Comprehensive list of TFAX recommendations

Transcription

1 Comprehensive list of TFAX recommendations Topic TFAX Recommendation HSG analysis Next steps 5 March /2013/ Transmission and 1. The TFAX recommends not using T2S settlement messages This is a generic statement/principle on best No further action but focus on maintenance of to pass on additional details through the settlement chain. market practice but not concrete enough to be concrete T2S market practices information in a Additional information requirements should be handled considered as a standard. no 3, 6, 11 (to be part of the cross-csd context outside T2S. More concrete T2S market practices based on this principle follow in the recommendations T2S harmonisation list). below (see T-FAX recommendations no.3, 6 and 11) Transmission and 2. The TFAX recommends minimising account segregation, in This is again a generic statement but cannot be Candidate for EPTG since maintenance of particular at the higher levels of the settlement chain (e.g. agreed as a EU or T2S standard as it stands, at neither T2S nor AG has the information in a issuer CSD level). Account segregation that needs to be least it cannot be imposed by the AG. In regulatory mandate to work on cross-csd propagated through the settlement chain should be avoided. If addition, it is rather unrealistic to expect that this issue. One HSG member context account segregation is required, this should be implemented the AG/HSG can in practice assess whether a proposed to raise the issue to at the lowest possible level of the settlement chain. However, specific CSD account segregation is ESMA too. investor and issuer CSDs should be free to offer their participants the possibility to operate segregated accounts on mandatory for propagation or not down the settlement chain. Even if AG/HSG was able to Page 1 of 9

2 a voluntary basis. do the assessment, it would have no regulatory power to impose change or flag noncompliance. Registration processing 3. Under current conditions (e.g. unharmonised information requirements and T2S specification) the TFAX recommends not to use T2S settlement messages as a means of passing market practice as it is not dependant on any external to T2S regulatory or other T2S HARMONISATION PRACTICE (added in the T2S harmonisation list v3.1) registration details. requirements. Registration 4. The TFAX recommends that account segregation for the T2S cannot establish and agree on such a Issue could either be raised to processing purpose of registration, which needs to be propagated standard, i.e. to impose on T2S market the EPTG with a proposal that throughout the settlement chain, should be avoided. infrastructures how their clients segregate their ESMA could potentially be the assets for registration purposes. This is an issue sponsor on this topic. for securities regulators. Registration 5. The TFAX therefore invites the HSG to discuss other This item covers three fundamental regulatory These issues could be raised to processing potential solutions of legal/regulatory nature - which go and legal notions in the area of EU post-trade the EPTG - for ESMA, the beyond the above technical or process-based approaches. framework (i.e. nominee registration, the General Meeting WG or even The TFAX has identified the following non-exhaustive potential solutions: (1) the possibility of nominee creation of rights on securities and frequency of registration). As they stand, these statements the European Commission in view of the forthcoming Page 2 of 9

3 registration, (2) linking the transfer of rights to settlement such that there is no post-settlement event questioning the transfer of rights, and (3) to abandon transaction-bytransaction registration completely. All of these options would aim at further integration of registration and settlement as a means of ensuring the realignment of both processes. Tax processing 6. Based on current conditions, the TFAX recommends that the tax related information for domestic and cross-csd transactions is not passed via T2S settlement messages for both domestic and cross-csd settlement. Tax processing 7. The TFAX recommends avoiding account segregation as a mechanism to support tax processing. are not standards or best practices but invitation for further legal harmonisation across EU. market practice as it is not dependant on any external to T2S regulatory or other actions. First the wording is not strong, i.e. how to monitor avoidance? Second, T2S cannot establish and agree on such a standard, namely to impose on CSDs and market participants rules on tax account segregation. These practices are very often based on national regulatory and legal requirements. Securities Law Legislation (i.e. for the creation of rights issue). T2S HARMONISATION PRACTICE (added in the T2S harmonisation list v3.1) (with a proposal that ESMA could potentially be the sponsor on this topic). Page 3 of 9

4 Tax processing 8. The TFAX invites the HSG to monitor the harmonisation of European tax regulations related to settlement. Tax processing 9. The TFAX recommends that trade-related taxes should not be collected at settlement level. If this cannot be avoided, then this should be done in a harmonised manner across markets in order to prevent detrimental impact on cross-csd settlement. The term European Tax regulations related to settlement in this context should only refer to the transaction taxes. The HSG is already monitoring the work on Financial Transaction Tax (see 3 rd Harmonisation Progress Report) This cannot be a T2S standard. This is a regulatory decision/agreement to be made at EU or national level, i.e. where the transaction taxes should be collected. In any case, there is a possibility to have the trade related taxes collected at the CSD (or settlement) level but not to be part of the settlement process (see French FTT collection model). The topic is already discussed in the EPTG. Topic already in the T2S harmonisation List. No additional action is required Topic already in the T2S harmonisation List. No additional action is required Portfolio 10. Since matching is mandatory for T2S settlement, the This is not a standard or best market practice Transfers TFAX recommends that settlement instructions related to but a clarification of what is possible in T2S. portfolio transfers should be sent to T2S as to be matched instructions or already matched instructions. Portfolio Transfers 11. The TFAX recommends that information on portfolio transfers should be passed outside T2S (scenario 2). Whether scenario 2 is implemented as variant a) information is market practice as it is not dependant on any external to T2S regulatory or other actions. T2S HARMONISATION PRACTICE (added in the T2S harmonisation list v3.1) exchanged between the custodians directly or b) information is passed through the CSD(s), e.g. by means of a tax application provided by the CSD, depends on the CSDs and Page 4 of 9

5 their choice whether or not to offer the particular service. Portfolio 12. The TFAX recommends that the information required by This is a statement about the exchange of Transfers the receiving custodians should be harmonised to the extent portfolio transfer information between (for EBF or AFME as possible to ensure smooth cross-csd settlement. intermediaries on the base of local regulatory or sponsors). other requirements. There is further harmonisation work to be driven by the industry associations or regulators Portfolio 13. The TFAX invites the HSG to follow up on the Relates to the monitoring of the follow up work Transfers harmonisation of information requirements and related message fields for portfolio transfers. on recommendation 12 above. Bond stripping and reconstitution 14. When the bond stripping process is handled by the CSD via standard settlement messages, the TFAX recommends that T2S allegement messages should be used to trigger the market practice as it is not dependant on any external to T2S regulatory or other actions. T2S HARMONISATION PRACTICE (added in the T2S harmonisation list v3.1) validations required for bond stripping and reconstitution Page 5 of 9

6 (option 3). Bond stripping 15. The TFAX recommends removing restrictions on the This cannot be a T2S standard. This depends on and reconstitution location of primary and recognised dealers securities accounts i.e. primary dealers should be free to choose the CSD of their preference. national rules for primary market dealer activity and access. The topic is already included in the Global Issues List of the EPTG (but not in the Action List) Status: in progress CSDR/EMIR/MiFID cover some high level principles on market access. Further work by ESMA on level II legislation would be required in all three legal acts. Non-standardised 16. The TFAX recommends that non-standardised securities (as This cannot be a T2S standard (i.e. T2S cannot securities defined for this document), should be eliminated over time in order to avoid the implementation of additional complexities in the settlement chain, preferably before T2S Go-Live. establish rules on the nature of the issuances of securities in national markets). This issue is also marginal in terms of business case for T2S and the EU market as a whole. Non-standardised 17. For those non-standardised securities that need to be This seems to be a clarification of the options securities handled in T2S, either CSD Validation Hold (option 1) is to for treating non-fungible securities in T2S be applied, or instruction needs to take place indirectly via rather than a standard. the CSD (option 2).. Page 6 of 9

7 CSD Ancillary 18. The TFAX recommends that participants should use Services (Classic Common Trade Reference in the ISO20022 message market practice for the usage of an optional Repo) SecuritiesSettlementTransactionInstruction (sese.023) in matching field in T2S as it is not dependant on order to avoid the risk of matching a Repo transaction with any external to T2S regulatory or other actions. other types of transactions (e.g. a trade related transaction). CSD Ancillary 19. The TFAX recommends that it should be up to the agent This seems to be a clarification that there is no Services (Tri- and its client to determine the need for segregation and the need for a standard on the issue. This statement party Repo) appropriate segregation method (i.e. the use of accounts or is also in line with the draft CSDR position segregation such as earmarking and blocking in T2S). CSD Ancillary 20. When segregation is used, the TFAX recommends that This is not a standard but an invitation for To be raised to EPTG and/or to Services (Tri- earmarked and blocked positions should be named in a further work on the establishment of an EU best COGESI party Repo) uniform way across markets, so that the agents can process the collateral in a seamless way in a cross-csd repo transaction. market practice on the naming of earmarked and/or blocked positions. CSD Ancillary 21. When segregation is used, the TFAX recommends that this This is not a standard but an invitation for To be raised to EPTG and/or to Services should be done in a uniform way across markets, so that the further work on the harmonisation of account COGESI (Securities Lending and agents could process the securities lending in a seamless way in cross-csd transactions. segregation across EU markets for securities lending purposes. The differences in Page 7 of 9

8 Borrowing) segregation are often due to legal/regulatory and fiscal requirements. The T2S community cannot decide on standards for account segregation on these issues. CCP instructions 22. The TFAX recommends that all markets should recognise the PoAs granted by CMs to their CCPs. In order to allow for the PoA concept to be effective, CSDs should set up privileges on T2S securities accounts based on the request of their participants (the CCPs CMs). T2S cannot impose such a regulatory requirement, namely that all T2S CSDs should grant PoAs according to the request they receive from their participants (which are also clearing members in a CCP). In any case such a standard would be extremely difficult to be monitored by the AG/HSG. Should it be raised to EPTG or to CSG? CCP instructions 23. The TFAX recommends that there should be no segregation of accounts based on OTC and on-exchange trades on a mandatory basis. T2S cannot impose a standard on how CSD participants segregate their holdings at the CSD level, especially if there are regulatory reasons behind the national models followed. To be raised to EPTG Page 8 of 9

9 CCP instructions 24. The TFAX recommends that trading venues, CCPs, CSDs and regulators should not impose any dependency between the locations of securities account of CMs and CCPs (or settlement agents). The CMs and CCPs (or settlement agents) should be allowed to open securities accounts in the CSD of their choice in order to be able to receive/offer CCP services. This is not a T2S standard. CSDR, MiFiR, EMIR are capturing part of this in their Market Access provisions. The topic is also included in the EPTG work (as a monitoring and not as an action plan). Topic already in the T2S harmonisation List. No additional action is required Issuance 25. The TFAX comes to the conclusion that from a T2S and No Practices cross-csd perspective no issues are apparent in the context of issuance. Message Fields 26. The TFAX invites the HSG to re-conduct the survey on message fields with the markets in order to be able to fully gauge the impact in the second quarter of This is not a standard but invitation to further explore whether there are message fields to be used in a harmonised way in the T2S messages (other than for matching and validation purposes) Topic already in the T2S harmonisation List. No additional action is required Page 9 of 9