T2S OnLine - London Stock Exchange Group...T2S OnLine I No 17, December 2013 3 views about the...

T2S OnLineQUARTERLY REVIEWNo 17, December 2013

EDITORIAL

NEWS FROM THE T2S PROJECT

INSIGHT ARTICLE ON THEVOLUMETRIC MODEL FOR T2S

ROUNDTABLE INTERVIEW:BECOMING A DIRECTLYCONNECTED PARTY IN T2S

T2S OnLine I No 17, December 2013 2

Jean-Michel Godeffroy

EDITORIAL

THE T2S COMMUNITY IS GETTING READY

On 18 December a preliminary political agreement was reached on the CSD Regulation inBrussels.There is no doubt that the T2S Community strongly welcomes this development,which is of key importance for our project. Our efforts to harmonise the T2S environmentwill be made more effective by the CSD Regulation. In particular, it provides a level playingfield for competition between CSDs; it facilitates the implementation of T2S in somecountries; and it introduces extremely important elements of harmonisation in thetransaction chain.The CSD Regulation provides a legal framework for what T2S makespossible technically.The work of the T2S Community on harmonisation will thus benefitgreatly from the final adoption of the Regulation, and, if the technical standards are in forceby end-2014, there will be sufficient time for the CSDs to adapt their legal documentationbefore the launch of T2S.

Post-trade harmonisation is indispensable if we are to reap the full benefits of efficientcross-CSD settlement once T2S is in place.The T2S harmonisation standards have beenendorsed by the T2S Advisory Group (AG), which also monitors compliance with thesestandards.The AG has established a detailed monitoring methodology for assessing thecompliance of T2S markets with the agreed T2S standards. It draws on the input providedby the T2S National User Groups (NUGs) and by the 24 CSDs which have signed theFramework Agreement.The results are published on a regular basis in the harmonisationprogress reports.

In light of this I would like to focus this editorial on the important issue of harmonisationwhich, for some T2S stakeholders, is almost as important as the success of the T2S projectitself.

Compliance with harmonisation standards requires the involvement of all T2S markets ifthe whole T2S Community is to benefit. If some T2S markets comply with the harmonisationstandards and others do not, it is the T2S Community at large which would fail to benefitfrom efficient cross-CSD processes in T2S.The T2S Board invites all T2S markets to considerthe standards as mandatory. Any instances of non-compliance with the harmonisationstandards should thus be exceptional and the result of a barrier that the various actors ina specific T2S market are not able to remove, even in the medium/long term.

The T2S legal documentation stipulates specific and precise obligations in some of the fieldscovered by the harmonisation standards. Some standards (but not all) are a prerequisite forconnecting to and safely operating on the T2S platform.The T2S Board discussed this issueat length and concluded that the NUGs should be asked to determine their chosen courseof action and be ready to discuss cases of non-compliance with their peers in the AG.

It is envisaged that the fourth harmonisation progress report will be published at the endof March 2014.This year considerable progress was made in terms of the T2S harmonisationagenda. I welcome the substantial efforts made by the market and trust that the cooperativespirit will continue in 2014.

In this issue of T2S OnLine, Marc Bayle provides an insight into the status of the T2S project,Robert Neitzel discusses the sizing of T2S and five large European organisations give us their


views about the advantages/disadvantages of becoming a directly connected party and whatmade them take their decision. I hope you will enjoy this issue and I would also like to takethis opportunity to thank the T2S Community for all the good and constructive cooperationin 2013.

We have all devoted considerable efforts to T2S over the past twelve months and shouldhence allow ourselves to shift our attention to more light-hearted matters. I hope you willhave an enjoyable festive season with your families and friends. Merry Christmas and a veryhappy new year to all of you!

Jean-Michel GodeffroyChairman of the T2S Board

EDITORIAL


As the year draws to a close, I look back at 2013 as the year in which the 4CBcompleted the development work, including the development of both the T2S corefunctions and the non-core software. A major achievement was thus realised and I wouldlike to thank the 4CB for their efforts. The focus of the 4CB this year has been ontesting the T2S software.The objective of the end-to-end testing period is to detectdefects in order to fix these before user testing begins. For one issue a defect wasdetected and the advice of the market was sought. The issue relates to cross-CSDsettlement and the need to make a provisional check of the realignment instructionswhich T2S automatically creates. Under severe time constraints, CSDs and theEurosystem have constructively discussed how to find the optimal solution in line withthe User Requirements Document.

Auto-collateralisation and client collateralisation workshopOn 29 November a workshop on auto-collateralisation was held.The T2S ProgrammeOffice provided: i) a technical description of how parties are identified for settlement,liquidity and collateral flows in T2S; ii) details of the technical constraints relating to theimplementation of the payment bank’s BIC structures in the T2S auto-collateralisationset-up; and iii) information on the alternatives that could be implemented in T2S toensure the right level of flexibility in the management of liquidity and collateral pools,and the appropriate management of parties and accounts in T2S and its set-up.Theworkshop participants had a preference for having the same level of flexibility in theset-up of central bank auto-collateralisation as in the set-up of client collateralisation(i.e. using a wildcard pattern). A change request, which will not have a substantial impacton the T2S Programme Plan, is currently under discussion.

New member of the T2S CommunityOn 26 September 2013 the Latvian CSD joined the T2S Community by signing theFramework Agreement.This brings the number of CSDs that have committed to T2S to24. I am happy to welcome the Latvian CSD and to see that the T2S Community iscontinuing to grow.

Migration planOn 21 November 2013 the Governing Council of the ECB approved the updatedmigration plan, which includes the Latvian CSD and the Bank of New York Mellon CSD.Both CSDs joined the T2S Community in 2013 and will migrate as part of the fourthmigration wave on 6 February 2017.

T2S value-added network providersThe two licensed T2S value-added network providers, SIA-Colt and SWIFT, successfullycompleted the Eurosystem network acceptance test phase at the end of September 2013,one month ahead of schedule. This important milestone allowed the programme toachieve Synchronisation Point 4 (confirmation of network service providers). Now allpotential users of these connectivity services can select one of them to access the T2Splatform.

Change requests approved since July 2013Since July 2013 nine change requests of a non-critical nature have been approved by theT2S Board.Two change requests (T2S-0409-SYS – Support the migration of pending

T2S PROJECT UPDATEMarc Bayle

T2S Programme Manager


instructions with ISD in the past and T2S-0411-SYS – Blocking and release of messagesduring migration weekend) were necessary in order to make the migration processsmoother. Two (T2S-0418-SYS – Digital signature on business layer and T2S-0422-SYS –Billing of external settlement scenario) arose from the 4CB testing process, where somecorrections were requested. Four were of an editorial nature and one related to theremoval of the Dedicated Link solution from the T2S User Requirements.The DedicatedLink solution was removed as no market participant showed interest in using thisconnectivity channel. The approval of these change requests will have no impact on theT2S programme plan.

Train the trainerIn October 2013 a T2S training programme entitled “train the trainer” was launched.Theprogramme will train designated trainers, who will in turn train the T2S end users duringin-house courses at CSDs and central banks. A detailed training schedule has beenprepared and will run until the end of 2014. The training material is exhaustive andself-explanatory and is based on the T2S Public Training Framework and on the T2S ServiceDescription.Training sessions are also offered remotely via webinar, allowing participantsto benefit from the training course without having to travel.

Directly connected party (DCP) in T2SOn 15 October 2013, 31 institutions communicated a non-binding expression of interestin becoming a DCP in T2S. The DCPs will interface directly with T2S via one of the twonetwork providers, subject to the authorisation of their respective CSD(s)/NCB andcertification by the Eurosystem. Please see the Roundtable interview in the Insight sectionfor more information.

Moving forward on harmonisationProgressing on the harmonisation agenda continued to be of key importance to theAdvisory Group (AG).The Harmonisation Steering Group (HSG) presented the first draftof the fourth harmonisation progress report to the AG on 19 November. Final approvalbefore publication will be in February 2014. The report will show the compliance statusof all T2S markets (including the two new CSDs that have signed up for T2S sincepublication of the previous report) regarding the 15 harmonisation activities that arecurrently monitored.This represents an increase of five activities compared with the lastreport.

Regarding the mandatory versus voluntary nature of the T2S harmonisation standards, anumber of T2S stakeholders have been asking the T2S Programme Office about thepotential consequences for the T2S markets of non-compliance.

For more information, I refer you to the editorial and to the view of the T2S Board onthe harmonisation pages (www.harmonisation.t2s.eu).

The Corporate Actions Sub-group (CASG) finalised its annual report on the T2S markets’compliance with the T2S corporate actions standards in October 2013.The report hasbenefited from comments made by the T2S NUGs and was approved by the HSG inNovember. It will be published on the T2S website (www.t2s.eu) by the end of 2013.

T2S PROJECT UPDATE


On 18 December a preliminary political agreement was reached on the CSD Regulationin Brussels.We welcome this development, which is of key importance for T2S. In advanceof this agreement the HSG had already started the preparatory work to facilitateharmonisation and coordination across T2S markets for some high-priority harmonisationactivities that depend on the Regulation. More specifically, the HSG had set up a task forceon T+2.The task force held its inaugural meeting on 15 November. The aim is to ensurethat the T2S markets move to a settlement cycle of T+2. In addition, the task force willfollow development in other European markets. Another HSG task force will also be setup to analyse the view of the T2S markets on the settlement discipline regime asestablished by the CSD Regulation. Its work will be initiated right after the publication ofthe ESMA consultation on the level II legislation, following the successful completion ofthe trilogue procedure on the Regulation in the European Parliament.The two new taskforces are expected to present their recommendations to the HSG in 2014.

The Cross-Border Market Practices Sub-group (XMAP) has finalised its assessment on theusage of T2S optional matching fields.This assessment will be presented to the HSG forconsideration in January 2014. It includes a recommendation to maintain the status quo ofthe “optional matching fields” and keep them as optional for the first release of T2S.The XMAP also started working on the CSDs’ restriction rules in October 2013. Theaim is to deliver the final analysis on CSDs’ restriction rules to the HSG in 2014.

T2S PROJECT UPDATE


THE VOLUMETRIC MODEL FOR T2S

A volumetric model is critical for both the design of a software application as well as fordetermining the capacity of the technical infrastructure required to run it – e.g. network,processing and storage capacity.The T2S User Requirements specify only the agreed dailyaverage and peak number of settlement instructions that T2S will be able to settle, and thedocument does not take into account other types of processing that can affect theperformance of the platform. However, in order to properly validate the design and capacityof this high-volume IT platform in terms of different aspects of its performance, such asvolume and scalability, additional detail on underlying data is required as well as informationon the use of services during the T2S operational day.

Work on the volumetric model for T2S began in February 2011 in joint workshops withrepresentatives of CSDs, central banks and banks. Initially, estimations regarding the usageof information services were the basis for pricing these services in T2S. An initial profilewas drawn up, documenting the types and number of instructions that T2S expects to receiveas well as the types and number of outbound business responses that T2S expects togenerate for inbound instructions.

In 2012 the 4CB began with the specification of non-functional tests, including performanceand scalability tests. It quickly became evident that the definition of meaningful test scenariosrequired additional information from CSDs and central banks on their intended usage ofT2S services. In order to obtain more data, the T2S Programme Office issued separatequestionnaires to CSDs and central banks in autumn 2012.Their responses validated theT2S Programme Office’s volumetric assumptions and they also answered, to the extentpossible, questions on future behaviour and volumes.The outcome of the questionnaireswas discussed in subsequent workshops with the CSDs and central banks in order to arriveat mutually agreed assumptions on the expected use of T2S services. 20 CSDs and 18 centralbanks responded to the respective volume questionnaires and contributed to this work.

Using the aggregated figures from the semi-annual CSD Settlement Volume Survey and theoutcomes of the questionnaires and workshops, the T2S Programme Office derived a modelfor processing in T2S, documented in the T2S Volume Processing Analysis. Based on thevolume forecast, the model specifies:

• peak workload requirements;• the distribution of the various types of inbound instructions and outbound notifications;• the number and types of inbound message-based and file-based communications;• the number and types of outbound message-based and file-based communications;• the distribution of workload between daytime and night-time processing; and• start-of-day and end-of-day processing workloads.

The T2S Programme Office intends to update the T2S Volume Processing Analysis on asemi-annual basis after receiving the aggregated figures from the semi-annual CSD SettlementVolume Survey in order to reassess the validity of the assumptions made.A regular reviewwith CSDs and central banks to further update and add detail to the volumetric assumptionsand the workload distribution model will take place as the work of CSDs and central banksto adapt to T2S progresses and as information on the expected behaviour of CSDparticipants and payment banks becomes more concrete.

Robert Neitzel,T2S Programme Office

INSIGHT


ROUNDTABLE INTERVIEW: BECOMING A DIRECTLY CONNECTED PARTY IN T2S

15 October 2013 was the deadline for non-binding expressions of interest in becominga directly connected party (DCP) in T2S. We spoke to five large European organisationsabout the advantages/disadvantages of becoming a DCP and what made them take theirdecision. Read more on what Karla Amend of Clearstream, Stephen Lomas of DeutscheBank, Anne Mairesse of LCH.Clearnet, Philip van Hassel of Euroclear Bank and RobertoVicario Montoya of BBVA had to say about this issue.

INSIGHT

1 Forum where DCP candidates can exchange views and raise questions in a centralised way withthe ECB and CSDs.

Karla AmendClearstream

Stephen LomasDeutsche Bank

Anne MairesseLCH.Clearnet

Philip van HasselEuroclear Bank

Roberto VicarioMontoyaBBVA

Facts about DCPsLike any other T2S actors, DCPs need to have a contract with a CSD and a centralbank in order to conduct business on the T2S platform. However, a T2S actor canbecome a DCP if it has been authorised by its contracting CSD or central bank toaccess T2S directly in order to use T2S services. DCPs will be directly connected tothe T2S platform via a value-added network and will therefore not need thecontracting CSD to provide a technical interface.

Is the number of entities that have expressed a non-binding interest in becominga DCP higher or lower than you expected? Are there any surprises?

Anne Mairesse: I would answer “higher”, as the participants of the DCP Forum1 accountfor less than half of the declarations. In addition, as the declaration is non-binding, it isclearly preferable to declare the intention to become a DCP and reserve the option todeploy the direct connection in the course of the migration.

Stephen Lomas: Yes, I must admit that it is higher than we expected. 16 members ofthe DCP Forum, representing 20 institutions, are on the list; in addition to the internationalCSDs (ICSDs), most of the others are new names, which have come as a pleasant surprise.The DCP Forum has asked the ECB to invite these entities to become members of theDCP Forum.

Roberto Vicario Montoya: There have been a slightly higher number of entitiesexpressing interest in becoming a DCP than expected.The list includes all the players weexpected plus some more besides, but it has not been such a surprise as there are clearreasons in these cases for this decision. First could be the fact that it is a non-binding


declaration, making it a more straight-forward decision as it does not rule out any potentialstrategy. Probably we will see a different final picture. Other reasons could be theuncertainty associated with the envisaged range of services to be provided by the CSDsor perhaps these entities are even considering offering new services to their clients.

Philip Van Hassel: The number of entities that have, until now, declared their interestin becoming a DCP is in line with what we would expect at this stage. However, as youpoint out in your question, what was asked for by mid-October was a non-bindingdeclaration, and the possibility remains to submit final, binding declarations later – aheadof each wave.Therefore, we may well see more entities declaring their interest in themonths to come. And some may even reconsider and withdraw from the list of candidateDCPs.

Becoming a DCP does not only require the establishment of a connection to T2S and thedevelopment of ISO 20022 settlement messaging, but may also entail network strategychanges for firms to hold European assets directly through the CSD. Some firms, therefore,may prefer to start as an indirectly connected party (ICP) and wait until after thecompletion of the final T2S migration wave, in February 2017, before seriously consideringthe option of becoming a DCP.

The published list of candidate DCPs holds few surprises.The names you would expectare there. And a good portion of these are multi-market custody providers with significantactivity in the markets that are scheduled to migrate in wave 1 – where DCP services areexpected to be offered as of the migration date (e.g. Italy and Greece).

We might have expected some more entities from markets that are joining T2S in waves2 and 3 and where we know that DCP services will be offered (e.g. Belgium, France, theNetherlands and Germany) to be present on the list. However, this number may increaseas more finalise their DCP business case. Similarly, it is probably too early for wave 4markets.

We are not surprised, either, that market infrastructures such as central counterparties(CCPs) and ICSDs have expressed their interest in becoming DCPs. DCP connectivitycould be a good strategic fit for them. And the ICSDs, especially, can build on theinvestment they are already undertaking for their CSDs.

In short – not too many surprises, but still too early to draw any final conclusions.

Karla Amend:The number as such does not come as a surprise to me.We already sawthat there was a huge amount of interest during the series of joint DCP Forum/CSDworkshops.

What is really of interest is that we see names on the list that do not count as globalplayers today.That is interesting, as DCP access has often only been associated with largeinstitutions.

Furthermore, within the DCP workshops we have seen an interesting geographical split.The majority of participants came from Italy, France and the United Kingdom.

INSIGHT


Given the non-binding nature of the expressions of interest we must take into accountthat the final number of DCPs might be smaller, as some entities have just reserved theirright to become a DCP in order to finalise their assessment and decision-making.

Anne and Stephen, what were your main considerations in deciding to become aDCP inT2S?

Anne Mairesse: Our main consideration is operational risk. As a CCP, we need toexchange settlement flows as efficiently as possible with the settlement platform.Weundertook an in-depth analysis of the two technical approaches (DCP versus ICP).Wecompared the adaptation efforts, the operational risks, the future settlement fees that ourCSDs could charge us, the messaging costs charged by the value-added network, etc.Theresults suggested that becoming a DCP offered significant, long-term benefits to ourbusinesses and in particular to our clients.

Stephen Lomas: Quite frankly, as a service provider in multiple T2S markets, we havea diverse client base who expect us to connect directly to T2S, and we are there to fulfiltheir needs.We want to provide our clients with robust and reliable connectivity, flexibility,optimal service levels, efficient deadlines and cost-effective set-ups.

Philip, Euroclear SA/NV comprises both a national CSD and an international CSD.What were your considerations in deciding to become a DCP inT2S?

Philip van Hassel: Four Euroclear CSDs, in Belgium, Finland, France and the Netherlands,will migrate to T2S. Obviously, these will connect directly to the new T2S platform.

Euroclear Bank, the ICSD of the Euroclear group, has also opted for a DCP approach forseveral reasons.

It puts us as close as possible to T2S as the primary source of settlement information.With a reduced dependency on market intermediaries, we will be able to provide ourclients with highly competitive deadlines, real-time reporting for faster settlementturnaround and easy access to all T2S functionalities.This removes possible concernsabout restrictions that could potentially be imposed by market intermediaries.

Direct connectivity will allow us to keep control of the end-to-end processing of ourclients’ settlement activity, as we channel their settlement instructions, using the highestsecurity protocols, directly to T2S.

In this way our clients will be able to continue to rely on our robust infrastructure tomanage their transactions in the most efficient way.

Looking at it from a more technical perspective, becoming a DCP will also allow us toreap the synergies needed to harmonise the development and maintenance of settlementmessages with 24 CSDs in Europe. Going forward, this will minimise the cost of yearlyISO upgrades. On top of this, Euroclear Bank can further leverage the connectivityinfrastructure it is already building for the ESES settlement platform (which applies toEuroclear Belgium, Euroclear France and Euroclear Nederland), and for Euroclear Finland,to connect to T2S.

INSIGHT


To summarise – market proximity, competitive deadlines, the availability of real-timereports, and development and maintenance synergies are some key features that guidedus towards a DCP approach.

Karla and Stephen, there were intense discussions between CSDs and the DCPForum ahead of the 15 October deadline. How did the deadline help in triggeringsuch discussions and what were the main topics?

Stephen Lomas: The deadline helped to bring us together and focus resources ondelivering results on time, so in the end it speeded up the process, which was helpful forall parties.The main topics centred on testing and migration, DCP service levels andcontractual arrangements. A number of issues remain open and we will be setting upfurther working groups with the CSDs to address them.

Karla Amend: Indeed, we had very positive and open discussions among the entitiesinterested in becoming DCPs and the CSDs.

The discussions helped to get a much clearer picture of the real differences between ICPsand DCPs in terms of access and processes.We were able to clarify that direct connectionis rather a further technical channel which might – depending on the entity’s businessmodel – make sense for some.

The main points of interest were the services that are available for DCPs, certificationand authorisation procedures, testing and migration specifics and the legal aspects ofbecoming a DCP.

The participants saw the need for further workshops, especially on cash and liquiditymanagement under T2S, i.e. becoming a Dedicated Cash Account holder.

Although only non-binding declarations had to be made by 15 October, the deadline alsoserved to focus the discussion and to facilitate decision-making by the interested entitiesby that point in time.

Roberto, despite being a large European player, BBVA has decided not to becomea DCP.What were the decisive factors in your decision?

Roberto Vicario Montoya:We are in the midst of a deep transformation of the Spanishpost-trade infrastructures, which demands great effort and resources of any entityparticipating in this market. In any case, as the October deadline was for a non-bindingcommitment but not a prerequisite, direct connectivity is by no means a closed matterat BBVA.

To begin with, our idea is to be connected to T2S through a single CSD rather than viamultiple CSDs, but, again, BBVA in its changing environment is not ruling out any options.Our client-driven culture requires permanent adaptation to fulfil the demands placed on us.

Anne and Stephen, the first migration wave toT2S will take place in less than two

INSIGHT


years, but full migration will only be completed 20 months later.Will you be directlyconnected toT2S already from the first wave?What criteria will you use to decidewhich CSDs you wish to be a participant of, in order to maximise the opportunitiesbrought by direct connection toT2S? How will the situation change compared withyour current participation in CSDs?

Stephen Lomas: Yes, we presently intend to be a securities and cash DCP from the firstwave.We intend to use this option in the markets we are present in today, and will lookto extend coverage over time. Our ultimate decision will depend on the DCP servicesavailable from the various CSDs and the flexibility they offer with regard to accountconfiguration, message subscription and costs.

Anne Mairesse:Yes, there is a very high probability that we will connect as a DCP asof the first migration wave. For each wave, we have already identified the efforts involvedand the impact on our business. As far as we are concerned, we envisage the secondmigration wave being close to a “big bang” for the markets we clear.Therefore, to mitigatethe risks, we would prefer to experience the DCP connection and eliminate that kind oftechnical consideration as of wave one.We would then concentrate our efforts on theoperational and business side for the second wave.

Anne, Stephen and Philip, the non-binding expressions of interest came fromdifferent market players in the post-trade industry. How will joiningT2S as a DCPbenefit your business case?

Anne Mairesse: The CCP business is to clear transactions executed on a trading venue.Our clearing members undoubtedly want to benefit from the netting effects to reduceboth their risk exposure and the number of settlement instructions to be processed.Withthe harmonisation initiatives (T+2 settlement cycles and corporate actions standards),our clearing members and their clients (trading member firms) will have an increasedopportunity to enjoy more netting than today (irrespective of the trading venue and thelocation of their CSD accounts). At the same time, under the European MarketInfrastructure Regulation (“segregation and portability” obligation), we also need to offera flexible account structure and allow our clearing members to segregate an individualclient from others when calculating their open positions, associated margins and settlementobligations.With our horizontal model, we do not want to impose on our client one CSDper trading venue (as in the current silo model). Being a DCP is a coherent answer to thisbusiness model: flexible netting or segregation mechanism and the free choice of CSD forour clients.

That said, as far as we are concerned, LCH is also envisaging concentrating its securitiesaccounts in one CSD. This CSD has to offer the full scope of securities covered by ourclearing business.This approach is perfectly compatible with our business model andwith T2S objectives to settle cross-CSD as easily as intra-CSD. We are conscious thatthere are pending issues with regard to the investor CSD offer. This is why we fullysupport the work of the Cross-Border Market Practices Sub-group and the CorporateActions Sub-group to eliminate any specific market practice that would preventcross-CSD settlement.

INSIGHT


Philip Van Hassel: Euroclear Bank will become a DCP in T2S to ensure that itscustomers receive the finest, top-rated settlement service.

Choosing direct connectivity with T2S is one of the many ways in which we intend toshield our clients from T2S adjustments. It removes the need for our clients to changetheir existing connectivity set-up.

Clients will be able to continue to send their settlement instructions as they do today,while Euroclear Bank translates them into ISO 20022 – a must for T2S – for forwardingto T2S.This will allow our clients to fully benefit from all T2S functionalities – without theneed for further investment.

Stephen Lomas: The business case for becoming a DCP will remain unfinished until wereceive the respective CSDs’ DCP service and product proposals.

Roberto, have you considered situations in which CSDs may wish or feel the needto treat DCPs and ICPs differently? Is the negotiating position of these two usergroups vis-à-vis a CSD different?

Roberto Vicario Montoya: The principle of equal treatment for ICPs and DCPs is akey factor in keeping a level playing field, which is one of the T2S aims. Nevertheless, ona deeper level, there seem to be some issues arising relating to the different availabilityof functionalities on the cash side depending on your type of connection.We will thereforerevisit our connectivity strategy in this area. In any case, we are waiting to see whichvalue-added services will be offered by the national infrastructures.

The negotiating position of DCPs and ICPs could be different, but another factor toconsider is the number of participants in each group related to a particular CSD. In thecurrent scenario, there are no Spanish entities expressing a non-binding interest inbecoming a DCP.

Karla, as a large CSD, Clearstream may wish or feel the need to offer differentoptions to DCPs and ICPs.Are the negotiating positions of these two user groupsvis-à-vis you as a CSD different?

Karla Amend: At the point in time when we formulated our T2S strategy we decidedto take a neutral position as to whether a customer wants to join as an ICP or DCP.

Practically speaking, this means specific ICP/DCP services will be provided where neededto support our customers to the best possible extent in the choice of their connectivityaccess model. In other words, there are no restrictions or preferences put in place; it isfor our customers to choose which access model best fits their business model.

Furthermore, for the vast majority of services there is no differentiation between ICPsand DCPs in terms of service functionality and related service levels.

Consequently, this is also reflected within our pricing model, where we make nodistinction between an ICP or DCP customer whenever the same service and servicelevel is applied.

INSIGHT


What is T2S OnLine?T2S OnLine is the T2S Programme’s review. It provides you with project updates,insights into T2S and details on the current outlook of the project.We hope you willfind T2S OnLine to be an enjoyable tool for obtaining up-to-date information aboutT2S.

Where can you find T2S OnLine?T2S OnLine is published on the T2S website (www.t2s.eu), with the option to printif you would like to have a hard copy.

How can you contribute?We are happy to hear your views on T2S OnLine. If you have any comments, or ifyou would like to propose a subject for an article, please contact us by e-mail [email protected]

Elin Amundsen, Anna Nuzzolo and Stefania Secola,T2S Programme Office1 http://www.ecb.europa.eu/paym/t2s/html/index.en.

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© European Central Bank, December 2013

AddressEuropean Central BankKaiserstrasse 2960311 Frankfurt am Main, Germany

Postal AddressPostfach 16 03 1960066 Frankfurt am Main, Germany

Websitehttp://www.ecb.europa.eu

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