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Page 1: Godeffroy T2S

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T2S: from vision to reality

SWIFT Business Forum

Madrid, 5 March 2013

Jean-Michel Godeffroy

Chairman of the T2S Board

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3

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Purpose and benefits of T2S 1

Functioning of T2S

Project status and challenges ahead

Spanish market 4

Table of contents

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What is T2S? Purpose and Benefits of T2S

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Scope of T2S 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

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Future EU Settlement Landscape Purpose and Benefits of T2S

One integrated settlement process

(domestic and cross-border)

CSD

CSD

CSD

CSD

Market Participant M

arke

t Par

tici

pan

t

Market Participant

Marke

t Particip

ant

Cust

odia

n

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Same processing and reduced settlement fees for domestic

and cross-border transactions

Possibility to access all securities from one account in one

CSD: T2S makes links between CSDs easier

Potential to optimise collateral and liquidity requirements

Reduced back-office costs by centralising settlement and thus

streamlining interfaces

New business opportunities through access to new markets

Impact of T2S

Benefits for Users

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Higher level of competition in post-trade industry

A Single Market for financial services in Europe through

harmonised clearing and settlement

Reduced settlement risks on cross-border transactions to

positively affect financial stability

Investors can more easily diversify their portfolios

Issuers can more easily reach European investors

Reduced costs of capital for firms lead to economic growth

Impact of T2S

Benefits for Markets

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Table of contents

3

2

Purpose and benefits of T2S 1

Functioning of T2S

Project status and challenges ahead

Spanish market 4

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Functioning of T2S

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Indirect vs Direct Connection Functioning of T2S

CSD

Client

Client

CSD

Client

Direct

Connectivity

Indirect

Connectivity

Indirect

Connectivity

CSD participants can connect directly to T2S…

…but their CSD determines their access rights

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Table of contents

3

2

Purpose and benefits of T2S 1

Functioning of T2S

Project status and challenges ahead

Spanish market 4

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T2S Community

22 CSDs have confirmed their

participation, representing

nearly 100% of settlement

volume in euro

Other CSDs may join later but

will have to pay an entry fee

So far only the euro and DKK

(as of 2018) will be settled in

T2S, but other currencies

may join later

12

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ECB Governing

Council

T2S

Board

Governors’

Forum

Non-euro

Currencies

Steering Group

(NECSG)

CSD Steering

Group (CSG)

Spanish National User

Group (NUG)

Non-euro

central banks’

governors / boards

Project Managers

Group (PMG)

Operations

Managers Group

(OMG)

Change Review

Group (CRG)

ECB

Centr

al B

ank

Deci

sion-M

akin

g

Bo

die

s

Steeri

ng

Leve

l

Bo

die

s

Mar

ket

advi

sory

bodie

s

Tech

nic

al G

roups

Reporting

Escalation

CRG reporting to CSG

Technical Groups reporting to T2S Board

Advisory Group

(AG)

T2S governance since 1 July 2012

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We are here

T2S Go-Live

Start Mon

17/07/06

Finish Tue 25/04/17

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

SP1 SP2 SP3 SP4

SP5 SP6

SP13 SP17

T2S Programme Status

99% of software developed for core functions

Focus is now on testing

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Contractual agreements with CSDs and Central Banks signed

– T2S Framework Agreement

– Currency Participation Agreement

Feasibility assessments by CSDs/NCBs completed

Technical documentation finalised and published

– UDFS v1.2.1, URD v5.02, GUI BFD v1.8 in Sept. 2012

– Business Process Description v1.1 in Nov. 2012

– T2S User Handbook v1.0 in December 2012

Connectivity solutions to T2S selected

What T2S has delivered so far

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Three T2S network providers

to maintain competition:

2 value-added and

1 dedicated-line;

Eurosystem licensing

procedures led to selection of

SIA/Colt and SWIFT as value-

added network providers.

The Proof-of-Concept phase

was successfully completed

before the deadline;

GovC decided Eurosystem’s

CoreNet to be the dedicated-

line provider.

User Connectivity

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Challenge: all T2S stakeholders (Eurosystem as provider, central banks,

CSDs, Users) need to be ready in time for T2S go-live / migration to T2S

Solution: 17 regular checkpoints (“synchronisation points”) to monitor

progress of all stakeholders, including:

- SP 3: Confirmation of the plan (April 2013)

- SP 5: Start of Internal Eurosystem Acceptance Testing (Mar 2014)

By this point 4CB need to deliver T2S software

- SP 6: Eurosystem Ready for User Testing (Sept 2014)

User Testing environments must be set-up, and relevant training

material and testing documentation delivered

- SP 16: Ready for T2S Go-Live (June 2015)

CSDs and Eurosystem NCBs in first migration wave need to be

ready for migration (several migration waves planned)

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Main challenge

Timely preparation of all stakeholders

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Euroclear ESES (BE, FR, NL)

Interbolsa

NBB – SSS

Clearstream Banking

Keler Hungary

LuxCSD

OeKB

VP Lux

VP Securities

9 months Wave 2

28/03/2016

Wave 3

12/09/2016

Wave 1

22/06/2015 6 months 5 months

BOGS

Depozitarul Central

Malta Stock Exchange

Monte Titoli

SIX SIS Ltd

Migration waves

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AS Eesti Väärtpaberikeskus

CDCP Slovakia

Euroclear FI

Iberclear

KDD Slovenia

CSD of Lithuania

Wave 4

6/02/2017

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CSD

Regulation T2S

A wide frame is needed…

…Harmonisation

operational

dimension

legal / regulatory

dimension

Market integration

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Europe is in the midst of significant regulatory change

MiFID 2 on trading; EMIR on clearing; CSD Regulation and Securities Law Directive on settlement

Issuers will be able to choose where they issue

CSDs will be able to more easily link with one another

Users will have much greater freedom of choice where they

trade, clear and settle their trades

Adoption of CSD Regulation necessary as technical standards

need to be developed by end 2013/early 2014

Many technical and market practice barriers tackled by T2S

EU Regulations

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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

T2S is a unique opportunity to remove Giovannini

barriers by harmonising EU post-trading

Harmonisation in T2S

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T2S

DVP will no longer be a

bilateral relationship

between one CSD and one

NCB.

Any CSD in T2S is

potentially in a DVP

relationship with any NCB

in T2S

Harmonisation

Same market practice all

over Europe: national

boundaries will be

broken down

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The new framework will lead to increased competition

CSDs regulation

Same safety and

efficiency rules all over

Europe

Competition

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Table of contents

3

2

Purpose and benefits of T2S 1

Functioning of T2S

Project status and challenges ahead

Spanish market 4

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T2S Market Compliance monitoring

Status 28/02/2013

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Priority 1 Priority 2

T2S Markets 1

T2S messages

ISO 20022

2

T2S messages

Matching fields

6

Schedule of

settlement day

7

T2S CA

standards

9

T2S Settlement

finality II

10

T2S Settlement

finality III

15

Availability of

omnibus

accounts

16

Restrictions on

omnibus

accounts

20

CA market

standards

(CAJWG)

27

Securities

amount data

X G G G R B B B B G B

Y G G G G B G B B G B

Z G G Y Y G G B B R - No info B

XX G G G Y Y G B B Y B

YX G R Y R G G B B G B

ZX G R Y R B Y B B G B

XY G G G R B G B B Y B

ES G G G Y B B B B G B

YY G R Y R B B B Y Y Y

ZY G G G G B G B B Y B

XZ G G Y Y B G B B R – No info B

YZ G G Y R Y Y B B R – No info B

ZZ G Y G G B G B B G B

XXX G G G R Y Y B B R – No info B

YXX G R Y Y G G B B R – No info B

ZXX G R Y Y B Y B B R – No info B

XXY Y Y Y R Y G B B R - No info B

YXY G G G G B G B B G B

ZXY G G G G G G B Y G G

XXZ G G R Y B G B B R B

YXZ G G G Y G G B B R B

ZXZ G G G R Y Y B Y R - No info Y

Summary

28/02/2013

Green: 21

Yellow: 1

Red: 0

Green:15

Yellow:2

Red: 5

Green: 12

Yellow: 9

Red: 1

Green: 5

Yellow: 8

Red: 9

Blue: 12

Green: 5

Yellow: 5

Blue: 3

Green: 14

Yellow: 5

Blue: 22

Yellow: 0

Red: 0

Blue: 19

Yellow:3

Red: 0

Green:8

Yellow:4

Red:10

Blue: 19

Green: 1

Yellow:2

Summary

25/01/2013

Green: 21

Yellow: 1

Red: 0

Green:15

Yellow:2

Red: 5

Green: 11

Yellow: 8

Red: 3

Green: 4

Yellow: 7

Red: 11

Blue: 12

Green: 3

Yellow: 7

Blue: 3

Green: 11

Yellow: 8

Blue: 22

Yellow: 0

Red: 0

Blue: 19

Yellow:3

Red: 0

Green:8

Yellow:4

Red:10

Blue: 19

Green: 1

Yellow:2

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T2S has been one of the key factors of the post-trade reform in

Spain: the reform facilitates the ability of Iberclear to compete in

a T2S context

Iberclear is one of the Eurosystem’s contracting partners to

offer T2S services to its clients

Iberclear has key responsibility to ensure the readiness of the

Spanish market for T2S and explain the expected adaptation

process. BUT dependent on adequate pace of regulatory reform

Preparations of the Spanish market

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Auto-collateralisation – Liquidity savings

Same platform for securities & central bank money settlement

15 cents for domestic & cross-border settlement + CSD add-on

How will adaptation costs to T2S be financed? Effectively all

CSDs in Europe are renewing their settlement system at the

same time.

Links? What access to securities held in other CSDs will

Iberclear provide?

What will change for Spanish market participants?

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T2S on the web: www.t2s.eu - 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‘

More information on T2S

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Thank you for your attention

www.t2s.eu

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