T2S Info session Paris March 24th 2010

Transcription

1 T2S Info session Paris March 24th 2010 Settling funds in T2S Presented by Frederic Perard, Head of Global Funds Services, BNP Paribas Securities Services The closer, the better

2 Agenda 1. Context 2. Today s French CSD settlement model 3. Tomorrow s French CSD settlement model? 4. Potential benefits of T2S 5. Conclusion 2

3 Context Funds, weird animals All types of securities settling in CSD being part of T2S scope, funds are de facto included (French funds and foreign funds admitted in Euroclear France and settling in ESES No specific documentation or information available for funds: neither the URDs, nor the GFSs provide any particulars for funds / EOC s white paper does barely However important functional choices are being made that could potentially affect the funds settlement processes The Lux CSD initiative to ensure Luxembourg is part of T2S (including the funds industry) co-existence of both models both in France and in Luxembourg Awareness of the need to focus on T2S impact and opportunities for funds The led objective to the creation of the of French a dedicated market working is to maintain group at European currently achieved efficiency, if not to improve it even level further (first meeting! on April 27th) 3

4 Today s French CSD settlement model (1/3) General overview Account opening contract Investor Distributor Distribution agreement Asset Management Company SLA Subscription/ redemption Transaction Notice Announce of collected s Financial Intermediary / Custodian Bank Earmarked Confirmation of Earmarked Confirmation of SWIFT EOC Order Routing Platform Earmarked Confirmation of Earmarked Confirmation of Centralising Agent Settlement Instruction Issuer s account agent DVP Settlement EOC France An efficient DVP process 4

5 Today s French CSD settlement model (2/3) Zoom on fund accounting specifics Investor A Investor B Order 10 shares Order 5 shares Custodian Bank 1 Custodian Bank 2 Settlement Instruction Order Order Confirmation of Confirmation of Fund Accountant NAV at 15 CENTRALISING AGENT Settlement Instruction NDC 00 IF Bank 1 10 shares NDC 00 IF Bank 2 5 shares Euroclear France NDC 62 Fund X 10 shares 5 shares 00 IF Bank IF Bank 2 75 BANQUE DE FRANCE An efficient DVP process Centralising Agent 225 5

6 Today s French CSD settlement model (3/3) Zoom on fund settlement instructions Investors / Distributors Orders Financial Intermediary / Custodian Bank SWIFT EOC Order Routing Platform Centralizing Agent Reporting Asset Management Company SETTLEMENT IN ESES (including issuance process) Settlement instructions without automatic generation option Settlement instructions with automatic generation option - Issuance and settlement processes = 1 process 6

7 Tomorrow s French CSD settlement model (1/3) Still many grey areas What we know What we don t know yet The settlement process will be transferred from the ESES/ SP platform to the T2S platform T2S will allow both direct connectivity (DC) and indirect connectivity through CSD (IDC) for a same market participant account No specific accounting structure in T2S (no account nature 62 for the issuing account ) / Movements on the issuing account still initiated trough EOC France but disconnected from the settlement The reporting will be provided by T2S if the market participant is in DC (even partial) The impact resulting from the dissociation of the issuing process and the settlement process The choice that needs to be done, at market level or participant level, for the funds settlement process The detailed account structure in T2S and the proposed accounting mechanism with the CSD s for funds The impact on the reporting and reconciliation processes 7

8 Tomorrow s French CSD settlement model (2/3) Various connectivity options Orders Financial Intermediary / Custodian Bank SWIFT EOC Order Routing Platform Centralizing Agent Reporting Asset Management Company Direct Connectivity (DC) Issuance and settlement processes are disconnected Indirect Connectivity without automatic settlement instruction generation (IDC ) Automatic settlement instruction generation by Eoc France (DC or IDC) 8

9 Tomorrow s French CSD settlement model (3/3) Next steps Await for further details on account structure (from T2S) and reporting/reconciliation flows (both from T2S and Euroclear France) Analyse impact on current French CSD model and flows Investigate alternatives options and define, if needed, additional requirements from Euroclear France (flows capture, enhanced reporting, ) Determine if new market practices need to be put in place (for matching criteria..) but with an European vision which means Re consider potentially the French specifics in view of T2S but also in view of ESES/SP Liaise with dedicated European funds working group 9

10 Constraints Vs Opportunities Short term constraints but a long term investment? CONSTRAINTS / THREATS No real consideration of the funds from scratch in the set up of T2S quick and dirty fixes? Disconnection from the routing platform, no longer a true integrated process OPPORTUNITIES Solution for direct s and opening to foreign distributors? No impact on good progress made on earmarking of s Settlement cost reductions 10

11 Conclusion T2S, a facilitator and accelerator for the fund distribution in Europe? Most likely, through the natural co-existence and convergence of both TA and CSD settlement models as an efficient European post market infrastructure is a must considering the coming major regulatory changes in the European funds industry with Ucits IV and AIFM 11

12 The information contained within this document ( information ) is believed to be reliable but BNP Paribas Securities Services does not warrant its completeness or accuracy. Opinions and estimates contained herein constitute BNP Paribas Securities Services judgment and are subject to change without notice. BNP Paribas Securities Services and its subsidiaries shall not be liable for any errors, omissions or opinions contained within this document. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For the avoidance of doubt, any information contained within this document will not form an agreement between parties. Additional information is available on request. BNP Paribas Securities Services is incorporated in France with limited liability and is authorised by the CECEI and supervised by the AMF. BNP Paribas Securities Services' London branch is subject to limited regulation by the Financial Services Authority for the conduct of its investment business in the United Kingdom and is a member of the London Stock Exchange. BNP Paribas Trust Corporation UK Limited and Investment Fund Services Limited are wholly owned subsidiaries of BNP Paribas Securities Services, incorporated in the UK and are authorised and regulated by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authority are available from us on request. The services described in this document, if offered in the U.S., are offered through BNP Paribas and its subsidiaries and its affiliates. Securities products are offered through BNP Paribas Securities Corp., a subsidiary of BNP Paribas, a broker-dealer registered with the Securities and Exchange Commission and a member of SIPC, the Financial Industry Regulatory Authority, New York Stock Exchange and other principal exchanges. The closer, the better