Publication of the Third T2S Harmonisation Progress Report (13 March 2013) Frequently Asked Questions

Transcription

1 Publication of the Third T2S Harmonisation Progress Report (13 March 2013) Frequently Asked Questions The report will be presented during the joint ECB-European Commission conference on Posttrade harmonisation and financial integration that will take place in Frankfurt on 19 March More information on the conference is available at ml. Who issues the report? The T2S harmonisation progress reports are the key publications on the post-trade harmonisation work conducted in the context of the T2S project. They are issued by the T2S Advisory Group on an annual basis. The Advisory Group is an important body in the T2S governance structure, comprising 93 senior officials from all categories of the project s stakeholders: central banks, central securities depositories (CSDs) and market participants from all T2S markets, i.e. from markets where at least one CSD has signed up for T2S (see list of signatories in annex). Harmonisation is one of the key deliverables of the Advisory Group. Why has the T2S Community engaged in post-trade harmonisation? First, the T2S Community, through the Advisory Group, engaged in post-trade harmonisation to answer the market s request to deliver T2S in a harmonised post-trade environment: the full benefits of an integrated settlement platform can only be obtained if market practice surrounding settlement is harmonised across participating markets. In addition, a high level of harmonisation and standardisation ensures that the T2S operational blueprint does not perpetuate national specificities that could undermine the system s efficiency. Finally, post-trade harmonisation represents an important contribution to the integration of financial markets in Europe. It is therefore part of the EU Single Market agenda in the field of financial services. How is the T2S Community pursuing harmonisation in securities settlement? The harmonisation work of the Advisory Group covers exclusively the T2S markets (comprising 22 CSDs). Page 1 of 5

2 The T2S Community has engaged in the definition and implementation of concrete standards. First, a list of 26 activities has been drawn up, corresponding to areas where harmonisation is needed to overcome market fragmentation that stems from divergent local practices, and which will ensure the efficiency of T2S at cross-csd level. 19 of them are considered as having high priority because they are essential for T2S to deliver efficiency and a level playing field within cross-csd settlement. A definition process has been launched to agree on concrete standards for each activity. Specific actors are responsible for defining standards and monitoring their implementation by a defined target date. Once a standard is defined and endorsed by the T2S Community, the relevant EU authorities or trade associations, monitoring of compliance by all T2S markets begins. Ten activities are currently being monitored. The process is transparent and all actors are involved: central banks, CSDs and users. Gaps and barriers to compliance (e.g. of a regulatory or technical nature) are escalated to the relevant stakeholders and authorities. The objective is to make sure that all T2S markets achieve full compliance with the highpriority harmonisation standards as of the start of T2S testing or, at the latest, by the respective migration wave date. What are the main findings of the Third T2S Harmonisation Progress Report? The Third T2S Harmonisation Progress Report shows considerable progress in comparison with previous reports. However, further significant steps still need to be taken in order to remove the remaining technical and regulatory barriers and to achieve a truly open and efficient cross-border settlement environment in T2S and in the EU. The definition process is already complete for 15 activities (out of the total 26). For most of the others, standards are expected to be defined by the end of Six of them depend on the adoption of the CSD Regulation by EU legislators. As regards the definition of the missing standards in areas for which the T2S Community is the responsible actor, no major obstacles are foreseen. Concerning the monitoring process, ten activities are monitored in the context of the Third T2S Harmonisation Progress Report, eight of which are high-priority topics. The results of the monitoring process are summarised in the following annexes to the report. Annex 3 (Harmonisation activities dashboard) shows the status of all 26 activities as far as definition, monitoring and compliance are concerned, based on a traffic light approach (red, yellow, green or blue status). Red means that there is currently an obstacle to completing the definition process (and therefore, to launching the monitoring process) and that urgent action is needed to facilitate the process. Six of the red activities depend on the implementation of the CSD Regulation. They are red because of the current uncertainty regarding when the Regulation will be adopted (scheduled for the end of 2013). Page 2 of 5

3 Annex 4 (Monitored harmonisation activities per market) shows the compliance status of each T2S market with the ten standards currently monitored, based on the traffic light approach (red, yellow, green or blue status): red is given to markets with no clear plan, or that are experiencing a delay in implementation, and where urgent action is needed to resolve open issues in time for T2S; yellow is assigned to markets that, while having a plan for implementation, have reported the presence of technical, regulatory or legal barriers; green is given to markets where there is a clear plan in place and no major obstacles to reaching full compliance by the given deadline; the European blue colour is given to markets that are already compliant with the standards and consequently no longer require monitoring. More details on the methodology used to assign the traffic light colours are available in Annex 1 to the report. What are the next steps? Work on the T2S harmonisation agenda will intensify as T2S user testing and the launch date get closer. The primary focus will remain on high-priority activities. The definition process will continue over the next few months, and standards for most of the 26 activities are expected to be finalised this year. This is conditional upon the CSD Regulation being adopted by the end of the year, as planned. Monitoring will extend to the new areas once the definition process is complete. EU legislation in the field of securities will continue to be monitored closely and participation in other European post-trade harmonisation initiatives will go on. Greater involvement of national authorities will be encouraged so as to assist national markets to comply with the standards agreed at European level. Further details and updates on the harmonisation work conducted in the context of the T2S project can be found on the T2S website at T2S: general background *** T2S is the future IT platform of the Eurosystem for the settlement of securities transactions in central bank money, and is set to start operations in June The project will help overcome the current fragmentation in the securities settlement layer Page 3 of 5

4 of the European post-trade landscape, thus making an important contribution to the establishment of a single market for securities services. T2S will provide a single harmonised platform on which almost all heavily traded securities circulating in Europe can be settled, with standardised communication protocols and harmonised market practices, at the same prices for all participating CSDs. T2S will provide CSDs with a sophisticated, state-of-the-art and highly robust settlement engine. It will enable banks to centralise their back-office operations and optimise their liquidity and collateral management. It will open up the market to competition and create new business opportunities for both CSDs and end users. By integrating settlement on a single platform, T2S will contribute to lowering settlement costs in Europe. Such savings are expected to be passed on to end investors through increased competition between intermediaries. T2S is expected to generate significant benefits and make post-trading in Europe safer and more efficient. It is therefore expected to have a positive impact on financial stability, reducing risks and allowing for a better management of liquidity by banks. For more info: Page 4 of 5

5 ANNEX In May and June 2012 the following 22 European CSDs signed the T2S Framework Agreement, thus committing to outsourcing settlement to the T2S platform: Bank of Greece Securities Settlement System BOGS (Greece); Centrálny depozitár cenných papierov (Slovakia); Clearstream Banking (Germany); Depozitarul Central (Romania); Eesti Väärtpaberikeskus (Estonia); Euroclear Belgium (Belgium); Euroclear Finland (Finland); Euroclear France (France); Euroclear Nederland (Netherlands); Iberclear BME Group (Spain); Interbolsa Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários (Portugal); KDD Centralna klirinško depotna družba (Slovenia); Központi Elszámolóház és Értéktár KELER (Hungary); Lietuvos centrinis vertybinių popierių depozitoriumas (Lithuania); LuxCSD (Luxembourg); Malta Stock Exchange (Malta); Monte Titoli (Italy); National Bank of Belgium Securities Settlement System NBB-SSS (Belgium); Oesterreichische Kontrollbank (Austria); SIX SIS (Switzerland); VP LUX (Luxembourg); VP Securities (Denmark). Page 5 of 5