TARGET2-Securities: overview

Transcription

1 TARGET2-Securities: overview Infosession on T2S auto-collateralisation Patrick Van den Eynde T2S BENUG Secretary Driver for T2S to stimulate the integration of the securities post-trading infrastructure in Europe Trading EUROPE BME Group BME Group Nasdaq Deutsche N asdaq Deutsche OMX Bör se Nordic OMX Börse N ordic MTFs e.g. Chi-x MTFs / Turquoise e.g. Chi-x / Turquoise LU S.E. LU S.E. Euro- Next Euro- PT, Next BE, FR, PT, NL BE, FR, NL London Stock London Exchange Stock Exchange Borsa Italiana Bor sa It aliana SIX Group SIX Group UNITED STATES N YSE N YSE MTFs e.g. MTFs BATS e.g. BATS N asdaq Nasdaq Clearing Eurex Clearing Eurex Clearing EMCF EMCF Euro- CCP Euro- CCP LCH.Clearnet SA LCH.Clearnet SA LCH. Clearnet LCH. Clearnet Ltd. Ltd. CassaDi CassaDi Comp Comp SIX-x Clear SIX-x Clear NSCC NSCC FICC FICC Securities Settlement & Asset servicing Iber clear Iber clear Clearstream Clearstream Banking Frankfurt Banking Frankfurt Clearstream Clearstream Banking Luxemb. Banking Luxemb. VP VP CSD CSD X X Inter Bolsa Inter Bolsa Euroclear UK BE FI FR NL SE & IE Monte Titoli Monte Titoli SIS SIS DTCC DTCC FED FED Cash settlement NCB NCB X X SNB SNB 2 / 14 T2S overview 1

2 Aim of T2S is to provide a single harmonised venue where almost all securities circulating in Europe can be settled with standardised communication protocols and harmonised market practices to lower the currently high costs of cross-border securities settlement and to bring a more general reduction in the total cost for settlement to foster financial stability by settling in Central Bank Money to offer a number of advanced and new facilities (optimisation functionalities like autocollateralisation, priorisation, partial settlement,...) 3 / 14 T2S overview What is T2S? T2S A single IT technical platform Harmonised DvP in CeBM Core Neutral Borderless securities settlement A solution to the current fragmentation An entirely new concept Reversed integrated model 4 / 14 Multi-currency dimension T2S overview 2

3 A single IT platform for DVP settlement in central bank money VALIDATIONand and MATCHING TARGET2 SECURITIES CENTRAL BANK BANK MONEY CENTRAL BANK BANK MONEY CSD A CSD A ACCOUNTS OPTIMISATION of SETTLEMENT NCB A ACCOUNTS NCB A ACCOUNTS NCB A CSD B CSD B ACCOUNTS SETTLEMENT and REALIGNMENT NCB B ACCOUNTS NCB B ACCOUNTS NCB B CSD C CSD C ACCOUNTS NCB C ACCOUNTS CENTRAL CENTRAL BANK BANK MONEY MONEY NCB C A ACCOUNTS NCB C Other RTGS 5 / 14 T2S overview T2S as a single Settlement platform CSDs participating in T2S will outsource their securities accounts to the single platform CSDs remain legal owner of these accounts and stay responsible for customer relations NCBs will create and hold Dedicated Cash Accounts (DCA) for their payment banks on the same technical platform settlement of Delivery-versus-Payment on T2S will take place by simultaneously adapting securities accounts and DCA 6 / 14 T2S overview 3

4 Expected results of T2S reduction of settlement costs banks can centralise back-office operations banks can optimise liquidity (one DCA for settlement in all T2S CSDs) and collateral management efficiency gains thanks to market practices harmonisation triggered by T2S (single settlement schedule, single calendar, single set of matching standards, common standards for corporate actions processing,...) increased competition between CSDs and intermediaries 7 / 14 T2S overview Broader perspective Europe will become a better place to invest issuers will benefit from a more diversified investor base securities markets will become more liquid and more attractive 8 / 14 T2S overview 4

5 T2S Governance owned by the Eurosystem and technically on the same platform as TARGET2 is being developed on the foundations that have been laid by market participants (User Requirements Document) strategic decisions by ECB Governing Council conduct of the project by the T2S Programme Board development by 4CB user forums: T2S Advisory Group (CSDs, NCBs, future end users), National User Groups 9 / 14 T2S overview T2S Contractual Relationship with CSDs CSDs that signed the Framework Agreement on 8 May: Bank of Greece Securities Settlement System - BOGS (Greece) Clearstream Banking AG (Germany) Depozitarul Central (Romania) Iberclear (Spain) LuxCSD S.A. (Luxembourg) Monte Titoli S.p.A. (Italy) National Bank of Belgium-Securities Settlement System NBB-SSS (Belgium) VP LUX S.à.r.l. (Luxembourg) VP Securities A/S (Denmark) non-euro NCBs are invited to sign the Currency Participation Agreement 10 / 14 T2S overview 5

6 11 / 14 T2S overview 12 / 14 T2S overview 6

7 13 / 14 T2S overview Further topics for today relationship T2S-T2 T2S auto-collateralisation functionality 14 / 14 T2S overview 7

8 T2-T2S: Cash aspects Brussels, 7 June 2012 Patrick HEYVAERT Chairman T2UG Background on TARGET2 and T2S From a T2S perspective: Bank Bank Bank Bank Bank NCBS CSDs CSDs CSDs Securities securities securities securities sec. settl. autocol Bank BankBank Bank Bank NCB NCB NCB Cash DCA DCA DCA liquidity Automated reimbursement CMS RTGS RTGS RTGS RTGS Banks on the cash side hold their RTGS account with their NCB. Banks can open at their NCB Dedicated Cash Accounts (DCA) for securities settlement purposes. For the securities settlement, banks will provide liquidity from their TARGET2 accounts to the DCAs e.g. via standing orders, liquidity transfers. Banks may also use auto-collateralisation in T2S. Towards the end of the business day all DCAs have to have a zero balance and auto-collateralisation credit has to be fully reimbursed. If the DCA balance should not allow to reimburse autocollateralisation, the so-called automated reimbursement will be invoked. 2 / 23 1

9 Background on TARGET2 and T2S RTGS account opened in TARGET2 only direct participants TARGET2 can be linked to one or multiple DCA's Dedicated Cash Account (DCA) cash account in T2S settlement of DvP transactions can be linked to only 1 RTGS account can be linked to one or multiple securities accounts can be used for one or multiple CSDs 3 / 23 TARGET2- Adaptations in view of T2S Getting ready for T2S Changes triggered by T2S (cash side) + Fragmentation of participants liquidity due to the multiplicity of cash accounts/sub-accounts for CSDs. Auto-collateralisation in few CSDs and with RTGS account opened with the local NCB. Multiplicity of the settlement procedures. Strong operational dependence between CSDs and TARGET2. Rationalisation of banks liquidity management (possibility to have one single DCA for settling in all CSDs). Auto-collateralisation available with all CSDs where the eligible securities are held. One single interface for all CSDs hosted by T2S. Large operational autonomy thanks to auto-collateralisation. 4 / 23 2

10 TARGET2- Adaptations in view of T2S Getting ready for T2S Banks challenge (cash side) BANK Central DCA Bank Money RTGS Banks wish to Monitor and consolidate their cash position in real time Shift liquidity quickly wherever it is needed Use the same technical interface for managing both their DCA and their RTGS accounts but T2S is exclusively based on ISO20022 TARGET2 is not yet using ISO20022 Not all TARGET2 participants will be ready to move to ISO20022 for cash management 5 / 23 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Standard offer general approach Standard offer ISO20022 Central DCA Bank Money RTGS ISO20022 compliant interface for participants, allowing them to manage their liquidity on their RTGS accounts. Access to DCAs related features via T2S but using the same ISO20022 standards. First users consultation in July/August 2011 with very supportive feedback. The Eurosystem confirms it will develop the standard offer as part of the core services. Technical implementation in Nov.2013 (dormant until T2S goes live). 6 / 23 3

11 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Standard offer main features Standard offer Implementation of camt5 standards for cash management interface with participants; Standing order liquidity transfer via ICM/U2A and A2A (camt5); Liquidity transfers via ICM/U2A and A2A (camt5) optional debit notification in camt5 Development of the interface as a new ASI model (e.g. highly urgent status); Sophisticated monitoring tools to ensure a smooth settlement of liquidity across the two systems without loss or undue delay; Optional notification of debit/credit stemming from liquidity shifts in either ISO20022 or MT900/MT202 formats; 7 / 23 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Optional offer Legacy Central DCA Bank RTGS Money Conversion by TARGET2 standards Optional offer Alternative interface using legacy standards for managing liquidity on both RTGS and DCAs. TARGET2 will ensure the conversion of messages to/from ISO Provision of the intraday balances of DCAs on the ICM (U2A) or via GetAccount messages (A2A) for all DCAs linked to the RTGS account of the participant; Possibility for participants to initiate pushed liquidity transfers (T2T2S) and pulled liquidity transfers (T2ST2) via MT202 messages; 8 / 23 4

12 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Optional offer Legacy Central DCA Bank RTGS Money Conversion by TARGET2 standards Optional offer Possibility for participants to initiate pulled liquidity transfers (T2ST2) via the ICM (U2A) or via LiquidityCreditTransfer messages (A2A); Eased access to T2S GUI pages via the ICM The provision of end-of-day statements for DCAs in legacy standards (MT940/950) was withdrawn considering the limited business case. It is expected that DCA holders will rely on other sources for their reconciliation (e.g. CSD settlement confirmation reports). In case of need, end-of-day statements are available in T2S for 10 years. 9 / 23 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Optional offer Screenshot (1/3) Aggregated view (RTGS, sub a/c, HAM and DCAs) / 23 5

13 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Optional offer Screenshot (2/3) Liquidity available on linked DCAs / 23 TARGET2- Adaptations in view of T2S Eurosystem s offer for TARGET2 Optional offer Screenshot (3/3) Pulling of liquidity from DCAs to RTGS / 23 6

14 Schedule T2S and impact on liquidity 18:45 Start of day 19:30 Night time settlement 03:00-05:00 Maintenance window 05:00 Real-time settlement < 16:00 Expectation: banks reimburse voluntarily auto-collateralisation normally prior to 16:00 16:00 DvP cut off 16:00 Securities settlement restrictions cut-off 16:00 Cash settlement restrictions cut-off 16:00-16:10 Cash sttlement restrictions released Prior 16:30 Automated optional cash sweep (bank's choice) 16:30 Automated reimbursement of auto-collateralisation in T2S 17:00 TARGET2 customer payments cut-off 17:40 Secured money market transactions (BATM) cut-off Central Bank Operations DvP cut-off at the latest 17:45 Automated mandatory cash sweep from DCAs to T2 18:00 FoP cut-off (both CBO FoP and interbank FoP)** 13 / 23 TARGET2 interbank payments cut-off * Indicative times ** Requests for accessing the standing facilities can be made until 18:15 (plus 15 minutes on the last business day of a minimum reserve maintenance period). Liquidity DCA Liquidity movements on DCA via: Liquidity transfers T2 to T2S T2S to T2 DCA to DCA Settlement instructions DvP transactions Corporate actions other Auto-collateralisation with Central Bank own RTGS account needed 14 / 23 7

15 Liquidity Transfer Flows T2 - T2S Cash DCA DCA DCA RTGS RTGS RTGS RTGS Liquidity transfers are possible from any TARGET2 account to any DCA (incl. standing orders) Liquidity transfers are possible from any DCA to any TARGET2 account. Internal liquidity transfer between DCAs are only possible between DCAs belonging to the same entity or linked to the same TARGET2 account. Rebalancing is possible between the DCAs under the same BIC11 Each DCA needs to be linked to one TARGET account. The liquidity sweeps transfer liquidity from the DCAs to the linked TARGET2 account. 15 / 23 Liquidity Transfer Flows T2 - T2S Overview about the Technical Interfaces in T2 for T2S-related business Liquidity Transfers to T2S: Initiation via ISO compliant MX message Liquidity Transfers to T2S: Initiation via MT message Liquidity Transfers to T2S: Initiation via ICM current order Liquidity Transfers to T2S: Processing of negative Receipt from T2S (Automatic Reversal booking in T2) Liquidity Transfer from T2S: Successful Processing in T2 (positive Receipt to T2S) 16 /

16 Overview Technical Interfaces in T2 for T2S-related business 17 / LT to T2S: Initiation via ISO compliant MX message (Core Service) 18 /

17 Liquidity Transfers to T2S: Initiation via MT message (Value Added Service) 19 / Liquidity Transfers to T2S: Initiation via ICM current order (Core Service) 20 /

18 Liquidity Transfers to T2S: Processing of negative Receipt from T2S (Automatic Reverse booking in T2) 21 / Liquidity Transfer from T2S: Positive Receipt from T2 (Core Service for MX / VAS for MT push message) 22 /

19 QUESTIONS? 23 / 23 12

20 T2S auto-collateralisation Brussels, 7 June 2012 Yvan TIMMERMANS T2S BENUG Chairman What is auto-collateralisation? Intraday credit operation triggered when a buyer lacks funds for settling a securities transaction on flow : credit secured by purchased securities on stock : credit secured by securities already held by the buyer 2 / 26 1

21 T2S auto-collateralisation Client collateralisation Payment/settlement banks' ability to provide intraday credit through auto-collateralisation Out of scope of this presentation 3 / 26 T2S auto-collateralisation Central bank auto-collateralisation T2S core settlement optimization procedure automatically providing (on behalf of NCB) the buyer with collateralised liquidity in case the buyer lacks liquidity to settle the underlying DvP transaction. Both auto-collateralisation on stock and on flow will be offered by T2S Night and day time 4 / 26 2

22 T2S settlement day 18:45 Start of day 19:30 Night time settlement 03:00-05:00 Maintenance window 05:00 Real-time settlement < 16:00 Expectation: banks reimburse voluntarily auto-collateralisation normally prior to 16:00 16:00 DvP cut off 16:00 Securities settlement restrictions cut-off 16:00 Cash settlement restrictions cut-off 16:00-16:10 Cash sttlement restrictions released Prior 16:30 Automated optional cash sweep (bank's choice) 16:30 Automated reimbursement of auto-collateralisation in T2S 17:00 TARGET2 customer payments cut-off 17:40 Secured money market transactions (BATM) cut-off Central Bank Operations DvP cut-off at the latest 17:45 Automated mandatory cash sweep from DCAs to T2 18:00 FoP cut-off (both CBO FoP and interbank FoP)** 5 / 26 TARGET2 interbank payments cut-off * Indicative times ** Requests for accessing the standing facilities can be made until 18:15 (plus 15 minutes on the last business day of a minimum reserve maintenance period). Conditions for T2S auto-collateralisation NCB offers auto-collateralisation Buyer eligible counterparty + agreement with its NCB own RTGS account Used collateral is eligible No close links (definition by the counterparties in the static data) For non-domestic collateral : domestic CSD of the NCB has links 6 / 26 3

23 Why is auto-collateralisation needed? To reduce settlement failures due to lack of liquidity gridlocks (when one party cannot deliver assets to another as it has not settled the assets) intraday liquidity needs for the settlement of assets To ease the settlement during the night time 7 / 26 Collateralisation techniques (repo/pledge) repo : underlying collateral transferred to NCB s securities account pledge : underlying collateral booked in favour of NCB but staying on the account of the counterparty variant 1: so called pledge Collateral transferred to counterparty s pledge securities account variant 2: so called pledge-sub Collateral earmarked on a counterparty s main securities account 8 / 26 4

24 Collateralisation technique in NBB-SSS Technical setup : repo NBB will open a dedicated NCB autocollateralisation securities account in the NBB-SSS NBB will open an auto-collateralisation cash account Legal setup : transfer on a pledge account of the NBB 9 / 26 Static data : roles of the counterparties Earmarking of the securities On flow At the level of : the securities account the settlement instruction (account level overrides instruction level) On stock At the level of : the securities account the securities position in a securities account No earmarking of securities with close links = responsibility of the counterparty 10 / 26 5

25 Static data : roles of the NCB To provide to T2S : eligible assets valuation of the assets To check the close links (ex-post) 11 / 26 Reimbursement of auto-collateralisation T2S will : generate and settle an auto-collateralisation operation and; simultaneously create on hold the reimbursement corresponding to the exact reverse operation Reimbursement at any moment (daytime) by the counterparty : release of on hold reimbursement instructions 12 / 26 6

26 Substitution (lack of securities) If securities not involved in a pending reimbursement operation If yes, T2S release of the pending transaction If enough liquidity : OK If not: generation of a new auto-collateralisation operation 13 / 26 Automated reimbursement (end of day) Mandatory reimbursement of the intraday credit T2S will automatically use all the liquidity available on the DCAs 14 / 26 7

27 Automated reimbursement (end of day) Exceptional case : procedure when insufficient liquidity Reallocation of the equivalent collateral to the regular NCB collateral securities account Increase of the credit line in T2 Reimbursement of the NCB in T2 If liquidity on the PM account in T2 is still missing : intraday credit marginal lending facility 15 / 26 Domestic view : cash and securities movements Domestic Auto-collateralisation : securities accounts providing collateral and the securities accounts receiving collateral in the same CSD Initial Position Available Deliverable Security with Party A : 350 Value of available eligible collateral with Party B : 500 Available Auto Collateralisation Limit for Party B : 1000 Available cash in T2S DCA2 : 0 Important: T2S Party B has earmarked securities account 456 in CSD-1 as a securities account providing collateral and the Central Bank has set-up securities account 789 in CSD-1 for receiving collateral T2S Security Account in CSD-1 T2S Party A T2S Party B Deliverer of Securities Receiver of Securities In need of cash Credit Receiver Securities A/c 444 Securities A/c 123 Available Deliverable Security: Receivable Security: 100 Central Bank Credit Provider Securities A/c 456 Securities A/c Value of available eligible collateral: T2S Dedicated Cash Accounts in NCB A T2S DCA T2S DCA CBCA3 T2S Central Bank Cash Account Movements 1, 2, 3, 4 happens on All-or-None basis 23-Feb-12 Auto Collateralisation in T2S (Internal) 1 This ensures that the credit received is used exclusively for the settlement transaction in need 16 / 26 8

28 Domestic view : reimbursement of autocollateralisation Payment Bank can trigger Reimbursement of Pending Auto-collateralisation by releasing the reverse collateral instruction (i.e. reimbursement instruction) in Hold status Initial Position Cash Available in T2S DCA2 : 300 Important: T2S Party B (i.e. the Payment Bank) releases the reverse pending instruction in the Hold status. T2S Party B Receiver of Securities In need of cash Credit Receiver Central Bank Credit Provider T2S Security Account in CSD-1 Securities A/c 456 Securities A/c 789 Value of available eligible collateral (before reimbursement: T2S Dedicated Cash Accounts in NCB A T2S DCA CBCA3 100 T2S Central Bank Cash Account Movements 1 and 2 happen on All-or-None basis 17 / 26 Cross-border view : cash and securities movements Cross Border Auto-collateralisation : securities accounts providing collateral and securities accounts receiving collateral in different CSDs Initial Position Available Deliverable Security with Party A : 350 Value of available eligible collateral with Party B : 600 Available Auto Collateralisation Limit for Party B : 1000 Available cash in T2S DCA2 : 0 Important: T2S Party B has earmarked securities account 456 in CSD-2 as source of collateral and Central Bank has set-up securities account 789 in CSD-1 for receiving collateral T2S Party A T2S Party B Central Bank Technical Account Deliverer of Securities Receiver of Securities Credit Provider In need of cash Credit Receiver T2S Security Account In CSD-1 Securities A/c 444 Available Deliverable Security: Securities A/c 123 Receivable Security: 100 Securities A/c b Mirror Account CSD1/CSD Omnibus Account T2S Security Account CSD1/CSD-2 Securities A/c 456 In CSD-2 Value of available eligible collateral: 500 2a (Issuer CSD for collateralised securities) T2S Dedicated Cash Account T2S DCA T2S DCA CBCA3 T2S Central Bank Cash Account Movements 1, 2a, 2b, 3, 4 happens on All-or-None basis This ensures that the credit received is used exclusively for the settlement transaction in need 18 / 26 9

29 Pricing Auto-collateralisation transactions (Provision of liquidity, rebooking of securities) : free (currently) End of day automated reimbursement (reallocation of collateral) : to be decided Reporting (as reporting messages) 19 / 26 T2S fees Underlying DvP Chargeable items buyer s instruction (15 cents) seller s instruction (15 cents) matching buyer s instruction (3 cents) matching seller s instruction (3 cents) daylight settlement (3 cents per instruction) 20 / 26 10

30 T2S fees Non-chargeable items Cash leg of the DvP transaction Security transfer / booking of the DvP transaction Intra-position movements (pledge-sub related transactions) 21 / 26 T2S fees : who is charged? NCBs for cash CSDs for securities CSDs and NCBs might charge more 22 / 26 11

31 Belgian specificities 2 CSD s in T2S : NBB-SSS and Euroclear Belgium Euroclear Belgium (EBE) is not an Eurosystem eligible CSD. NBB can therefore not receive collateral in EBE NBB-SSS has no links Consequence : only eligible assets issued in NBB-SSS usable for auto-collateralisation by Belgian settlement banks Direct holding structure (one CSD of reference by ISIN) of ESES : only Euroclear France has links with non-eses CSDs. limitation also for Dutch participants : one DCA of a settlement bank only linked to one NCB receiving auto-collat. securities account 23 / 26 Belgian specificities (examples) Belgian settlement bank is participant in Monte-Titoli (MT) no auto-collateralisation using Italian securities (no link NBB-SSS with MT) auto-collateralisation (on stock) using eligible securities held in the NBB-SSS possible Belgian settlement bank is participant in Euroclear Belgium auto-collateralisation (on stock) using eligible securities held in the NBB-SSS possible 24 / 26 12

32 Questions to the Belgian counterparties 1) Do you intend to use auto-collateralisation taking into account the practical limitation of eligible securities to the ones issued in NBB-SSS? 2) Could you confirm if your institution is a direct participant and acts as cash settlement bank in non-belgian CSDs (so nor indirect participation via a custodian nor a direct participation with the use of a cash settlement agent)? 25 / 26 Questions T2S : general aspects Patrick Van den Eynde: patrick.vandeneynde@nbb.be» 02/ T2/T2S (cash) Patrick Heyvaert : patrick.heyvaert@nbb.be» 02/ T2S Auto-collateralisation Yvan Timmermans : yvan.timmermans@nbb.be» 02/ Collateral management Catherine Specia : catherine.specia@nbb.be» 02/ / 26 13