T2S CORPORATE ACTIONS STANDARDS GAP ANALYSIS REPORT FOR 2012

Transcription

1 T2S CORPORATE ACTIONS SUBGROUP ECB-PUBLIC 12 December /2013/ FINAL T2S CORPORATE ACTIONS STANDARDS GAP ANALYSIS REPORT FOR 2012 Executive Summary Introduction In line with the decision of the T2S Advisory Group (AG) from March 2012, the 2012 T2S Corporate Actions (CA) Standards Gap Analysis focuses on T2S markets, i.e. the markets where at least one CSD has signed the T2S Framework Agreement. The 2012 Gap Analysis was launched on 2 April By mid-september the T2S CASG has received the feedback from 21 markets/csds representing all T2S markets. T2S markets compliance The CASG has carefully analysed the individual responses and has highlighted issues of particular importance (see Section 3). In addition to measuring the number of standards that the markets currently comply with, the CASG has provided a risk assessment for each market (HIGH, MEDIUM, LOW) regarding its current expectation that the T2S standards will be implemented in full, with the appropriate quality, and in time for the launch of T2S. The risk assessment took into account not only the current level of compliance with the standards, but also the development since the previous survey, the severity of the barriers to implementation and the perception of the national market s commitment to implement the standards. In total, the following 11 markets/csds were assessed as HIGH risk: Austria, Denmark, Estonia, Finland, Germany, Hungary, Lithuania, Malta, Romania, Slovakia and Slovenia. Furthermore, 6 markets/csds are assessed as a MEDIUM risk: Belgium (NBB-SSS), Greece (BOGS), Luxembourg (LUX CSD), Luxembourg (VP Lux), Spain and Switzerland. Finally, the remaining 5 markets/csds were assessed as a LOW risk: Belgium (ESES), France, Italy, Netherlands and Portugal. Rationale for risk assessment Page 1 of 222

2 A positive development is that all T2S markets have a forum where compliance with the standards is being discussed and assessed. This is a sign that the level of understanding, relevance and importance of the T2S CA standards has increased significantly since last year. Nevertheless, compared to the past year, the results show that for most markets the rate of compliance has not changed, or has improved only marginally (see table in 2.3). While on the surface this may be considered as a relatively positive sign, it should be noted that a year has passed without material progress being made in some key markets. It should be recalled from the 2011 CA Gap Analysis Report, that particular emphasis is placed this year on barriers stemming from legislative/tax changes and CSDs /markets implementation plans. Therefore, the risk assessment was increased for 8 markets which have not progressed on needed legislative/regulatory changes and/or which have not elaborated concrete implementation plans or the timeline of such plans has been extended compared to what was reported last year. Regulatory framework dependency In a number of markets, it has been identified that legal/regulatory amendments are required in order to fulfil some of the standards, e.g. Austria, Germany, Finland, Hungary, Lithuania, Romania, Spain and Slovenia. In some cases, the markets have already achieved some progress to change the legislation/regulation. For example, Spain has already amended its law to permit the amendment, cancellation and recycling of market claims and now needs to implement the changes in the lower-rank legislation. In Austria and Germany, however, the key issue is that there is currently no Record Date in these markets and to implement a Record Date will require a legal amendment. In some other markets where legal action is required, it is not clear if any action has yet been initiated or planned. In other markets Denmark, Estonia, Finland and Hungary- there are still issues to be solved with tax authorities (in particular with regards to different tax status on different securities accounts). The CASG will monitor closely the progress on legislative developments and report back to the AG if escalation is required. Buyer protection Several markets have claimed that they do not have buyer protection, and therefore do not plan to implement the T2S buyer protection standards. The CASG believes that such responses involve a misunderstanding about the standards and their applicability. All markets, without exception, will have securities which are subject to corporate action events involving elections, and the buyer of such securities will want to be protected. It may be that in some markets such buyer protection is known by a different term, but it will certainly still be taking place. Most likely in such markets, the buyer protection is being handled manually and on a bilateral basis. But just because the buyer protection occurs manually and outside the CSD does not mean that the standards are not applicable to the market. It was emphasised by the AG in March 2012, that in this scenario, in which BP takes place bilaterally outside of the CSD, the standards would need to be fulfilled only by the buyer and seller. The CSD would not be affected and would therefore have nothing to do. The CASG would nevertheless still plan to monitor the implementation of the BP standards by market participants. If a manual buyer protection process (i.e. no Page 2 of 222

3 CSD involvement in the process) is chosen, then only the first four of the Corporate Actions Joint Working Group (CAJWG) standards are applicable; with the revised 2012 CAJWG standards, the full set of manual buyer protection standards will apply. It has also been clarified that a CSD in T2S is not obligated to provide BP services for its domestic securities; however, if a CSD plans to act as an Investor CSD to a market in which the issuer CSD provides automated BP functioning, then the investor CSD also needs to comply with the issuer CSD BP service although not necessarily implementing an automated BP functionality. Future work The CASG will investigate whether to update the T2S CA Standards according to the revised CAJWG Standards (currently under endorsement process). The CASG will then repeat the T2S standards gap analysis again in A specific focus in 2013 will continue to be placed on the progress of legislative/tax/regulatory changes required in some markets and on elaboration of concrete implementation plans for compliance by the CSDs and the markets. The results of the 2012 gap analysis will provide input to the 3 rd T2S Harmonisation Progress Report. Page 3 of 222

4 1. Introduction In September 2009, the T2S AG approved the T2S standards for processing corporate actions on flows (i.e. the standards for market claims, transformations and buyer protection) which had been prepared by the AG s CASG. 1 The standards were subsequently endorsed by the European Commission s CESAME2 Group in early Given their importance to the settlement efficiency of T2S, the AG has agreed that CSDs (and their participants including CCPs) should therefore implement the standards in their T2S test platform/environment in accordance with the relevant synchronisation points in the T2S Programme Plan. This is to ensure that they can effectively test the various scenarios that will be defined. The CASG has been tasked with monitoring the progress of the implementation of the standards in the national markets. In January 2010, the first Gap analysis survey was launched across all potential T2S markets to understand the current status regarding compliance with the standards. The results of this work showed that for most countries there is a large gap between current market practice and the T2S corporate actions standards. The exercise was repeated again in 2011 and while the awareness of the markets has been raised no significant material progress has been made since For the 2012 Gap Analysis, the AG decided in March 2012 that the CASG will monitor the compliance with the T2S CA Standards of T2S markets only, i.e. markets in which at least one CSD has signed the T2S Framework Agreement. Furthermore, it was agreed that the T2S National User Groups (NUGs) chairmen will be made ultimately responsible for the delivery the gap analysis surveys of individual markets and they will nominate national coordinators for that purpose to the CASG. Following these decisions of the AG, the CASG initiated the 2012 T2S Corporate Actions Gap Analysis Survey in the beginning of April. The CASG provided the Market ation Groups (MIGs) and NUGs with a template and explanatory details on how to complete the gap analysis. In particular, more details were requested on the nature of the gap (i.e. whether it required a legislative or regulatory change, a major system change, a change in market practices, etc) and the market s implementation plans. The aim was to improve the granularity of replies, so as to enable the CASG to make an assessment of what the most important difficulties are in each market. In accordance with the agreed deadline, in September the CASG received the feedback from 21 markets/csds of all 20 T2S markets (including two entries from the Belgian market: separately from NBB-SSS and Euroclear Belgium). This report for the Advisory Group provides the results of the 2012 Gap Analysis. The key findings of the report and the follow-up work that is planned for 2013 are presented in the executive summary. Section 2 summarises the main findings of the report and provides a comparison with the results of the gap analysis 1 The latest versions of the three sets of standards can be found on the T2S website ( Page 4 of 222

5 done in previous years. Section 3 goes into detail for each market, with a risk assessment assigned by the CASG to estimate whether the standards will be implemented in time. There are also two annexes. Annex 1 provides the detailed individual responses from markets. Annex 2 provides the list of CASG members who are responsible for monitoring the various markets, measuring their compliance with the T2S CA standards and acting as liaison persons for the respective market. 2. Overall results 2.1 Response rate All T2S participating markets have replied to the 2012 survey. The LU market also provided its gap analysis for the first time for the market as a whole. The LU gap analysis suggests that compliance with the CA standards by the LU CSDs should be straightforward to implement. Nevertheless, the final assessment of the LU CSDs took into account additional feedback received from the CSDs and the market about the actual current implementation of the T2S CA standards by the LU CSDs. 2.2 Summary of results for 2012 Below is a summary table of the results. It shows the current percentage of compliance with the market claim, transformation and buyer protection standards. In addition, the CASG has provided a qualitative risk assessment regarding whether the market will implement all the standards in time for the launch of T2S. This risk assessment takes into account a number of factors, inter alia: the degree of current compliance with the standards; the trend of compliance since the previous year; the severity of barriers to implementation (in particular the need for extensive legislative amendments or changes in tax policy are given a strong weighting); and the perception of the national market s commitment to implement the standards. Market Transformations Buyer Risk Market/CSD claims protection assessment AT Austria 7% 0% 39% HIGH BE - Belgium (EoC) 48% 29% 0% LOW BE Belgium (NBB) 0% 0% 0% MEDIUM Main rationale for risk assessment Low rate of compliance and few details on implementation plan; legislative or market practice change required for introducing a Record Date; legislative change needed to address the information flow between issuers/issuer agents and the AT CSD. Good current compliance. Progress is being made, in cooperation with other ESES markets. No standards will require legislative change. No standards are met, but corporate action types and volumes expected to be limited. Furthermore, introduction of new software is Page 5 of 222

6 in progress which should resolve inconsistency with the standards by December CH Switzerland 37% 14% 0% MEDIUM DE Germany 52% 50% 0% HIGH DK Denmark 0% 0% 0% HIGH EE Estonia 0% 0% 0% HIGH ES Spain 59% 57% 0% MEDIUM FI Finland 0% 0% 0% HIGH FR France 48% 29% 0% LOW GR Greece (BOGS) 30% 0% 0% MEDIUM HU Hungary 0% 0% 0% HIGH IT Italy 59% 36% 0% LOW LT Lithuania 0% 0% 0% HIGH Good current compliance. All non-fulfilled standards deemed straightforward to implement. Good implementation plan exists;; however, its timely implementation may be jeopardised due to continued discussions on the market. Good but declining rate of compliance since last year. Legislative changes required for introducing a Record Date; furthermore, the implementation of this change is uncertain and not scheduled. No standards are currently met and the exact implementation plan has yet to be agreed with the market. No standards currently met, and while there are concrete plans to implement the standards and their implementation is considered mostly straightforward to implement, there are still issues to be resolved with tax authorities. Good rate of compliance. Legislative changes have been implemented; however, lower rank legislation is needed to fully comply with the standards. No standards currently met. Furthermore, there are dependencies with regards to changes of the tax legislation and the exact timeline for the implementation plan has not been provided. Good compliance reported. MIG is active and good progress is being made, in cooperation with other ESES markets; no standards would require legislative changes. Corporate action types and volumes expected to be limited. BOGS has committed to comply with the standards on time and sees no significant issues in that respect. No standards implemented, and although Hungarian NUG is now actively working on corporate actions and shows a high level of commitment, there is no concrete plan how to address significant changes that need to be implemented also with respect to legislation. Good compliance reported. No legislative changes have been identified to fully implement the standards. No standards are implemented. ing standards would require major technical, market practice and legislative changes. LU Luxembourg (LUX CSD) 0% 0% 0% MEDIUM The LUX CSD has reported that it is currently not compliant with the CA standards but sees no problem in implementing them by the time of joining T2S. The LUX market has confirmed that would be straightforward to implement. Page 6 of 222

7 LU Luxembourg (VP 0% 0% 0% Lux) MEDIUM MT Malta 70% 0% 0% HIGH NL Netherlands 74% 57% 0% LOW PT Portugal 85% 43% 0% LOW RO - Romania 0% 0% 0% HIGH SI Slovenia 0% 0% 0% HIGH SK Slovakia 0% 0% 0% HIGH The VP Lux has reported that it is currently not compliant with the CA standards but sees no problem in implementing them by the time of joining T2S. The LUX market has confirmed that would be straightforward to implement. Good compliance with market claims. Some standards may require legal or regulatory changes. Very good and increasing compliance reported. ation plans do not preview need for legislative changes and are coordinated at ESES level. Very good level of compliance reported and a clear implementation plan is on-going. A minor issue is to be solved with tax authorities to be fully compliant. No standards are currently implemented. Furthermore, changes to the legislation are needed in some cases. No standards are currently implemented. Legislative changes as well as major changes in market practice will be required to comply. No standards are implemented. Legislative changes may be needed for processing CA in T2S in a standard way. The charts below rank the markets/csds by rate of compliance for each set of standards. Market claims (% compliance for each market/systems in 2012) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Page 7 of 222

8 Transformations (% compliance for each market/systems in 2012) Buyer protection (% compliance for each market/systems in 2012) 2.3 Comparison with 2010 and 2011 results The table below compares the results for 2012 with the results from the 2010 and 2011 gap analyses. In some markets, the rate of compliance between 2011 and 2012 increased significantly (NL) or only Page 8 of 222

9 marginally (AT, ES, GR(BOGS), MT) while in a few others it decreased substantially (DE) or only marginally (IT). In the majority of markets, however, the rate of compliance stayed the same. The CASG considers that the changes seen in compliance rates generally reflect a more accurate understanding/interpretation of the standards rather than real progress towards harmonisation. Nevertheless, this deepening of the understanding of the standards is considered to be a major first step forward. Market claims Transformations Buyer protection Total Trend Austria 26% 7% 7% 0% 0% 0% 0% 0% 39% 12% 3% 15% Belgium (EoC) 37% 48% 48% 29% 29% 29% 0% 0% 0% 24% 29% 29% Belgium (NBB) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Switzerland 15% 33% 37% 36% 21% 14% 0% 0% 0% 15% 20% 20% Germany - 81% 52% - 64% 50% - 0% 0% - 53% 36% Denmark 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Estonia 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Spain 59% 56% 59% 43% 50% 57% 0% 0% 0% 37% 37% 41% Finland 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% France 37% 48% 48% 29% 21% 29% 0% 0% 0% 24% 27% 29% Greece (BOGS) 0% - 30% 0% - 0% 0% - 0% 0% - 14% Hungary 33% 0% 0% 0% 0% 0% 0% 0% 0% 15% 0% 0% Italy 52% 52% 59% 57% 57% 36% 0% 0% 0% 37% 37% 36% LU (LUX CSD) - - 0% - - 0% - - 0% - - 0% LU (VP Lux) - - 0% - - 0% - - 0% - - 0% Lithuania 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Malta - 67% 70% - 0% 0% - 0% 0% - 31% 32% Netherlands 37% 48% 74% 29% 29% 57% 0% 0% 0% 24% 29% 47% Portugal 89% 85% 85% 0% 43% 43% 0% 0% 0% 41% 49% 49% Romania 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Slovenia 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Slovakia 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Development of compliance with T2S Corporate Actions standards ( ) Page 9 of 222

10 3. Analysis of individual replies 3.1 AT - Austria 2 Market Transformations Buyer claims protection Total Austria 7% 0% 39% 15% Market claims According to the Austrian CANIG reply, the major gap is that the Record Date and its relation to the other Corporate Action key dates (i.e. Ex Date and Pay Date) are not yet implemented in the Austrian market. This is due to the fact that the issuer has to directly inform the CSD about a Corporate Action including the key dates. This is currently a legal gap in the Austrian market as the issuer is not obliged to do this. The Austrian Corporate Actions National ation Group (CANIG) has reported that record date introduction and the new detection regime requires legal or market practice changes as well as IT-changes within OeKB and the AT-Banks. It plans to close this gap till at the latest. Transformations 2 CASG liaison persons: Thomas Rockstroh (Clearstream) and Dagmar Habersack (Deutsche Bank) Page 10 of 222

11 For CSD/OTC Settlement no transformations are done. On CCP level, basic (manual) transformation services are offered. The new regime must therefore be built up from scratch. The Austrian CANIG replied that serious change to current market practice and to IT-Infrastructure (for OeKB and market participants) would be required to close the gap with the CA Standards. Transformations are done manually today in the Austrian Market. Buyer protection There are extremely few cases per year where BP would be applicable. The Austrian CANIG response stated that OeKB does not and will not implement an automated BP service as affected events are very rare. As market practice BP is carried out bilaterally between the buyer and seller. The standards will be established as market practice till the introduction of T2S. From that perspective, the Austrian market believes that it has implemented 7 out of the 18 standards in manual mode. Overall assessment: High risk Only very few of the standards are currently implemented and the legislative and/or market practice changes required to implement a record date represent a major risk. There are also only limited details currently available regarding the implementation plan. In view of the current changes of the CAJWG Standards to include standards for manual BP, the Austrian market considers that it now covers almost half of the BP standards. 3.2 BE - Belgium Euroclear Belgium Market claims Transformations Buyer protection Total Belgium 48% 29% 0% 29% Market Claims Few problems detected. Detection, processing and reporting of market claims are available in the CSD. Part of the standards is already fully implemented. Some standards require major technical changes with regards to Opt-out facility, Cum and Ex indicator management, Hold and Release mechanism and Partial settlement of market claims in securities. What is not implemented is previewed to be implemented from technical perspective in the frame of T2S. Transformations 3 CASG liaison persons: Benoit Hermant (Euroclear) and Ben Van der Velpen (ING) Page 11 of 222

12 The implementation of most of the standards requires major technical changes. Transformation is available on intra-csd transactions for most mandatory reorganisations. For mandatory reorganisation in cash and mandatory Reorganisation with Options, the CSD only cancels pending transaction. Likewise, for cross-csd transactions, the CSD only cancels the pending transactions. Buyer Protection Currently, a manual buyer protection process only exists on CCP transactions (performed by the CCP). Manual buyer protection solution will be developed on a bilateral basis. Overall assessment: Low risk The national MIG is very active and the level of details provided shows that detailed analysis has already been carried out. There is also a close cooperation between the 3 ESES markets (Belgium, France and The Netherlands) and good progress is made. The detailed implementation plan has been produced National Bank of Belgium SSS Market claims Buyer protection Total BE NBB SSS 0% 0% 0% 0% Overall assessment: Medium risk None of the standards are currently met. However, corporate actions volume and the variety of corporate actions on NBB eligible instruments are deemed limited. In addition, new software will be launched for the CSD, which by December 2014 will incorporate the full set of standards. 3.3 CH - Switzerland 4 Market claims Transformations Transformations Buyer protection Total Switzerland 37% 14% 0% 20% Market claims For market claims 37% of the standards are implemented. For the standards not currently fulfilled, the Swiss MIG replied that they would be straightforward to implement. The Swiss market has to change its current market practice of "cross-ex compensation". On the positive note, standard 23 has been implemented since last year: Payment date reached' and 'resources available' are already in place today as common market practice. 4 CASG liaison person: Florentin Soliva (UBS) Page 12 of 222

13 Transformations The CSD has a partly automated Transformation process in place but it is not in line with the requested CASG standards. In the case of transformations, only 14% of the standards are currently fulfilled. The majority of the standards not fulfilled are expected to be straightforward to implement. Four standards represent a. The CH market has downgraded its overall assessment of standards on transformations by considering standard 5 not implemented although the process is not in place today but with the move of the CSD on T2S it will be implemented. Buyer Protection Currently the requested Buyer Protection Process is not market practice in the Swiss market. Buyer protection is per se nothing new as it will be done manually on a bilateral basis. There is a market practice for BP in place but not along the requested key dates. There is actually the intention to introduce an automated buyer protection but further business analysis has to be done in order to implement on a technical side (enhancement CSD system) and market side (implement new market practice). The assessment of the standards has been made under the perspective that there will be an automated BP in place for the time when the Swiss CSD joins T2S and not under the manual/bilateral BP process. Overall assessment: Medium risk Since last year one standard more for Market Claims and one standard less for Transformations have been implemented. Regarding the implementation, it was stated that there is already a Corporate Actions Standards implementation plan in the Swiss market. The CA Standards on stock will be implemented in November 2012 for the infrastructure and the CA Standards for Transaction Management in November According to this plan the standards will be in place when the CSD SIX SIS will move on T2S in Nevertheless, conflicting interests of local market participants may jeopardise the timely implementation of the plan. 3.4 DE - Germany 5 Market claims Transformations Buyer protection Total 5 CASG liaison person: Thomas Rockstroh (Clearstream) Page 13 of 222

14 Germany 52% 50% 0% 36% Market claims For market claims, 52% of the standards are implemented. Compared with last year the German market has significantly downgraded its compliance: 9 standards which last year were considered implemented are not anymore; only one standard which has not been implemented last year is now considered implemented. The standards involving the Record Date are not fulfilled, as Record Date processing has not been introduced for German market it requires a legislative change. Compliance with four more standards would require major technical changes while compliance with the other standards would be straightforward to implement. Transformations In the case of transformations, 50% of the standards are currently fulfilled. Compared with last year the German market has downgraded its compliance: 4 standards which last year were considered implemented are not anymore; 2 standards which have not been implemented last year are now considered implemented. Compliance with 2 standards would require major technical changes while compliance with the other standards would be straightforward to implement. Buyer Protection Buyer protection is not considered applicable for the German market. It is of the opinion that harmonisation of the basic activities with regards to corporate actions in Europe must be achieved before creating (manual) BP standards. Therefore, it does not foresee and has not scheduled an implementation plan for BP. Overall assessment: High Risk Although there is good compliance by the German market with the standards, there is substantial downgrade in the assessment of the compliance with the standards since last year. Furthermore, the timely implementation of the legal amendments in order to introduce a Record Date represents a risk that several of the key standards may not be fulfilled. A mitigating factor is that the Clearstream system already incorporates record date functionality, so once the law is changed there would be no technical obstacles to implementing it immediately. 3.5 DK - Denmark 6 Market Trans- Buyer Total 6 CASG liaison person: Nikolaj Hesselholt Munck Page 14 of 222

15 claims formations protection Denmark 0% 0% 0% 0% Market claims No standards are currently met, and the exact implementation plan has yet to be agreed with the market. There is no automatic procedure or system implemented for the detection of market claims.a significant amount of standardisation work needs to be initiated in order to comply with the market claims standards. Transformations No standards are currently met, and the exact implementation plan has yet to be agreed with the market. As in the case of market claims, a significant amount of standardisation work needs to be initiated in order to comply with the transformation standards. Buyer Protection No standards are currently met, and the exact implementation plan has yet to be agreed with the market. Legal and major technical changes are needed for implementation of some of the standards. Overall assessment: High risk No standards are currently met and the exact implementation plan has yet to be agreed with the market. Legal and major technical changes are needed for implementation of some of the standards. 3.6 EE - Estonia 7 Market claims Transformations Buyer protection Total Estonia 0% 0% 0% 0% Market claims No standards currently implemented. CSD functionality should be possible to implement, though there may be an issue with taxation of market claims. The specification regarding the changes in the system related to the development of T2S will be ready by the end of Q The specification includes the implementation of market claims, transformations and buyer protection according to the T2S standards. Decision has been taken to implement the new functionalities in two steps - first the detection mechanism and later the generation and settlement of the relevant instructions (proceeds). Detection functionality of market claims and transformations is to be available in the test system by January 2013, testing (with the 7 CASG liaison person: Christine Strandberg (SEB) Page 15 of 222

16 involvement of market participants) to be conducted during Q and launched in live system by end of Q Transformations No standards currently implemented. CSD functionality should be possible to implement. The specification regarding the changes in the system related to the development of T2S will be ready by the end of Q The specification includes the implementation of market claims, transformations and buyer protection according to the T2S standards. Specification to be ready by the end of Q1 2013, new functionality in the test system and draft changes to the CSD rules by the start of internal testing Q1 2014, to be followed by the T2S testing according to the T2S timetable. The functionality will be launched together with the implementation of T2S. Buyer protection No standards currently implemented. The detection mechanism of buyer protection cases to be implemented by the CSD in the first stage of developments - detection mechanism available in the test system by January 2013, testing of functionality during Q1 2013, live by end of Q The management of buyer protection instructions by market participants or the CSD in cross-csd cases will be offered via manual procedures. The procedures are to be tested during the internal testing period Q Q3 2014, to be followed by the T2S testing according to the T2S timetable. Draft amendments to the CSD rules will also be ready by the start of internal testing. The functionality will be launched together with the implementation of T2S. Overall assessment: High risk There are no standards met at this time. Although the Estonian CSD has concrete plans how to comply with each standard, there are still outstanding issues with regards to tax law that may affect implementation of market claims standards. 3.7 ES Spain 8 Market claims Transformations Buyer protection Total Spain 59% 57% 0% 41% Market Claims For the standards which are not fulfilled, 6 require a. Most of these are because SWIFT CA Messages are not implemented in Iberclear (e.g. for the implementation of Ex/Cum indicator (standard 7), CLAI transaction type (standard 11), etc). For some standards (e.g.19-21), 8 CASG liaison person: Irene de Miguel (IBERCLEAR) Page 16 of 222

17 implementation will require further lower rank legislative changes, as the most significant legal changes have already been implemented. Transformations Again, several standards are not fulfilled because IBERCLEAR does not use SWIFT CA Messages and therefore a major technical change is required (standards 4-6, 14). Buyer Protection Although Iberclear does not comply with the standards, it has declared its intention to comply with manual BP standards. Overall assessment: Medium risk The legal change required to implement some standards (securities Law 32/2011) was published in the BOE (Official state Bulletin) at the beginning of October This change implies that amendments, cancellations and recycling will be possible within IBERCLEAR. Nevertheless, lower rank legislation needs to be amended. An implementation plan will be elaborated in order to develop the required modifications in the IBERCLEAR system. In addition, IBERCLEAR is focusing on the development of the ISO messages for corporate actions. 3.8 FI - Finland 9 Market claims Transformations Buyer protection Total Finland 0% 0% 0% 0% Market claims No standards currently implemented. There is no market claims detection nor processing of market claims at the CSD. This would require a major technical change as well as a change of market practice. The latter still require further investigation on the dependencies on the CCPs and direct access participants. Taxation of market claims will require a change in tax legislation and market practice. No concrete implementation plan has yet been made. Transformations No standards currently implemented. CSD functionality should be possible to implement. No concrete implementation plan has yet been made. Buyer protection 9 CASG liaison persons: Päivi Ahola (Sampo Pankki) and Antti Turunen (Euroclear FI) Page 17 of 222

18 No standards currently implemented. Overall assessment: High risk No standards currently met. Legislative changes seem to be required to comply. No concrete deadlines in the implementation plan. 3.9 FR - France 10 Market claims Transformations Buyer protection Total France 48% 29% 0% 29% Market Claims Few problems detected. Detection, processing and reporting of market claims are available in the CSD. Part of the standards is already fully implemented. Some standards - Opt-out facility, Cum and Ex Indicator Management, Hold and Release mechanism and Partial settlement of market claims in securities - require major technical changes. Transformations The implementation of most of the standards requires major technical changes. Transformation is available on intra-csd transactions for most mandatory reorganisations. For mandatory reorganisation in cash and mandatory Reorganisation with Options, the CSD only cancels pending transaction. Likewise, for cross-csd transactions, the CSD only cancels the pending transactions. Buyer Protection Currently, a manual buyer protection process only exists on CCP transaction (performed by the CCP). Manual buyer protection solution will be developed on bilateral basis. Standard and procedure should be implemented by end 2012 (need of implementation of Key Dates prior). The process will be manual and based on the coming model that was presented in the scope of the new version of the CAJWG standards. The French community would like to raise that it is intended to draw a procedure at ESES level as requested by coming CAJWG standards version but it sounds that a parallel work would have to be led by the CASG in order for all the T2S markets to use the same kind of harmonised procedure for manual BP. Overall assessment: Low risk The national MIG is very active and the level of details provided shows that fairly detailed analysis was already carried out. There is also a close cooperation between the 3 ESES markets (Belgium, France and The Netherlands) and good progress is made. There is some improvement of the results since last year. 10 CASG liaison persons: Benoit Hermant (Euroclear) and Frederic Beck (BNP Paribas) Page 18 of 222

19 3.10 GR Greece (BOGS) 11 Market claims Transformations Buyer protection Total Greece 30% 0% 0% 14% BOGS has reported compliance with a number of market claims standards and no standards for transformations and buyer protection. However, corporate actions volume and the variety of corporate actions on BOGS eligible instruments are deemed limited. In its 2012 response, BOGS has stated that it plans to fully implement the standards with the exception of automated buyer protection which is not previewed. It considers the necessary changes straightforward to implement. Overall assessment: Medium risk 3.11 HU - Hungary 12 Market claims Transformations Buyer protection Total Hungary 0% 0% 0% 0% Market Claims Currently custodians of the buyer and seller having pending transactions between each other monitor trades being subject of market claim. The market claim standards therefore require a major technical change from KELER's perspective. Legislative changes would also be required to fulfil standard 2, as currently it is optional for unlisted companies to announce corporate events which prevent KELER currently to operate an explicit CA Database. Most other standards require Market Practice Change and s. Transformations Since transformation process is not recognized in the market it would require major market practise and technical changes and also legal issues arise from KELER's viewpoint. Buyer Protection Since BP process is not recognized in the market it would require major market practice and technical changes and also legal issues arise from KELER's viewpoint. 11 CASG liaison person: Frederic Beck (BNP Paribas) 12 CASG liaison person: Ben van der Velpen (ING) Page 19 of 222

20 Overall assessment: High risk Although the Hungarian market is active in understanding the standards, no concrete plan for their implementation has been elaborated. Furthermore, many of the changes are classified as requiring legislative, regulatory or major technical changes IT - Italy 13 Market claims Transformations Buyer protection Total Italy 59% 36% 0% 36% Market Claims The Italian model is currently based on Issuer CSD detection; therefore, some changes need to be implemented in order to be fully compliant with the standards, either at processing, market practice or regulatory level in the cross-csd environment of T2S. Nowadays Monte Titoli detects failed settlement instructions only for on-exchange trades according to market rules. Detection is to be extended to OTC and the rules have to be introduced in Monte Titoli's regulatory framework. Transformations In the same way as described above for market claims, the Italian model is based on Issuer CSD detection and major technical changes need to be applied in order to be compliant with the standards, either at regulation and market practice level. Buyer Protection At the moment Buyer Protection is likely to be carried out between buyer and seller outside the CSD only for OTC transactions. Overall assessment: Low risk Being part of the 1st migration wave, Monte Titoli commits to enhance its system in order to be ready for testing when there will be T2S user testing. It was confirmed by the Italian market that there is no need for legislative changes on taxation to comply with the standards LT Lithuania 14 Market claims Transformations Buyer protection Total 13 CASG liaison persons: Carla Bachechi (Monte Titoli) and Paola Deantoni (Société Générale) 14 CASG liaison person: Christine Standberg (SEB) Page 20 of 222

21 Lithuania 0% 0% 0% 0% Overall assessment: High risk No standards are currently complied with. Major legislative, regulatory, technical and market practice changes will be needed. The specifications for technical solutions are to be drafted in The draft LCVPD rules and procedures to be drafted in Possible technical changes will be implemented in , before testing in the T2S platform/environment. The solution to be ready for implementation in the production system of the CSD SSS as of CSD and participants migration to T2S LU Luxembourg LUX CSD Market claims Transformations Buyer protection Total LUX CSD 0% 0% 0% 0% Overall assessment: Medium risk The Luxembourgish market has replied to the T2S CA Standards gap analysis for the first time in Furthermore, the LUX MIG has been created in September. While the LUX CSD does not comply currently with the standards, the initial assessment of the market showed that compliance with the standards will be easy to implement VP LUX Market claims Transformations Buyer protection Total VP LUX 0% 0% 0% 0% Overall assessment: Medium risk The Luxembourgish market has replied to the T2S CA Standards gap analysis for the first time in Furthermore, the LUX MIG has been created in September. While the VP Lux does not comply currently 15 CASG liaison persons: Carlo Matagne (BEEL) and Nikolaj Hesselholt Munck (VP Securities) Page 21 of 222

22 with the standards, the initial assessment of the market showed that compliance with the standards will be easy to implement MT - Malta 16 Market claims Transformations Buyer protection Total Malta 70% 0% 0% 32% Market claims The majority of standards in this area are already implemented. As to the standards not yet implemented, some of them are related to functionalities that are currently not provided in this market (e.g. PFOD, partial settlement, auto-collateralisation, settlement priority, recycling) and that will be included before the start of the T2S user testing phase by the end of Transformations and Buyer Protection The status with regard to Transformations and Buyer Protection remain not implemented as neither are currently a feature of the market practices, although with regard to Transformations there has been some limited developments in certain cases. However, this area requires only market rules and some regulatory and technical changes, but does not necessitate any legal change. The standards with regard to Buyer Protection are being reviewed together with relevant legislation and regulation. Overall assessment: High risk A significant technical upgrade is being implemented on the CSD system due for implementation in the first quarter of 2013 which will already include technical solutions in order for some T2S standards to be met by the Maltese market. In view of the preferred option of the market to migrate in Wave 1, a detailed ation Plan for compliance with all the standards of T2S is being discussed with the IT provider of the CSD. In addition, the MT NUG has now been set up and has created the platform in order for all interested parties to discuss T2S implementation, particularly with regard to the relevant market practice changes that are required to fully comply with T2S standards. Nevertheless, compliance with some standards may require implementation of legal changes NL - Netherlands 17 Market claims Transformations Buyer protection Total 16 CASG liaison persons: Carla Bachechi (Monte Titoli) and Massimiliano Renzetti (Banca d Italia) 17 CASG liaison persons: Benoit Hermant (Euroclear) and Ben van der Velpen (ING) Page 22 of 222

23 Netherlands 74% 57% 0% 47% Market Claims There is a major progress on these standards compared with last year. Detection, processing and reporting of market claims are available in the CSD. Few problems detected. Some standards still require major technical changes (Opt-out facility, Ex/Cum indicator) Transformations Good progress is also registered for the standards on transformations. Still the implementation of 6 standards requires major technical change which is nevertheless previewed in the evolution plan of ESES. Buyer Protection No progress so far implementation would require major technical change which is planned for scope 2 of ESES evolutions. Overall assessment: Low risk Significant progress has been realised by the NL market since last year. The national MIG is very active and the level of details provided shows that detailed analysis was already carried out PT Portugal 18 Market claims Transformations Buyer protection Total Portugal 85% 43% 0% 49% Market Claims Few problems have been detected due to a project being carried out since 2009 for the implementation of market claims and transformations for the OTC transactions in the Portuguese market. Market claims and transformations for the exchange trades are done by the CCP. Some technical issues have been identified such as the lack of Opt-Out or Ex/Cum information in the settlement instructions due to the local market practice. Transformations 18 CASG liaison person: Jyrki Leppanen (Interbolsa) Page 23 of 222

24 Transformations are being implemented in Portugal but the process has been slower as the market claims have been implemented first. The missing standards are being implemented in the Interbolsa s system. Buyer Protection The implementation of BP services is not planned yet as no interest/need has been shown by the local market. Overall assessment: Low risk Interbolsa has already achieved high compliance with the T2S CA Standards and is working actively for implementation of the rest - the adaptation of its internal systems to comply with most T2S rules are planned to be carried out during Still there is a minor issue to be resolved with tax authorities to be fully compliant RO - Romania 19 Market claims Transformations Buyer protection Total Romania 0% 0% 0% 0% Market Claims Generally, according to Romanian regulatory framework and market practice, for Romanian issuers, Depozitarul Central performs the distributions only based on settled positions at record date and there is no ex-date concept. Furthermore, the failed settlement rate is 0%, so no market claim for pending transactions at record date can be currently raised. Depozitarul Central will have to adapt its system in order for market claims to be processed according to T2S standards. In order for Depozitarul Central to detect/process market claims in a timely manner, the regulatory framework needs to be changed in order to ensure that the issuer informs Depozitarul Central in a standard format as soon as possible after the corporate action announcement. Another issue that should be addressed is the tax regime applicable to distributions and market claims. Furthermore, Depozitarul Central will also analyze with NCB the possibility of settling payment associated to corporate actions (i.e. distributions and market claims) via NCB s RTGS system as it is currently the case for the domestic settlement. Transformations Generally, according to Romanian regulatory framework and market practice, for all reorganisations of Romanian issuers, the underlying ISIN is suspended from trading one settlement cycle before the record date. Furthermore, the failed settlement rate is 0%, so no pending settlement instructions can be in place on record date end of day. Depozitarul Central has to adapt its system in order for transformations to be processed according to T2S Standards. The implementation of the respective changes in the CSD s 19 CASG liaison persons: Mihai Radu (Depozitarul Central) and Ben Van der Velpen (ING) Page 24 of 222

25 system may involve high costs. In order for Depozitarul Central to process transformations in a timely manner, the regulatory framework should be changed in order to impose the issuer to inform Depozitarul Central in a standard format as soon as possible after the CA announcement. Depozitarul Central will have to implement the ISO standards and will also analyze with NCB the possibility of settling payment associated to corporate actions (i.e. cash outturns) via NCB s RTGS system as it is currently the case for the domestic settlement. Buyer Protection The BP is not implemented, regulated or used in practice in the Romanian market. Depozitarul Central will have to adapt its system in order for buyer protection to be processed properly. The implementation of BP in the CSD s system may involve high costs. For most of the transactions concluded in Romanian market and settled by Depozitarul Central, the counterparties are not known to each other. So a mechanism needs to be developed in order for the buyer instruction to be able to reach the seller. Additionally, in order for transactions which are eligible for BP to be properly detected, the regulatory framework should be changed in order to ensure that the issuer informs Depozitarul Central in a standard format as soon as possible after the corporate action announcement. Depozitarul Central will also have to implement the ISO standards. Overall assessment: High risk None of the T2S standards are currently implemented in Romanian market. Need for changes to the legislation have been identified, however, the feedback received on these changes so far from the relevant authorities is positive. Depozitarul Central has synchronized its plans to implement the respective standards by mid 2014, in accordance with the new T2S project plan SI - Slovenia 20 Market claims Transformations Buyer protection Total Slovenia 0% 0% 0% 0% Market Claims KDD d.d. as CSD does not provide market claims service. For majority of trades (traded via LJSE stock exchange trades) there are rules for mandatory settlement at CSD level with penalty for CSD member forcing CSD member into effectively securing settlement (via stock lending/borrowing on such occasions) therefore market claims do not arise at CSD level. For OTC trades, market claims are settled bilaterally between counterparties. CSD - KDD d.d. operates on model of final customers holding accounts at CSD as account provider and CSD members act as account operators. 20 CASG liaison person: Ben Van der Velpen (ING) Page 25 of 222

26 To implement the standard a change of existing legislation and CSD rules and change of market practice and IT support would be needed. Transformations Legal rules and KDD d.d. operations model do not adhere to Market standard at all. Pre-condition is abolishment of Mandatory settlement, Swift matching with CSD is not yet possible and will be done only for OTC trades Compliance would require major technical, market practice and regulatory/legal changes. KDD information system should be upgraded to enable using information on Reorganisation events in order to detect relevant pending transactions and enter transformed transactions. KDD Rules and Regulations should be amended in order to enable KDD to perform Corporate Actions processes as suggested with both CAJWG and CASG standards. Buyer Protection The implementation is not envisaged. Buyer protection is organised in different way as arranged in T2S CASG Market Standard. In Slovenia there is a mandatory settlement requirement for trades done on LJSE Stock Exchange by CSD to its Members, Members arrange securities lending/borrowing in case of settlement problem on behalf of its client. Buyer is thus effectively protected; CSD Member and Seller arrange bilaterally usage of CA options. For OTC trades counterparties agree bilaterally. Overall assessment: High risk None of the standards is currently implemented. The Slovenian Working Group on Corporate Actions remains actively involved in understanding the standards and how they can be best implemented for T2S but major legislative, regulatory and technical efforts are required SK - Slovakia 21 Market claims Transformations Buyer protection Total Slovakia 0% 0% 0% 0% Market Claims CDCP still does not meet two out of three preconditions for provision of Market Claims (MC) - it does not have information on Corporate Actions and it does not pay the dividends or other cash proceeds. CDCP plans to provide for collection of information on Corporate Actions based on information duty of issuers while CDCP shall support this collection by provision of proprietary software that will enable the issuers to provide needed information to CDCP in a simple way. The User Requirements enabling CDCP to collect and provide information on Corporate Actions and to provide Market Claims are to be drafted by end CASG liaison persons: Thomas Rockstroh (Clearstream) and Dagmar Kopuncova (CDCP) Page 26 of 222