T2S Direct: The Swiss solution to an international challenge
The content of this presentation is prepared for general information purposes only and intended for the confidential use of the person addressed. SIX SIS Ltd. makes no guarantees, representations or warranties and accepts no responsibility or liability as to the accuracy or completeness of the presentation, and under no circumstances will it be liable for any loss or damage caused by reliance on any opinion, advice or statement made in this document. Information in this document is subject to change without notice. Copyright SIX SIS Ltd. Your contact for T2S: T2S-info@six-group.com 2
Topics T2S introduction s 4 6 Our T2S approach s 7 9 Our T2S service offering s 10 12 Our T2S connectivity, cash models & services s 13 20 Our T2S Community Testing for Migration Wave 1 s 21 25 3
About TARGET2-Securities TARGET2-Securities (T2S) is an EU harmonization initiative of the European Central Bank (ECB), owned and operated by the Eurosystem, with a close involvement of all relevant stakeholders in the governance framework. The objective of T2S is to harmonise post-trade processes for domestic and cross-border transactions by centralizing settlement on a single pan-european Settlement Platform and enable the settlement of securities in Central Bank Money (CeBM) EUR. The standardisation shall render cross-border settlement more efficient. Domestic CSDs will delocalize their settlement functions to the T2S platform, where final settlement will take place. While the settlement function will be commoditized, value added asset services will become a key differentiating factor. The implementation of T2S will significantly reshape the post-trade infrastructure in Europe, affecting a wide variety of market players. 4
C A S H S E T T L E M E N T C L E A R I N G T R A D I N G Today s Fragmented Post-Trading Environment SIX Swiss Exchange Deutsche Börse LUX S.E. EURONEXT FR BE NL PT LSE London S.E. Borsa Italiana (LSE) Wiener Börse (CEESEG) CSE (NASDAQ OMX) NASDAQ OMX Helsinki SIX x-clear Eurex Clearing LUX S.A. LCH Clearnet UK Ltd. Cassa di Comp. CCP.A EMCF SIX SIS Clearstream DE LUX Inter Bolsa PT FR BE Euroclear NL UK IRE Monte Titoli OeKB VP Securities Euroclear Finland Oy SIC TARGET2 TARGET2 CHAPS KRONOS Disclaimer: This is a simplified representation to serve the purpose of T2S. 5
Benefits of T2S Today s post-trading environment is highly fragmented across Europe. Post-trade harmonization is a key objective of T2S. T2S will introduce a single set of rules and standards and therefore reduce the complexity of the current market structure. By harmonizing areas of post-trade activities, T2S can reach its full potential and bring further benefits to European markets: Competition and business benefits: at present CSDs often operate in monopolistic national environments with ample room for increased competition. Safety benefits: in today's environment, reducing counterparty risk and risk on the settlement agent is an important approach. T2S will reduce this by only settling in Central Bank Money (CeBM) the safest settlement asset. Operational efficiency benefits: T2S is designed to make cross-border settlement as efficient as domestic settlement and therefore immediately increases the operational efficiency of its users. 6
T2S In line with our Swiss Value Chain Strategy For existing customers Provide seamless access to T2S markets and CeBM settlement Minimise both technical and operational impact for clients Develop existing high value-add service proposition further, above average service excellence, competitive pricing For new large Broker Dealers/Investment Banks/Wealth Managers Build on existing strengths and provide tailored T2S solutions to meet sophisticated client needs: T2S-connectivity models Cash & Securities account models Account Operator facilities Provide easy access to international collateral pools and Swiss National Bank s multi-currency Repo facilities 7
Leverage our integrated infrastructure to connect to T2S directly EUR settlement transactions in 21 T2S markets will be settled on the T2S platform in Central Bank Money Links to CSDs and sub-custodians to provide safekeeping and asset servicing in T2S markets T2S CSDs & Agents Non-T2S CSDs & Subcustodians Links to CSDs and subcustodians to provide settlement, safekeeping and asset servicing in non-t2s markets SIX SIS (SECOM) Client SIX SIS clients can settle transactions across the Swiss and T2S markets in Central Bank Money EUR and across other markets in Commercial Bank Money by using a single interface to SIX SIS. 8
Seamlessly access T2S markets and 66 markets globally Finland Estonia +7 Americas markets Denmark Lithuania Netherland Germany Belgium Luxembourg Slovakia France Austria Hungary Latvia 21 T2S markets +16 other European markets +15 Asia Pacific markets Italy Slovenia Romania Portugal Spain Greece Malta +7 MEA markets 9
What s in for you as a client? Services SIX SIS Direct, unintermediated access to T2S, reducing process complexity and costs Advanced cross-border asset servicing capabilities, with deep expertise in equities Unbundled services, sourced from various providers to your benefits and for greatest flexibility Registrar function Settlement in Central Bank Money Safekeeping Income payment Corporate Actions Tax processing Collateral management Securities lending for fail coverage Settlement in Commercial Bank Money Deposits / FX Credit lines Core CSD services Non-banking type of ancillary services Banking type of ancillary services 10
T2S Direct: A unique solution to match your priorities Our understanding of your priorities SIX Securities Services solution 1 Manage complexity through an integrated approach SIX Securities Services will provide a comprehensive solution for T2S, offering access to all T2S markets and the full breadth of services It will leverage the same technology and client interface as today, limiting any impact on clients 2 Reduce costs through direct access In contrast to custodian banks, SIX Securities Services will have direct, unintermediated access to the T2S platform Pricing of settlement will be more competitive than custodian banks thanks to the elimination of a cost layer 3 4 5 Benefit from best-in-class asset servicing through advance capabilities Pool securities into single place Effectively manage cash SIX Securities Services will offer the full breadth of asset servicing, using inhouse capabilities and 3 rd parties when required Offer will be priced and delivered unbundled, allowing clients to optimally manage costs and quality As a single point of access to T2S markets, SIX Securities Services will allow the pooling of securities across T2S markets Tri-party collateral management functionality will enable optimal use of assets as a collateral SIX SIS Ltd, the legal vehicle of SIX Securities Services, is incorporated as a bank and able to provide banking services Clients will be able to pool their cash into a single account 11
Our differentiator: advanced asset servicing out of one system in a unique infrastructure environment Minimising operational risks, complexity and costs We have long developed numerous ways to help our clients to control their daily business using our scores of Web Services such as CAES (Corporate Action Enhanced System) or CONNEXOR Reporting. We offer full range of boundless reporting possibilities. a a High Quality Information Experience We cross check our various market providers accurately and guarantee best available information in a timely as well as in a complete manner to our clients. a Best-of-Breed Services We are proud to offer highest operational flexibility on customer requirements, for instance we provide instruction deadline which are closely aligned to those of market closure. More benefits include an automatic reminder service for uninstructed balances, active default management or enriched data notifications. a As sole CSD we are able to supply advanced Asset Services for 65 international markets as of today. We operate professionally and are committed to provide you with our best expertise. 12
Tailored solutions for SIX SIS clients T2S connectivity models 2 Models Indirect Connected Participant (ICP) Direct Connected Participant (DCP) Safekeeping account model 1 Model T2S Participant Account with new Position Type (TS) in SECOM Cash account models 3 Models SIX SIS Cash Model (SCM) Payment Bank Cash Model (PCM) National Central Bank Cash Model (NCM) Account operator model Tailored Service range as fits Agent(s) of your choice per market SIX SIS tailored account set-up for T2S 13
T2S Connectivity Models 1 T2S access as Indirectly Connected Participant (ICP connectivity) Settlement Safekeeping SIX SIS Client ISO 15022 SIX SIS ISO 20022 Issuer CSD Asset servicing 2 T2S access as Directly Connected Participant (DCP connectivity) SIX SIS Client SWIFT ISO 20022 SIX SIS Issuer CSD Settlement Safekeeping Asset servicing 14
SIX SIS s Tailored Account Operator Model 3 T2S Direct access as Account Operator SWIFT ISO 20022 Settlement Safekeeping SIX SIS Client ISO 15022 SIX SIS Agent Issuer CSD Asset servicing Tailored = accommodating to your needs and priorities T2S connectivity models: ICP or DCP Cash account models: choice between 3 cash models Account Operator facilities: by market, with the agent(s) of your choice 15
T2S account structure overview Safekeeping and Cash Accounts SETTLING WITHOUT BORDERS Securities EUR - CeBM EUR - CeBM SIX SIS CSD b CSD c Participant acc. CSD Nostro acc. Participant acc. CSD b Nostro acc. Participant acc. CSD c Nostro acc. T2S Settlement Engine DCA of SIX SIS sponsored by SECB DCA of Bank b DCA of Bank c PM acc. of SECB PM acc. of Bank b PM acc. of Bank c BUBA NCB b NCB c DKK etc. Settlement Instructions RTGS acc. of Bank c Participant acc.: T2S Participant account CeBM: Central Bank Money DCA: Dedicated Cash Account SECB: Swiss Euro Clearing Bank BUBA: Deutsche Bundesbank NCB: National Central Bank 16
T2S Safekeeping Account Model Clients maintain same Participant Account in T2S for the Issuer and the Investor Business SIX SIS - SECOM Client a Client b Client c Ordinary Vostro Acc. Client a Repo A/c TCM A/c SIX SIS Client a Client b Client c Participant Acc. T2S CSD Client b Lending A/c COSI A/c Repo A/c SIX SIS CM Omnibus Account Mirror A/c SIX SIS Omnibus A/c Technical Nostro A/c 17
T2S Safekeeping Account Model Model description SIX SIS will open and operate segregated Participant Account(s) in the name of the client in T2S. New T2S services will be recorded at the Participant Account level as per client s instructions. Transactions that have settled in T2S (Issuer & Investor CSD business) will be booked in the T2S Participant account and reflected with a new position type TS in SECOM (Ordinary Account). TS positions may require re-alignment: For Issuer CSD business, we offer auto-realignment services for settlement (APRS) and collateral (APRC). For Investor CSD business, we offer APRC services 18
Your Cash Account Models for T2S 1 SCM SIX SIS - Cash Model ICP Clients use the DCA of SIX SIS (sponsored by SECB - Swiss Euro Clearing Bank) Participant Accounts are linked to the DCA of SIX SIS in T2S 2 PCM Payment Bank - Cash Model Clients use the DCA of a Payment Bank (PB) SIX SIS links the clients Participant Account to the DCA of the PB 3 NCM National Central Bank - Cash Model Clients use own DCA in T2S (linked to own T2 cash account at the National Central Bank SIX SIS links the clients Participant Account to the clients DCA 19
Client s Participant Account(s) Your choice of T2S Connectivity, Cash Models & Services T2S Connectivity Cash Model Securities Model SIX Securities Services Service Range SCM Registrar function Settlement in Central Bank Money Safekeeping ICP PCM Income payment Corporate Actions Tax processing NCM Collateral management Securities lending for fail coverage DCP PCM NCM Settlement in Commercial Bank Money Deposits / FX Credit lines 20
T2S Testing Activities for Migration Wave 1 Testing in migration wave 1 Start End SIX SIS internal testing May 14 Jul 14 T2S Pilot Testing Jul 14 Sep 14 Bilateral Interoperability Testing (UAT) Oct 14 Dec 14 Migration Testing Oct 14 Jan 15 Multilateral Interoperability Testing Jan 15 Mar 15 Community Testing 05 Mar 15 15 May 15 Business Day Testing 18 May 15 12 Jun 15 21
Timeline for T2S testing activities for MW 1 Formal sign-off required 2015 Jan Feb Mar Apr May Jun SIX SIS functionality testing Feb. 2015 15.05.15 Community Testing 05.03.15 15.05.15 Business Day Testing 18.05.15 12.06.15 Sign-off T2S Go-Live MW 1 22
T2S Community Testing for MW1 Preparation and execution Factsheet: Community Testing (MW1) Date 05 March 15 May 2015 Test cases for Settlement Corporate event execution plan Publication of test data Sign-off Approximately 25 test cases related to In-CSD settlement, matching, additional and optional matching parameters, linked settlement, cancellation, hold and release functionality, PTFs, etc. SIX SIS will carry out execution of published Corporate Actions (CA). Clients are requested to monitor their subsequent business flows resulting out of these cases Test Data as well as Sign-off form is published on the SIX SIS Private Website > T2S > T2S Testing & Migration SPOC to send Community Testing Sign-off Form to SIX SIS Relationship Manager by 15 May 2015, at the latest 23
T2S Community Testing for MW1 Testing requires preparation well in advanced Preparatory tasks Deadlines A Counterparty instruction coordination Clients coordinate with the counterparty of their choice Start of testing B Testing data set-up Account Set-Up Form (ASF) data will be considered in community testing environment End January 2015 C BICs In the Community Testing, Test BICs are used for communication and Production BICs are used for party identification in the message instructions 24
MW 1 SIX SIS test support SIX SIS will support clients before and during the test phase General Support Test Support Contact us on T2S-Info@six-group.com A dedicated Test Support Team will assist clients while performing the Community and Business Day testing activities. Contact us on T2SCommunityTest@six-group.com T +41 58 399 39 91 25
Solutions for the future. Now. The content of this presentation is prepared for general information purposes only and intended for the confidential use of the person addressed. SIX SIS Ltd. makes no guarantees, representations or warranties and accepts no responsibility or liability as to the accuracy or completeness of the presentation, and under no circumstances will it be liable for any loss or damage caused by reliance on any opinion, advice or statement made in this document. Information in this document is subject to change without notice. Copyright SIX SIS Ltd.