

Bringing on one technical platform all securities and cash accounts to settle all securities transactions

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T2S will be a single IT platform enabling settlement of securities in central bank money in the euro area/EU/EEA.

CSDs will delocalise their securities accounts to T2S, which will perform the processing of their settlement instructions on these accounts.

CSDs will keep their customer base and continue to perform non-settlement related functions (e.g. issuance, corporate actions, custody, etc.).

Settlement in commercial bank money is out of the scope of T2S

WhWhatat isis T2S? T2S? A new conceptA new concept

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Volume-based

More commoditised

Closer to central bank expertise

Benefits from achieving a single pool of liquidity/collateral

Settlement fees (in particular CSD component) not the largest chunk of the costs, but cross-border fees are high

SettlementSettlementT2ST2S

Custody/Corporate eventsCustody/Corporate eventsCSDsCSDs

Value-based

More innovation / calls for harmonisation

Less central bank involvement (in particular for equities)

Large cost-saving opportunities

Scale Competition

What is the economic logic?What is the economic logic?

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T2S concerns only the settlement function of CSDs!T2S concerns only the settlement function of CSDs!

Registration of issuer indebtness and investor holdings

Change of ownership among investors

Notary function

Custody and asset-servicing

functionSettlement

function

Banking function**only in some (I)CSDs

e.g. coupon payments, redemptions, stock splits

e.g. lending and borrowing

issuer / investor

buyer / seller

lender / borrower

What is the scope of T2S?What is the scope of T2S?

Type of intermediation

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CSD

Custody

Other

ReportingLending

Coll. Mgmt

Settlement

CSD

Custody

Other

ReportingLending

Coll. Mgmt

T2S

Settlement

Today

T2S world

CSD

Custody

Other

ReportingLending

Coll. Mgmt

Settlement

CSD

Custody

Other

ReportingLending

Coll. Mgmt

What is What is T2ST2S??IIt is a service to CSDst is a service to CSDs, not a CSD., not a CSD.

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Settlement function

Custody function

Notary function

GovernmentSecurities(incl. agencies)

Equities, corporate bonds,

1 432 5 6

All types of securities

DTC

CEurosyste

mT2SSettlement function

Custody function

Notary function

Fedw

ireS

ecur

ities

Ser

vice

CSDs

What is What is T2ST2S??Comparison with the USComparison with the US

A new concept

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Table Table of contentof contentss

I. Why does Europe need T2S?

II. What is T2S

III. Current status of the project

IV. What are the challenges ahead?

V. Benefits for the Romanian Stakeholders

15

We are in the specification phase until We are in the specification phase until Q1 2010Q1 2010

Feasibilitystudy

July 2006Launch of

the concept

March 2007Feasibility of

T2S concluded

User requirements phase

December 2007Launch of publicconsultation on

User Requirements

April/May 2008Revision of

User requirements and offer to CSDs

July 2008Decision tobuild T2S

following CSDsletters of intent

Specificationphase

Development phaseTesting and

migration phase Operational phase

2013envisaged

Go-live of T2Sand

Framework Agreement

2010/2011

1Q2009GFS 1.0

3Q2009MoU

Specificationphase

2010UDFS

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T2S Specification phaseT2S Specification phaseFinalisation of technical documentation The User Requirements Document (URD) which defines

the features that the market requires from T2S has now been largely frozen.

The final version of General Functional Specification (GFS) which provides the system design published in November 2009.

The User Detailed Functional Specification (UDFS) published in Q1 2010

Contractual arrangements with CSDs 28 CSDs signed a Memorandum of Understanding

Preparation of formal contract to be signed in first half 2010

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Subgroup on user

requirements management

National User Groups

Advisory Group

Subgroup on message

standardisation

Subgroup on testing

and migration

Subgroup on

process efficiency

Subgroup on

contractual issuers

Subgroup on

corporate actions

Information Sessions with all Stakeholders

ECB Governing Council

Executive Board PSSC

T2S T2S GGovernance: First phase of the projectovernance: First phase of the project

T2S Programme Board

Since May 2009 a new Eurosystem body

manages the project, reporting to

Governing Council

Subgroup on

operational framework

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T2S programme BoardT2S programme Board Composition

- 8 members (including two former CEOs of CSDs) and 4 alternates

Objective- To ensure the Eurosystem delivers T2S on time, within budget and

according to market needs

Important principles- Represent the interests of the T2S project and the Eurosystem (and not

of their own institution)

- Governing Council remains ultimate decision-maker

- T2S Programme Board is supported by the T2S Project Team

Responsibilities- Preparation of strategic Governing Council decisions, daily

management of T2S Programme and reporting, managing relations with 4CB/CSDs/other external stakeholders, validation of 4CB deliverables

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External governanceExternal governance T2S Advisory Group is currently the only external

governance forum

Future external governance arrangement needs to take into account- The role of the T2S Programme Board

- Future contractual relations between CSDs and the Eurosystem

External governance needs to be adapted for Development Phase (starting Q1 2010)

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Future external governanceFuture external governance New forum for bilateral discussions between CSDs

and the Euroyststem- To the prepare the Contractual Agreement for the

Development Phase and the Framework Agreement for the Operational Phase

- To discuss policy as well as technical matters of common concern

Future role of the Advisory Group- Many aspects still to be settled (mandate, composition,

reporting lines etc)

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Table Table of contentof contentss

I. Why does Europe need T2S?

II. What is T2S

III. Current status of the project

IV. What are the challenges ahead?

V. Benefits for the Romanian Stakeholders

22

TheThe next stepsnext steps

Technical documentation URD, GFS, GTD and UDFS

Legal T2 Guideline Preparation of contractual arrangements between Eurosystem and

CSDs

Pricing structure Analysis of Total Cost of Ownership, volume estimates and the

resulting price structure

Governance Establishment of a forum for bilateral CSD-Eurosystem discussions,

and adaptation of the Advisory Group

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Building T2S- On time: 2013 at the latest

- Within budget

- According to market needs (User Requirements: >800 pages)

Future challengesFuture challenges

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Table Table of contentof contentss

I. Why does Europe need T2S?

II. What is T2S

III. Current status of the project

IV. What are the challenges ahead?

V. Benefits for the Romanian stakeholders

25

T2S benefits for Depozitarul Central S.A and NBR

T2S provides:

- a core, neutral and technically advanced infrastructure supporting various CSD business models in a pan-European operational framework

- the possibility to avoid huge investments to meet new technical and business requirements

- a state-of-the-art business continuity concept

- economies of scale at a European level

T2S offers new business opportunities:

- beyond domestic borders and across all EU/EEA countries

- to focus on value-added products and services

26

T2S benefits for Romanian custodians Reduced settlement fees stemming from economies of

scale and increased competition among CSDs. Back-office cost savings from harmonised single

settlement process for all European securities and settlement centralisation with one single CSD.

Single pool of collateral and liquidity, accessible in real- time.

New business opportunities.

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T2S benefits for Romanian issuers Main benefit: lower fees from

- increased competition,

- European harmonisation, and

- cost reductions at CSD and custodian level, in particular for cross-border business

Simpler management of multiple shareholder bases;

Opportunity to reach a wider investor base for equities, bonds, commercial paper, etc.

Reduction in cost of capital

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T2S benefits for Romanian investors

Main benefit: lower fees from:

- increased competition,

- European harmonisation and

- cost reductions at CSD and custodian level, in particular for cross-border business

Possibility to manage a diversified securities portfolio across Europe through one single CSD at low cost.

Increase in return on financial investments

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ConclusionConclusion

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TheThe fivefive big winsbig wins of T2Sof T2S Making cross-border settlement fees as

inexpensive as domestic fees

Reducing userscollateral/liquidity needs

Harmonising settlement to make Europe a true Single Market

Create new opportunities for competition

Market users will only need an account at one CSD to settle any transactions in securities within T2SThe Eurosystem and the market believe in T2S and

are ready to take the challenge and invest in it.

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Slide Number 1Slide Number 2Why does Europe need T2S?Slide Number 4The current landscape of EU settlementThe future landscape with T2SSlide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16T2S Specification phaseSlide Number 18T2S programme BoardExternal governanceFuture external governanceSlide Number 22The next stepsSlide Number 24Slide Number 25T2S benefits for Depozitarul Central S.A and NBRT2S benefits for Romanian custodiansT2S benefits for Romanian issuersT2S benefits for Romanian investorsSlide Number 30The five big wins of T2SSlide Number 32