Post on 19-Jan-2016
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TARGET2-SecuritiesTARGET2-Securities
Washington, Washington, May May 20072007
Washington, Washington, May May 20072007
Denis BeauDenis BeauDeputy DirectorDeputy Director
Payment Systems and Market Payment Systems and Market Infrastructure, Infrastructure,
Banque de FranceBanque de France
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IntroductionIntroduction
T2S is only one of several initiatives put T2S is only one of several initiatives put forward by public authorities of the EU to forward by public authorities of the EU to improve the post-trading infrastructure of EU improve the post-trading infrastructure of EU capital markets(removal of “Giovanni capital markets(removal of “Giovanni barriers”, ESCB-CESR, Code of Conduct)barriers”, ESCB-CESR, Code of Conduct)
T2S is a technical platform to be provided by the Eurosystem to CSDs to execute settlement instructions in central bank money
The decision to develop or not the T2S The decision to develop or not the T2S platform will be taken early next yearplatform will be taken early next year
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OutlineOutline
1.1. Why?Why?
2.2. How?How?
3.3. When? When?
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• 8 years after the launch the integration of market
infrastructures remains to be completed:
•11 CCPs
•21 CSDs
•Significant differences in technical requirements/market practices/taxation/legal rules for ownership transfer..
• Diverging strategies of market participants to develop further the integration:
•Development of links between systems
•Horizontal integration ( eg Euroclear, LCH.Clearnet)
•Vertical integration (e.g Clearstream)
1. Why?1. Why?
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cost of this lack of integration
0
5
10
15
20
25
30
35
UnitedStates
EUdomestic
EU cross-border
Min Max Avg.Source: Oxera, LSE, CEPS
Settlement Costs
1. Why?1. Why?
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• Benefits expected from T2S Efficiency of settlements improved:
Consolidation into one single platform processing both cash and securities
Based on the most efficient model
No more difference between cross-border and domestic,
Costs reduced: mutualisation of investment and running costs
Competition fostered since CSDs, which will retain their current role vis-a-vis their participants, will be able to offer added-value services (tri-party, securities lending…)
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T2S creates two main sources of cost savings to market participants:
Reduction in the number of settlement engines
at CSD level
Reduction in CSD infrastructure costs Reduction in custodian back-office costs
(number of interfaces)
Reduction in domestic (CSD) feesReduction in cross-border (custodian)
fees
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OutlineOutline
1.1. Why?Why?
2.2. How?How?
3.3. When?When?
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CSD
Custody
Other…
Reporting
Lending
Coll. Mgmt
Settlement
CSD
Custody
Other…
Reporting
Lending
Coll. Mgmt
T2S
Settle-ment
T2S world
It provides a common settlement facility
T2S does not segregate custody and settlement…T2S does not segregate custody
and settlement…T2S does not segregate custody and settlement…
CSD operations today
2. How?2. How?
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The concept: securities and cash accounts in one platform
T2S
CSD A
CSD B
CSD C
T2S SETTLEMENT
ENGINE
SECURITIES TARGET2 CASH
CSD A ACCOUNTS
NCB C ACCOUNTSCSD C ACCOUNTS
CSD B ACCOUNTS NCB B ACCOUNTS
NCB A ACCOUNTS NCB A
NCB B
NCB C
TARGET2
2. How?2. How?
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OutlineOutline
1.1. Why?Why?
2.2. How?How?
3.3. When?When?
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Phase 1 Phase 2 Phase 3
User Requirements Detailed Functional Specifications
(DFS) Architectural Specifications Decision on Migration Policy
March 2007
T2S Development & Implementation
Units and Modules Testing
Fine Tuning (DF S)
UAT Testing Integration,
performance, interface & back up testing
Migration Options Final Deployment
T2S
Production
March 2013
Governing Council Decision
Public consultation
3. When?3. When?
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Governing Council decision 8 March 2007•Feasible to build T2S• Move to next phase (user requirements)• Decision on development phase: early 2008also• T2S built on TARGET2• Regular and transparent interaction with stakeholders • Centralised collateral system to replace CCBMGoverning Council decision 26 April 2007• Launches the public consultation on the general principles and proposals• Approves UR phase Governance • Preparation of UR by the end of 2007 and second consultation thereafter
3. When?3. When?
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Objectives of the next phase
• Consult the market on principles, needs and expectations
• Define the T2S User Requirements
In cooperation with all T2S stakeholders
• Prepare decision of CSDs to commit to T2S or not
• Keep all stakeholders involved in the process
• Refine the cost/benefit evaluation
3. When?3. When?
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T2S Advisory Group
Co-ordination Group
Scope &
Schedule
National User Groups
ECB Governing Council
Lifecycle &
Matching
Settlement
FunctionalityStatic Data Interfaces
Non-functional
requirements
Executive Board PSSC
3. When?3. When?
Information Sessions with all
Stakeholders
Six Technical Groups
Governance of the project
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Conclusions
Objectives of T2S: To contribute to the integration of European post-market
infrastructures To provide efficient and harmonised settlement services in
central bank money To reduce the cost of securities settlements To contribute to harmonisation of market practices
Complementarity between the initiatives of the Commission and those of the ECB/Eurosystem
Complementarity between T2, T2-S and CCBM2
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