T2S: two months after launch
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The document outlines the successful launch and operation of Target2-Securities (T2S), a landmark platform for securities settlement that went live on June 22, 2015. T2S aims to provide a harmonized delivery-versus-payment settlement system in central bank money, with participation from 8 central banks and multiple central securities depositories (CSDs). Since its launch, T2S has demonstrated stability in operations and is crucial for enhancing financial stability and liquidity management in the European financial sector.
T2S: two months after launch
- 1. T2S: two months after launch 2nd Annual Post-trade Forum, Vienna, 10 September 2015 Meike Ströter European Central Bank KatharinaTobiasch Deutsche Bundesbank
- 2. 2 https://youtu.be/uwNuFLXQK4U T2S – Europe’s single securities settlement engine
- 3. T2S in operation2 1 T2S is live! 3 Bundesbank’s role in T2S 4 T2S harmonisation Table of contents 5 Programme plan 3
- 4. 4
- 5. 5 4CB at Bundesbank4CB (Banca d’Italia) with T2S Programme Office Live from the migration weekend
- 6. T2S successfully launched 6 • On 22 June 2015 T2S – the Eurosystem‘s landmark platform for securities settlement started live operations. • 8 central banks provide liquidity for securities settlement in T2S (France, Germany, Greece, Luxemburg, Malta, Netherlands, Romania plus the ECB) • A first group of CSDs and their user communities from Greece, Malta, Romania and Switzerland migrated toT2S. © Alexandra Lechner
- 7. MonteTitoli joining MonteTitoli and the Italian market successfully connected to the T2S platform on 31 August 2015. 7
- 8. What is TARGET2-Securities? 8 Eurosystem product to provide harmonised and commoditised delivery- versus-payment (DvP) settlement • on a real-time basis • in central bank money • in euro (and other currencies) Integrated model, but run by the central bank rather than by the CSD Integration of cash and securities legs on one single IT platform T2S is no (pan-European) CSD • T2S will serve only as a provider of settlement services to CSDs • CSDs continue to operate and provide their other services (custody, asset servicing, taxes….) • Contractual relationship only between T2S and CSDs • Market participants still contract with the CSD(s)
- 9. TheT2S integrated model 9 CSD A CSD B CSD C T2S SETTLEMENT ENGINE Securities CeBM Accounts CSD A T2S SETTLEMENT INSTRUCTIONS Accounts CSD C Accounts CSD B Accounts Central Bank A Central Bank A Central Bank B Central Bank C Accounts Central Bank B Accounts Central Bank C Accounts Central Bank A Accounts Central Bank B Accounts Central Bank C CeBM CeBM TARGET2 Non - € RTGS CeBM = central bank money
- 10. A project for whole Europe – more than 20 CSDs participating! 10 CSDs Eurozone Austria Belgium Estonia Finland France Germany Greece* Italy Lithuania Latvia Luxembourg Malta Netherlands Portugal Slovenia Slovakia Spain EU CSDs Denmark Hungary Romania Non-EU CSDs Switzerland** *Greece – government bonds **Switzerland – euro business
- 11. 2 1 3 4 Table of contents 5 T2S in operation T2S is live! Bundesbank’s role in T2S T2S harmonisation Programme plan 11
- 12. Two months after its launch, the T2S platform has proven to be stable. It experienced only few technical issues within the normal range of what we would expect, which were resolved in due time. Since the very start of T2S live operations, the settlement process has been very smooth. Stability of the platform 12
- 13. Business continuity model 4 sites/ 2 regions concept in detail: 13
- 14. Business continuity in practice Permanent connection to the colleagues in Italy via video conference Operational teams in Frankfurt and Italy work closely together - One team is responsible for the test environments - The other team is responsible for the production Regular changes of responsibilities to guarantee best knowledge on both sides © Alexandra Lechner 14
- 15. 2 1 3 4 Table of contents 5 T2S in operation T2S is live! Bundesbank’s role in T2S T2S harmonisation Programme plan 15
- 16. 16 Bundesbank experiences from migration and operation Bundesbank participated in the migration weekends of 22 June 2015 and 31 August 2015 in its roles as provider of central bank liquidity and collateral manager. • From Bundesbank point of view both migration weekends were a success • The processes and interaction as jointly prepared by the migrating CSDs and Central Banks and as previously tested proved to work Since the go-live T2S – including its connection to TARGET2 – is running smoothly. • Neither Bundesbank and nor its customers faced any (major) (operational) issues Key success factors • Proper preparation and performance of testing • Start of customer preparation early in advance (e.g. via specific information sessions as well as bilateral support on individual basis) 16
- 17. Part of the Eurosystem Member of the 4CB (developing and operatingT2S) Provider of central bank money User of the settlement service (customer of Clearstream) Plus : Central banks’ financial stability task Bundesbank’s roles in T2S 17
- 18. 18 The 4CB as developer and operator ofT2S Governing Council Decision (17 July 2008) “The Governing Council of the European Central Bank (ECB) decided to launch the TARGET2- Securities (T2S) project and to provide the resources required until its completion. It also decided to assign the development and operation of T2S to the Deutsche Bundesbank, the Banco de España, the Banque de France and the Banca d’Italia.” © Alexandra LechnerT2S Control Center – Bundesbank‘s Technical Team and Operational Team premises 18
- 19. 19 Provision of central bank money in T2S CSD A CSD B CSD C T2S SETTLEMENT ENGINE Securities CeBM Accounts CSD A T2S SETTLEMENT INSTRUCTIONS Accounts CSD C Accounts CSD B Accounts Central Bank A Central Bank A Central Bank B Central Bank C Accounts Central Bank B Accounts Central Bank C Accounts Central Bank A Accounts Central Bank B Accounts Central Bank C CeBM CeBM TARGET2 Non - € RTGS CeBM = central bank money 19
- 20. 20 Bundesbank as provider of central bank money T2S Dedicated Cash Accounts (DCAs) funded byTARGET2 accounts Provision of intraday credit via auto-collateralisation Facilitates the settlement of underlying securities-related instructions that would fail due to lack of cash Triggered automatically whenever the buyer has insufficient funds to settle securities transactions Intraday credit provision is collateralised with securities… • …already held by the creditor (collateral-on-stock) • …through collateral-on-flow (through the eligible securities that are being purchased) Automated substitution functionality 20
- 21. 21 Enhanced liquidity and collateral management Focus of market participants has shifted from efficiency and savings in cross-border settlement Optimisation of liquidity management due to liquidity pooling and auto- collateralisation • Netting effects across all T2S markets • Liquidity buffers in various national markets become redundant • Auto-collateralisation across all T2S markets reduces liquidity needs Less collateral needed Optimisation of collateral management • Efficient mobilisation of collateral cross-border Right collateral at the right time at the right place 21
- 22. 22 Bundesbank‘s offer to Payment Banks In order to allow its payment banks to benefit from the T2S opportunities, Bundesbank offers its services to Payment Banks already since the go-live, although Clearsteam will only migrate in Wave 3 (September 2016). 1. Opening of DCAs • Liquidity pooling is possible since 22 June 2015. • In wave 1 in total 10 DCAs have been opened in the books of Bundesbank by 9 Payment Banks. 2. Auto-collateralisation • Provision via the „interim solution“ since 31 August 2015. • In wave 1 3 Payment Banks use auto-collateralisation via Bundesbank. 22
- 23. 23 Relation to central banks’ financial stability task CeBM = central bank money T2S is a very critical system for the European financial industry the functional design fosters financial stability s Settlement in risk free central bank money (real-time/batch) business continuity concept Shortened settlement chains 23
- 24. 2 1 3 4 Table of contents 5 T2S in operation T2S is live! Bundesbank’s role in T2S T2S harmonisation Programme plan 24
- 25. 25 one transaction many post trade standards high cost of cross- border operations T2S harmonisation 25
- 26. 26 3 reasons T2S community asks strongly for this: Harmonisation is the added value of theT2S project. Harmonisation supports the LeanT2S system specification. Keeps budget and time under control Part of the EU single market agenda (financial integration) T2S harmonisation 26
- 28. 2 1 3 4 Table of contents 5 T2S in operation T2S is live! Bundesbank’s role in T2S T2S harmonisation Programme plan 28
- 29. 29 T2S Programme Plan:Where do we come from? 22 June 2015 –T2S started operations Four CSDs of migration wave 1 started securities settlement inT2S together with their communities On 31 August 2015 the Italian CSD MonteTitoli successfully migrated toT2S In total 10 Central Banks provide liquidity for securities settlement inT2S Three further migration waves will follow until February 2017 MAIN PHASES 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Preparation Phase Specification Phase Software Development & Integration Testing Eurosystem Acceptance Testing User Testing Phase Phased Go-Live Jul 2006 Jul 2008 Jul 2008 Sep 2012 Apr 2009 Sep 2014 Jan 2017 22 June 2015 Feb 2017 ✰ Mar 2014 Mar 2014 Jun/Oct 2014 29
- 30. 30 T2S migration wavesT2S – A great deal of work has been done … © Nadine Knaust A major milestone was achieved with the successful go-live of wave 1 CSDs, NCBs and their communities Considerable efforts yet to make for everyone involved until spring 2017 to meet the coming challenges: operations, testing, another three migration waves … … but there is still some way to go: 30
- 31. wave1 •Bank of Greece Securities Settlement System (BOGS) •Depozitarul Central (Romania) •Malta Stock Exchange •SIX SIS (Switzerland) wave2 •Euroclear Belgium •Euroclear France •Euroclear Nederland •Interbolsa (Portugal) •National Bank of Belgium Securities Settlement Systems (NBB-SSS) wave3 •Clearstream Banking (Germany) •KELER (Hungary) •LuxCSD (Luxembourg) •Oesterreichische Kontrollbank (Austria) •VP Lux (Luxembourg) •VP Securities (Denmark) wave4 •Centrálny depozitár cenných papierov SR (CDCP) (Slovakia) •Eesti Väärtpaberikeskus (Estonia) •Euroclear Finland •Iberclear (Spain) •KDD - Centralna klirinško depotna družba (Slovenia) •Lietuvos centrinis vertybinių popierių depozitoriumas (Lithuania) •LCD - Latvijas Centralais depozitarijs (Latvia) 31 T2S migration waves • Monte Titoli (Italy) 31/08/2015 Next migration waves T2S migration waves Migration of Central Banks • Central banks migrate their transaction business along with their “home CSD”. • But: cash accounts for settlement in T2S opened as of wave 1 if needed by Payment Banks • Auto-collateralisation as from migration of “home CSD” or earlier via the „Interim Solution“ 31
- 32. 32 Client readiness dashboard Next migration waves Client readiness Dashboard 32
- 33. Eurosystem ready for user testing 1 Sept 2014 Ready to start connectivity set-up 1 Aug 2014 Bilateral inter- operability testing 1 Oct 2014 Multilateral inter- operability testing May 2015 Community testing Sep 2015 Migration to T2S 28 Mar 2016 33 Key milestones for wave 2 & 3 Multilateral inter- operability testing June 2015 Community testing Feb 2016 Migration to T2S 12 Sep 2016 Common for all waves Wave 2 Wave 3 33
- 34. 34 Further challenge for Bundesbank: preparation of the migration of wave 3 • The majority of the German market will migrate to T2S together with the German CSD Clearstream in September 2016 • Wave 3 participants are being prepared by the Bundesbank (as regards the cash side) and by Clearstream (as regards the securities side) to ensure their readiness for testing and migration Bundesbank offers general information sessions, dedicated workshops and individual support to its payment banks Information on previous information sessions and further information (e.g. registration, test cases) can be found under the following link: https://www.bundesbank.de/Navigation/DE/Aufgaben/Unbarer_Zahlungsverkehr/TARGET2_Securities/target2_securi ties.html • In wave 3 Bundesbank also migrates toT2S in its role as CSD participant The necessary adaptations of the internal systems and operational processes are well on track 34
- 35. 35 Thank you very much! 35