ECSDA Status Report on Matching Harmonisation

Transcription

1 18 November 2013 ECSDA Status Report on Matching Harmonisation This report provides an update on the state of implementation of the ESSF-ECSDA matching standards by CSDs as at 1 September These market standards, adopted by the European Securities Services Forum (ESSF, now AFME), and the European Central Securities Depositories Association (ECSDA) in October 2006, aim to harmonise and standardise matching processes in Europe, thereby supporting more efficient matching and settlement of securities transactions. Executive Summary Overall, compliance with the matching standards is high among the 29 respondent (I)CSDs 1. Although the degree of implementation varies across standards and across markets, the compliance rate has improved steadily since the last three surveys in 2008, 2010 and The average compliance rate in September 2013 across all markets was 82%, compared with 74% in Looking at the 8 major markets 2, compliance now reaches 91%. 5 out of 29 CSDs are 100% compliant, 3 standards are fully implemented in all markets. There are no longer any standards with a compliance rate below 50%, and only 4 standards show a compliance rate below 60%. The remaining gaps in implementation are primarily due to a lack of local market demand, regulatory obstacles, technical limitations of CSDs IT systems and the implementation of other priority projects. CSDs which intend to participate in TARGET2-Securities and continue to allow for matching to take place in the CSD (rather than in T2S) plan to be fully compliant with the matching standards by the time T2S is operational. 1 The survey includes the same 29 respondents as in June 2012 report, see: 2 CH, DE, ES, FR, IT, UK, and the 2 ICSDs: BE (EB) and LU.

2 1. Overview of progress since the last survey in 2012 Among the respondent CSDs, five have improved their compliance with the matching standards since last year: Monte Titoli and KDPW have implemented a full hold-and-release (H/R) mechanism and are thus now compliant with Standard 9, while CDCP SR has started to implement some features of an H/R mechanism (possibility to put an instruction on hold); Monte Titoli also highlighted the H/R fields in its graphical user interface (GUI) and user documentation, including detailed explanations on how the indicators work, thus complying with Standard 13; CSDL now allows for the amendment of non-matching fields and is thus compliant with Standard 11; In MKK, unmatched instructions are now retained at least for 20 days, in accordance with Standard 5, and there is no autocancellation of matched instructions, in accordance with Standard 6; CDCP SR and MKK are now compliant with Standard 15 on query flexibility, which allows participants to select the frequency and format of electronic matching status information. Standard 2 on the possibility to send only one matching instruction, Standard 8 on the separation of matching from provisioning, and Standard 10 on the acceptance and matching of STP instructions in the CSD are all fully implemented in all the markets surveyed. Furthermore, seven standards are now close to full implementation (compliance rate of 90% or higher): Standard 1 on the list of mandatory matching fields, Standard 3 on real-time matching, Standard 7 stating that matching instructions should only become locked-in at the time of the start of the settlement process, Standard 12 on the identification and display of matching fields, Standard 14a on matching status information, Standard 15 on query flexibility and Standard 16 on the availability of matching standards, attributes and data for counterparty trade allegements. All remaining standards but three show a high level of compliance with an implementation rate of 70% or more. The three standards which show the lowest level of compliance are Standards 5, 9 and 13: Standard 5 on the retention of unmatched instructions for more than 20 days improved from 38% in 2010 to 52% in 2012 and 55% in 2013; Standard 9 on the availability of a fully-fledged hold-and-release mechanism for market participants is divided into three sub-standards. Compliance with the first sub-standard on the possibility to instruct in hold status and to release later is relatively high (at 69%), whereas only 55% of the respondent CSDs comply with the two other sub-standards which allow for the opposite, i.e. the possibility to put on hold previously released transactions, including failed transactions. 2

3 Standard 13 requires CSDs to display trade attributes that assist the delivery management process such as H/R mechanisms in a standardised format in their GUI (graphical user interface), distinguishable from matching field information. 59% of CSDs comply with this requirement, which is in fact closely related to standard 9. Availability of a hold-and-release mechanism In Italy, the H/R mechanism was introduced in September 2013 and currently only applies to OTC trades. Markets may make use of the facility upon request. In Poland, KDPW implemented system changes in April 2012 which now allow instructions to be put on hold following a previous release and after a settlement fail, in line with Standards 9b and 9c. CSD participants however have hardly made use of the facility since it was implemented. In some markets (AT, BE, DK, FR, NL), CSD participants can release on-hold instructions for settlement, but the reverse (putting a released transaction on hold) is not possible. Although the ESES CSDs do not offer a full H/R mechanism, a similar functionality is available through a pre-matching facility in the settlement platform. This mechanism is used by custodians to ensure that the underlying internal client has the required securities or cash provision before committing to settle. By using this mechanism, a custodian can prevent a matched instruction from settling, even if the settlement date is reached and even if it has all resources required for settlement in its account. Chart. Overall increase in the compliance rate for all Matching Standards since

4 2. Remaining obstacles to the full implementation of the Standards There are different reasons why certain standards are not yet fully implemented by CSDs in their respective markets. Some of these reasons are country- or CSD-specific, while others are more general. The main explanations given by CSDs for the remaining gaps in implementation are: (1) Lack of market demand In most cases, the functionalities required by the Matching Standards have not yet been developed due to a lack of domestic demand from market users for such functionalities. This is for example the case for Standard 0 (allowing users to prevent the dumping of shares in their accounts by requiring FoP matching) in Denmark and Norway, for Standard 6 (at least as regards on-exchange transactions) in Sweden, and for Standards 9b and 9c in Austria, Norway, Slovenia, Slovakia, Romania, Lithuania and Turkey. (2) Legal obstacles A few CSDs also mention that the domestic regulatory framework does not always allow them to implement all the standards. In Greece and Cyprus, the non-implementation of Standards 5, 6 and 17 is due to legal prohibitions. Indeed, the exchange legislation and clearing regulation specify that transactions should be settled in full by the end of the settlement period (T+3) and thus require that all unsettled trades past their intended settlement date should be purged. In fact, both CSD systems are parameterised to allow recycling for a given period and for using a given tolerance amount, but due to the legal restrictions, the parameters are currently set to 0. (3) Technical obstacles The limitations of CSDs' IT systems are sometimes an obstacle to the full implementation of the standards. This is for example the case with Standard 3 on real-time matching in Greece and Cyprus. CSDs working to implement a new IT system often wait until such system is in place before developing the necessary functionalities for the implementation of the matching standards. In Latvia for example, LCD plans to achieve full compliance with the Matching Standards with the launch of its new X-stream platform in CSD Prague targets end of 2013 for full implementation. In Turkey, MKK notes that the lack of technical capabilities of some CSD participants (e.g. participants not equipped to deal with SWIFT) can also constitute an obstacle towards implementing some of the standards. Given the limited resources at their disposal, CSDs also have to prioritise different projects. In Spain, Iberclear is adapting its system following a major reform of the domestic clearing, settlement and registry framework, and plans to implement Standards 5 and 9 as part of these changes. 4

5 (4) Inclusion of the matching standards in the T2S implementation plans CSDs which intend to participate in the TARGET2-Securities project of the Eurosystem and continue to allow for matching to take place in the CSD (rather than in T2S) plan to be fully compliant with the Matching Standards by the time T2S is operational 3. In some cases, the scale of the technical developments required means that CSDs will only implement the necessary functionalities as part of their T2S implementation plan. The introduction of an H/R mechanism in particular is scheduled for implementation prior to T2S by the CSDs in Austria, Lithuania, Romania, Slovenia and Slovakia, among others. (5) Standards flagged not applicable In some cases, respondent CSDs have indicated that individual standards are not applicable (N/A in the Appendix table), rather than not implemented. This can be due to a variety of reasons: In Italy, the CSD does not fully comply with Standard 14b but participants may obtain the list of any transaction status updates (including timestamps) from Monte Titoli. In Poland, KDPW does not offer a system GUI to its participants since the latter have their own proprietary GUIs, which is why Standards 12 and 13 are marked N/A. In practice, it is up to KDPW s participants if they want to configure their interfaces to highlight the matching fields and H/R fields. In Turkey, although the system of MKK would technically allow for an H/R mechanism as prescribed by Standard 9, the relevant ISO codes are not used by participants. Standards 9a, b and c as well as the related standard 13 are thus flagged N/A. 3. Matching tolerance threshold Standard 17 recommends a tolerance amount of EUR 25 (or approximate counter value in another currency) although for retail-size transactions (below EUR 100,000), CSDs can introduce a lower tolerance amount of EUR 2. In practice, 9 CSDs have a EUR 25 threshold in place, 12 CSDs use a lower amount, and 8 CSDs have EUR 0 tolerance. Sometimes in the latter case (e.g. Estonian CSD), the CSD offers the matching tolerance functionality in its settlement system but the amount is set at 0 at the request of participants. Only 5 CSDs apply a different threshold for retail-size transactions: CSD Prague (CZK 50 instead of CZK 600), Euroclear Finland (EUR 2 instead of EUR 25), KDPW (PLN 8 instead of PLN 100), KDD (EUR 2 instead of EUR 25) and Euroclear UK and Ireland (GBP 0 instead of GBP 10 since members can opt out of matching tolerance for retail transactions). 3 T2S is expected to be fully compliant with the ESSF-ECSDA Matching Standards. 5

6 Appendix: State of implementation of the matching standards in the 29 respondent (I)CSDs S0 S1 S2 S3 S5 S6 S7 S8 S9a S9b S9c S10 S11 S12 S13 S14a S14b S15 S16 AT Y Y Y Y N N Y Y Y N N Y N Y N Y Y Y Y 68% BE (EB) Y Y Y Y Y Y Y Y N N N Y Y Y N Y Y Y Y 79% BE* N Y Y Y N Y Y Y Y N N Y Y Y Y Y Y Y Y 79% BG Y Y Y N Y Y N Y N N Y Y Y Y Y N N N Y 63% CH Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 100% CY Y Y Y N N N Y Y Y Y Y Y Y Y Y Y Y Y Y 84% CZ Y Y Y Y N Y Y Y Y Y Y Y Y N N Y N Y Y 79% DE Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 100% DK N Y Y Y Y Y N Y Y N N Y N Y N Y Y Y Y 68% EE Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 100% ES Y Y Y Y N Y Y Y Y Y N Y Y Y Y Y Y Y Y 89% FI Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y 95% FR* N Y Y Y N Y Y Y Y N N Y Y Y Y Y Y Y Y 79% GR Y Y Y N N N Y Y Y Y Y Y Y Y Y Y Y Y Y 84% HU Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y 95% IT Y Y Y Y N Y N Y Y Y Y Y Y Y Y Y N/A Y Y 84% LT Y Y Y Y N Y Y Y N N N Y Y Y N Y Y Y Y 74% LU Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y 95% LV Y Y Y Y N Y Y Y N N N Y N Y N N N Y Y 58% NL* N Y Y Y N Y Y Y Y N N Y Y Y Y Y Y Y Y 79% NO N Y Y Y Y Y Y Y N N N Y N Y N Y Y Y Y 68% PL Y Y Y Y Y Y Y Y Y Y Y Y Y N/A N/A Y Y Y Y 89% PT Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 100% RO Y Y Y Y N N Y Y N N N Y N Y N Y Y Y N 58% SE Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y 95% SI Y Y Y Y Y Y Y Y N N N Y N Y N Y Y Y Y 74% SK Y N Y Y N Y N Y N Y N Y Y N N Y N Y N 53% TR Y Y Y Y Y Y Y Y N/A N/A N/A Y Y Y N/A Y Y Y Y 79% UK Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 100% 83% 97% 100% 90% 55% 79% 90% 100% 69% 55% 55% 100% 72% 90% 59% 93% 83% 97% 93% * The three Euroclear CSDs on the ESES Platform (BE, FR, NL) have identical rules for matching. 6

7 S17 Retail threshold AT 25 EUR n/a BE (EB) 25 EUR n/a BE 2 EUR n/a BG 0 EUR n/a CH 25 EUR (40 CHF) n/a CY 0 EUR n/a CZ 25 EUR (600 CZK) 50 CZK DE 25 EUR n/a DK 15 EUR (100 DKK) n/a EE 0 EUR n/a ES 10 EUR n/a FI 25 EUR 2 EUR FR 2 EUR n/a GR 0 EUR n/a HU 17 EUR (5000 HUF) n/a IT 5 EUR n/a LT 0 EUR n/a LU 16 EUR (25 USD) n/a LV 0 EUR n/a NL 2 EUR n/a NO 6 EUR (50 NOK)** n/a** PL 25 EUR (100 PLN) 8 PLN PT 25 EUR n/a RO 0 EUR n/a SE 5 EUR (50 SEK) n/a SI 25 EUR 2 EUR SK 0 EUR n/a TR 5 EUR (10 TRY) n/a UK, IE 15 EUR (10 GBP) 0 EUR List of matching standards: S0: Scope: FoP matching S1: Matching fields S2: One instruction only possible S3: Real-time S5: Unmatched retention > 20 days S6: No autocancellation of matched S7: Locked-in at start of settlement only? S8: Matching separate from provisioning S9a: Status Transition H->R possible? S9b: Status Transition R->H possible? S9c: Status transition R->H after fail possible? S10: Acceptance and matching of instructions STP in the CSD S11: Amendment of non-matching fields S12: Matching fields highlighted in GUI S13: H/R fields highlighted in GUI S14a: Actual status query S14b: Previous status query S15: Query flexibility S16: Matching data in allegements S17: Matching tolerance in EUR For a more detailed description of the individual standards, please check the ECSDA website at: or contact Soraya Belghazi, Secretary General, at soraya.belghazi@ecsda.eu List of the 29 respondent (I)CSDs: AT Austria OeKB BE (EB) Belgium Euroclear Bank BE Belgium Euroclear Belgium BG Bulgaria CDAD CH Switzerland SIX SIS CY Cyprus Cyprus Stock Exchange CZ Czech Republic CSD Prague DE Germany Clearstream Banking AG DK Denmark VP Securities EE Estonia Estonian CSD ES Spain Iberclear FI Finland Euroclear Finland FR France Euroclear France GR Greece HELEX HU Hungary KELER IT Italy Monte Titoli LT Lithuania CSDL LU Luxembourg Clearstream Banking SA LV Latvia Latvian Central Depository NL Netherlands Euroclear Nederland NO Norway VPS PL Poland KDPW PT Portugal Interbolsa RO Romania Depozitarul Central SE Sweden Euroclear Sweden SI Slovenia KDD SK Slovak Republic CDCP SR TR Turkey MKK UK UK Euroclear UK & Ireland **0.1 NOK for cleared transactions and 50 NOK for OTC transactions. 7