T2S OnLine. T2S PROGRAMME REVIEW No 15, April 2013 EDITORIAL

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1 1 T2S OnLine T2S PROGRAMME REVIEW No 15, April 2013 EDITORIAL NEWS FROM THE T2S PROJECT FOUR INSIGHT ARTICLES

2 T2S OnLine I No 15, April Jean-Michel Godeffroy EDITORIAL In a little over a year from now, the central securities depositories (CSDs) in the first migration wave will be able to begin the preliminary testing ( pilot testing ) of the T2S system. To meet this deadline, the 4CB (Deutsche Bundesbank, Banco de España, Banque de France and Banca d Italia) are working hard on both development and internal testing, and major progress has been made. The core functions of the T2S software are now fully developed. So, what remains to be done? The T2S non core functions, such as those concerning billing and short-term statistical information, are currently under development, and the change requests that have recently been approved still need to be implemented. Marc Bayle will elaborate on the progress of the project in the next article. Since last November, when the previous issue of T2S OnLine was published, the migration plan has been reviewed. CSDs will be connecting to T2S in four migration waves. The new plan, as well as the reasons for changing the previous agreement, is explained later in this issue by Ignacio Terol, the new Head of the T2S External Stakeholder Management Section (replacing Helmut Wacket, who became Head of the Oversight Division in another area of the ECB). Between now and when T2S goes live in 2015, time will pass quickly and the T2S Community will be busy testing the system and adapting internal processes to business strategies. The extent to which the T2S Community will reap the benefits of having a Europe-wide system largely depends on the degree of harmonisation that we manage to achieve within the next two years. The T2S Community has not only committed to delivering a pan-european platform, but also to reaching a number of concrete harmonisation goals. The T2S Advisory Group is achieving a great deal in this respect. In my view, the winning factor in the current T2S harmonisation strategy is the constant engagement of all stakeholders and the application of a transparent monitoring methodology that has been agreed upon with the market itself. Change is being driven by the prospect of the new business opportunities that can only be generated by a fully harmonised T2S environment. A further catalyst for change is the peer pressure created by the fact that the Advisory Group will regularly publish an assessment of the compliance status of each T2S market for each harmonisation activity. This approach has driven real change so far, and we are committed to pursuing it further. The results of the T2S related harmonisation work conducted so far are summarised in the Third T2S Harmonisation Progress Report, presented in the article by T2S team member George Kalogeropoulos. The report was also a topic of discussion at the conference on Post-trade harmonisation and financial integration in Europe, which took place here in Frankfurt on 19 March. The event was jointly organised by the ECB and the European Commission to associate all EU and national stakeholders that are and will be involved in the significant changes brought about by the current post-trade harmonisation initiatives. The conference confirmed that post-trade harmonisation is an essential component of financial integration. An account of the conference highlights is provided by T2S team member Elin Amundsen later in this issue.

3 T2S OnLine I No 15, April EDITORIAL During the conference, it also emerged that it is increasingly important to ensure that the results of the T2S harmonisation work are complemented by the implementation of the CSD Regulation. The ECB and the European Commission share exactly the same view T2S and the CSD Regulation go hand in hand, and Europe will miss an important opportunity for market integration if the two do not fall into place in a coordinated manner, supporting each other in making settlement safer, more efficient and more competitive. This was a key message that came out of the interviews (published in the Insight section) held during the conference with the two delegates from the European Commission: Emil Paulis, Director of Internal Markets and Services, and Patrick Pearson, Head of the Financial Markets Infrastructure Unit. Back to delivering T2S. At this point in time, the main focus of the project is to deliver the platform according to plan and in line with market expectations. At the same time, keeping fees as low as possible, despite the sharp reduction in settlement volumes because of the crisis, remains a very important objective for us. In order to avoid increasing the T2S settlement fee or to keep a possible increase minimal, the T2S Board is currently exploring possible ways of increasing T2S revenues by attracting new settlement volumes. One way to do this would be through European markets that have not yet expressed their intention to join T2S. Another way would be through new asset classes, such as Eurobonds, which were not included in our initial calculations. Several CSDs have indicated that they are ready to settle such assets in T2S if their clients request this service. More daring ideas can also be explored. I recently spoke at an event organised by the Bank of Japan in Tokyo, and it struck me that the Japanese market showed a keen interest in T2S, regarding it as an opportunity to settle Japanese government bonds in Europe more easily than is possible today. Moreover, CSDs participating in T2S could offer non-european issuers and investors a service that is not available anywhere else today integrated cross-border delivery-versus-payment settlement in central bank money, at the regional or global level. These are just embryonic thoughts which I would like to discuss within the T2S Community. I hope you enjoy reading this issue of T2S OnLine. The next edition is due to be published in July. Jean-Michel Godeffroy Chairman of the T2S Board

4 T2S OnLine I No 15, April Marc Bayle T2S Programme Manager NEWS FROM THE T2S PROJECT Considerable progress has been made in many areas of the T2S project since the last edition. We have worked in close cooperation with all stakeholders on complex issues such as the migration plan, and we have started preparations for the next big step for the T2S Community: testing. Tests are already ongoing at the 4CB; Eurosystem internal acceptance testing is due to start in the spring of next year; pilot testing is planned to be launched in July 2014; and testing with the market will begin in October It is with these milestones in mind that we are working at a fast pace together with CSDs and national central banks. Here is an overview of the T2S news since November Status of software development The development of the T2S core functions by the 4CB is now largely complete. It is foreseen that the non-core functions (legal archiving, short-term statistical information, billing, operational services) will be completed by the third quarter of Development related to the recently approved change requests (see below) will be completed before the start of user testing. Change requests (CRs) Regarding the 34 CRs that were raised by CSDs as a result of their detailed feasibility assessments, the T2S Board has maintained a strict approach, considering only those CRs that are indispensable for the go-live of T2S. This is because the priority now is to remain on track, given that the T2S application has already been developed and internal testing is nearing completion. Overall, the CRs resulting from the feasibility assessment process have been resolved successfully, without affecting the project plan. In this context, the T2S Board approved the following CRs: CR 348-SYS (Allow instructions from CSDs on/after maturity date); CR 356 (Pagination for messages exceeding the maximum volume of 32MB); CR 389-SYS (Provision of reference to identify instructions matched in T2S and identification of origin of Conditional Securities Delivery-generated blockings), i.e. a simplified version of CR 351; CR 372-SYS (Issue accounts in the name of entities other than CSDs). Discussions are still underway with regard to the CR 390-SYS (System configuration for rule-based models), i.e. the lighter version of CR 364-SYS (Limitation of the number of rules). These CRs concern the number of market-specific attributes that can be used by CSDs to set restriction rules for settlement instructions in T2S. They are the most controversial CRs and have been the subject of extensive discussions with CSDs, not only on account of their possible impact on the project plan but also because of the concerns they raise from a harmonisation perspective. In addition, the T2S Board approved a number of additional CRs for which the Change Review Group recommended approval. The T2S Advisory Group and the CSD Steering Group were also consulted, and they supported the Change Review Group s recommendation. Some of these CRs are related to data migration tools (DMTs),

5 T2S OnLine I No 15, April NEWS FROM THE T2S PROJECT namely: CR 385-SYS (Migration of reserved, blocked and earmarked positions via DMTs), CR 386-SYS (Migration of pending instructions via DMTs), and CR 396-SYS (Clarification on the baseline version (version 0.6) of the Data Migration Tool Requirements and Related Procedures). The others result from the ongoing testing activities: CR 392-SYS (Addition of the cancellation status to the reports of pending instructions semt.018 and semt.034), CR 393-SYS (Complement to the billing service items list), and CR 395-SYS (Modification of the sese.032 to add information on the CSD Validation Hold code and to remove the CSD Hold code). All of these CRs, as well as those mentioned above, will be implemented before the start of the user testing phase. Detailed information on the status of CRs is available on the T2S website (see the page dedicated to the Change Review Group). The T2S Programme Plan: Synchronisation Point 3 (SP3) The next Synchronisation Point foreseen in the T2S Programme Plan is SP3, i.e. the confirmation that mutual agreement on the Programme Plan has been reached by the Eurosystem and the CSDs after consideration of the issues raised in the CSD/central bank feasibility assessments. Such issues include those relating to migration, change requests and user testing. In order to take into consideration the final decisions in all these areas, SP3 was postponed from December 2012 to end-april 2013, with the option of postponing it one more month until the end of May This option has now been activated, so as to enable all CSDs to take stock of the final outcome of CR 364/390 (Limitation of the number of rules). The new SP3 definition has no impact on the T2S Programme Plan in general and has no consequences for the subsequent Synchronisation Points. New migration plan As announced in the last issue of T2S OnLine, in November 2012 the Governing Council of the ECB approved a CSD migration plan comprising three waves. However, the plan meant that 85% of T2S volumes would be migrating within the last six months of the migration period. Hence, discussions with CSDs continued in order to find a more balanced distribution of CSDs across waves. The discussions resulted in a new migration plan, which was approved by the Governing Council in March The new plan, comprising four waves, makes the whole migration process safer, and accommodates the CSDs request to expand the intervals between migration waves. While the first wave remains set for June 2015, waves 2 and 3 have been brought forward to March 2016 and September 2016 respectively (instead of July 2016 and November 2016, as foreseen in the initial agreement). A fourth wave has been introduced, which is scheduled for February A detailed presentation of the new migration plan and its implications can be found in one of the Insights in this issue of T2S OnLine. Technical and functional documentation On 14 December 2012, version 1.0 of the T2S User Handbook was published in the Key documents section of the T2S website. The document describes all screens accessible via the T2S Graphical User Interface and includes step-by-step instructions for a large number of typical user workflows, or business cases. The document was reviewed by the market during the first quarter of Written feedback will be taken into account for version 2.0 of the handbook.

6 T2S OnLine I No 15, April NEWS FROM THE T2S PROJECT Connectivity: Dedicated Link solution In March 2013, the Governing Council of the ECB approved the legal provisions to be established between the Eurosystem and those directly connected T2S actors that decide to make use of the Dedicated Link solution in T2S. The legal arrangement has now been offered to potential counterparties. It is available in the Key documents section of the T2S website. Any directly connected actors choosing this option will be requested to inform the Eurosystem by the end of June 2013, so as to allow for the implementation of the Dedicated Link solution before the start of the Eurosystem s pilot testing. Harmonisation The prominence given to T2S-related harmonisation in this issue of T2S OnLine testifies to the importance of the progress made in this field. In a nutshell, the Third T2S Harmonisation Progress Report, approved by the Advisory Group on 28 February, was published on 13 March and presented at the joint ECB-European Commission conference on post-trade harmonisation and financial integration, which was held in Frankfurt on 19 March. For all details, please see the Insight section. Work on harmonisation has further proceeded after the publication of the Report. The Harmonisation Steering Group has launched the monitoring process related to three more activities in the field of T2S messages, following the final recommendations of the Task Force on adaptation to cross-csd settlement in T2S, or TFAX (Interaction with T2S for registration procedures, for tax information requirements and for CSD ancillary services). Two additional monitoring surveys are scheduled for May They aim at measuring T2S markets compliance with the endorsed standard on securities and cash accounts numbering in T2S. First results on all five activities are expected in June It was also decided to set up a new sub-structure of the Harmonisation Steering Group that should be mandated to deal with harmonisation issues around the market s adaptation to T2S (T2S Cross-border market practice sub-group- XMAP). Similarly to the TFAX, the group will bring together experts from various markets and represent different participants (e.g. CSDs, banks, custodians, CCPs), thus ensuring a balanced representation of multiple viewpoints and a comprehensive knowledge base. Finally, the T2S Programme office is closely monitoring the progress at EU level as regards the adoption of the CSD Regulation. As stated in the ECB Opinion dated 1 August 2012, the Governing Council of the ECB supports a timely implementation of the CSDR and the related technical standards prior to the launch of T2S.

7 T2S OnLine I No 15, April George Kalogeropoulos T2S Programme Office THIRD T2S HARMONISATION PROGRESS REPORT - A TALE OF HORSES, CARTS, WHYS AND HOWS In the early days of the T2S project, the work on harmonisation was often characterised as the weak link in the chain. The Eurosystem has put the cart before the horse, critics used to tell us. It is true that it sounds intuitive to begin by creating the single rulebook for post trade activities, and only then to launch a European settlement engine. However, had we followed this path, the T2S project would not have taken off. So the Eurosystem argued in favour of what some regarded as the cart first model, through which launching the European settlement engine project would create the incentives and momentum necessary for removing barriers at the national level. This is the angle from which to assess the T2S harmonisation work and the Third T2S Harmonisation Progress Report. It was published by the T2S Advisory Group (AG) on 13 March, ahead of the conference on Post-trade harmonisation and financial integration in Europe, jointly organised by the ECB and the European Commission. The key question is this: has the T2S project created the necessary momentum for removing at least some of the barriers to harmonisation? From the perspective of the harmonisation team within the T2S Programme Office at the ECB, the answer is yes, and I will try to explain why. When the AG, with the help of the Harmonisation Steering Group (HSG), published the first two harmonisation progress reports (in July 2011 and January 2012), the focus was on building consensus on establishing the key harmonisation topics for the T2S Community. Some T2S stakeholders spoke out strongly about the need for harmonisation. Others, mainly national market stakeholders, had serious reservations concerning what could actually be changed, especially on the regulatory and legislative fronts. I remember that the most frequent question we were asked during that period was: is it mandatory for us to follow the harmonisation standards? In 2012, while preparing the Third T2S Harmonisation Progress Report, the AG decided to follow the motto of the HSG be modest and bold. Modest in the sense of establishing what can realistically be achieved with the help of the T2S Community, and bold in the sense of being transparent about the compliance of T2S markets with the endorsed standards. This strategy yielded good results, as can be seen in the findings of the Report (available on the T2S website in the Harmonisation section). Defining standards. Considerable progress has been made with regard to defining and endorsing harmonisation standards. The T2S Community has now agreed on the standards for 15 of the 26 harmonisation activities. This covers 68% of the high priority activities (compared with 50% at the time of the second report). It is important to note that, for six important harmonisation activities, defining standards depends on the timely adoption of certain EU legislative initiatives, in particular the CSD Regulation and the Securities Law Legislation.

8 T2S OnLine I No 15, April THIRD T2S HARMONISATION PROGRESS REPORT Monitoring compliance. All T2S markets are now monitored, so their compliance with the standards concerning the harmonisation activities can be assessed. Considerable progress has been made with regard to the number of harmonisation activities monitored by the AG. Currently, ten of the 26 harmonisation activities and 42% of the most important issues are monitored (compared with 21% at the time of the second report). Level of compliance. Of the ten monitored activities, two have reached high levels of compliance, with all T2S markets either already complying or facing no significant barriers to achieving compliance in time for the launch of T2S. These two activities are the implementation of the ISO message standards and making omnibus accounts available at issuer CSDs. Significant progress has also been identified in most other areas, with all markets guaranteeing that they will be compliant by the time they migrate to T2S. Finally, a small amount of progress has been made in two areas: T2S corporate actions standards and corporate actions market standards (as defined by the Corporate Actions Joint Working Group - CAJWG). For more information please see the Report. Although standards in both areas have already been agreed upon and endorsed, and a clear monitoring framework is in place, regulatory and legal barriers in national markets are still impeding national compliance and implementation in many countries. For all activities, the parties responsible have been clearly identified, deadlines have been set, and concrete, achievable objectives have been established. A substantial amount of work is scheduled for the rest of 2013, both in terms of setting standards and monitoring compliance. We plan to publish the Fourth Harmonisation Progress Report in the first quarter of This will be the last report before the start of the T2S Community multilateral testing phase (Synchronisation Point 8, October 2014). Its results will therefore be critical for ensuring smooth cross-csd settlement in T2S. I would like to take this opportunity to thank all stakeholders, both within and outside the T2S Community, who have contributed to the production of this report. It is also thanks to them that T2S stakeholders no longer ask us why they should comply with harmonisation. Instead they ask for advice on how they can do so. The harmonisation horses are galloping.

9 T2S OnLine I No 15, April Elin Amundsen T2S Programme Office INSIGHT POST-TRADE HARMONISATION AND FINANCIAL INTEGRATION IN EUROPE IMPRESSIONS, VIEWS, STATEMENTS That Europe needs further harmonisation to increase financial integration was generally agreed during the joint conference held by the ECB and the European Commission on 19 March The full conference material, including speeches, videos and interviews, is available on the T2S website in the Events section ( n.en.html). Greater financial integration is a key thread in the fabric of the Single Market and is essential for making Europe stronger. However, it cannot be achieved if the underlying infrastructure is fragmented and dominated by national barriers. The objective of the conference was to highlight the importance of post-trade harmonisation for financial integration by discussing current EU initiatives at the legislative, operational and business levels. The distinguished group of speakers debated the following questions, among others. What are the roles of the different stakeholders? What is the right balance between regulation, safety and competition? Can further harmonisation help Europe to achieve economic growth? Interest from the market was high and the initial venue had to be changed to accommodate the 250 participants. In addition, almost ten times as many joined the conference remotely via live webcasting. This was an important signal, as the challenges ahead are challenges for all of us. As the ECB President said: It is definitely a joint effort, and what I see is not just the commitment of public authorities at the European or national level, but also the commitment of market participants, central securities depositories and central counterparties. Father of and veteran of post-trade harmonisation in Europe, Alberto Giovannini, put pressure on the process as he voiced the view that it was time for Europe to make a move, saying: if we keep discussing these issues over the next ten years, I do not know where the rest of the world will be and I do not know where we will be relative to the rest of the world. Chris Prior-Willeard (BNY Mellon CSD) took a positive view and stated that if Europe would do it right we could become a very attractive place for large corporates to think of as future domicile. The fact that some very important markets in Europe are not part of the euro area and that the global agenda needs some thought was echoed by a number of speakers. In a short interview Jeffrey Tessler (Clearstream) stressed that we started off with the G20 initiatives on the same path, but. there is a risk that one turns left and one turns right, and from a market standpoint that is something to be very concerned about. Regulatory initiatives in the post-trade environment were hot topics during the conference. Whether the industry was facing legislative fatigue was debated.

10 T2S OnLine I No 15, April INSIGHT Emil Paulis (European Commission) compared the need for regulatory developments to a ship with holes: you cannot just repair some of the holes, because then the ship will sink anyway. We need to repair all the holes, and once we have done this we need to go over the ship again to ensure that there are no imminent holes, and that is what we are doing. Regulation is like medicine: if you take the right amount it can help you, but an overdose can be fatal. This was the view of Werner Steinmüller (Deutsche Bank), whereas Tim Howell (Euroclear), on the other hand, felt that the regulatory changes were justifiable, but that it was important to keep the right balance between competition and safety. In a short interview, Alexander Justham (London Stock Exchange) was asked about the aim of regulation. Part of it is safety, part of it is financial stability and part of it is continuity of markets. I think that one of the key lessons [to be learned] from the financial crisis has to be a recognition that continuity of markets is a good thing and that the infrastructure performed well doing the crisis. The importance of regulation for European economic growth was highlighted by Patrick Pearson (European Commission). We needed to re-regulate, to re-shape and re-design our regulatory objective, and that is what is going on; and that is a small price to pay to see growth in Europe s economy again. Tim Howell also put growth high on the list of important issues by saying that with economic growth in Europe being somewhat minimal, the focus needs to be on what we can do to increase growth generally, which, he acknowledged, was a lot easier said than done. As regards the CSD Regulation, the European Commission was confident that it would be in place before the launch of T2S (see the interview with Emil Paulis and Patrick Pearson in the next Insight article). But Steven Maijoor (ESMA) cautioned that once political agreement has been reached on the Regulation, the European Securities and Markets Authority (ESMA) will need a year in which to complete highly technical work on the related standards, which will have a major impact on stakeholders and market participants. A lot of the focus was on T2S and the harmonisation agenda triggered by the project. Jean-Michel Godeffroy (ECB) linked the two with the CSD Regulation and stressed that the efforts of the T2S Community to harmonise the T2S environment can only be completely effective if they are complemented by the CSD Regulation. Only with the CSD Regulation in place can all harmonisation activities be defined and monitored. Only with the CSD Regulation in place can the full benefits of T2S be achieved. Alberto Giovannini praised the T2S initiative when he compared Europe s situation to the prisoner s dilemma. We can only solve the prisoner s dilemma with leadership from authorities, and that is why I think that the T2S strategy is the winning strategy, he said. Jeffrey Tessler saw the journey to harmonisation as a bumpy ride. The journey to harmonisation is not a straight path and, while the benefits will come in the foreseeable future, the immediate impact may surprise some. The immediate impact may not be a

11 T2S OnLine I No 15, April INSIGHT reduction in prices; you may not see your operational costs go down, due to the high implementation cost; and you will not necessarily see an increase in volume. What you are paying for is the longer-term good, which is harmonisation. For Tim Howell, the real issue was harmonisation. There are still significant differences on the corporate actions side. This means that in many countries there is a value in knowing how the local systems work. When asked how the world would look in five years, Chris Prior-Willeard replied: In the short run there will be more CSDs, but after the introduction of something like T2S you are going to see a contraction in the number of individual CSDs. Jeffrey Tessler was of the view that T2S transforms competition: T2S creates a single playing field, at least for settlement in central bank money. CSDs will become more competitive in value-added services, which will be good for the market and for the clients, as competition normally enhances services and brings down prices. Diana Chan (EuroCCP) was of the view that we need to work together and embrace competition, as customers want simplicity. Substantial attention was also given to the regulatory framework around collateral management and what can be done to improve the movement of collateral. Godfried de Vidts (ICAP) compared collateral to water: Collateral should be treated like water a scarce resource not to be wasted. Patrick Pearson was even more vivid: Collateral is like a bath towel. It can be soft and warm, but it had better be there when you get out of the bath or you will be awfully exposed and awfully naked. During her speech, Daniela Russo (ECB) elaborated on the current activities that she considered crucial for enabling market participants to deal with the increased demand for collateral. That no one can do the job alone became clear during the conference and, as mentioned above, the ECB President said that everyone has a role to play. This was echoed by Emil Paulis in a speech given on behalf of Commissioner Barnier, in which he stressed that the challenges we face are challenges for all of us; we all need to participate in the actions global and European regulators, legislators and the industry. Don t wait only for the regulators and legislators. I encourage you to watch the summary video and the interviews given during the conference, available on our website.

12 T2S OnLine I No 15, April INSIGHT Emil Paulis Director of Internal Market and Services, European Commission Patrick Pearson Head of Financial Markets Infrastructure, European Commission WHY A EUROPEAN REGULATION FOR SECURITIES SETTLEMENT? INTERVIEW WITH EMIL PAULIS AND PATRICK PEARSON ON THE CSD REGULATION The European Commission published a draft of the future regulation on central securities depositories (CSDs) approximately one year ago, on 7 March 2012.The CSD Regulation will introduce a common European framework for the authorisation and supervision of CSDs and will harmonise a number of key aspects of securities settlement, among them settlement cycles, settlement discipline and market access.the aim of the Regulation is to increase the safety and efficiency of settlement in Europe, while opening up the market for competition.the text of this new piece of EU legislation is currently with the European Parliament and the Council of the European Union (EU Council). During the joint conference of the European Central Bank and the European Commission on post-trade harmonisation and financial integration in Europe, we had the opportunity to interview the two delegates from the European Commission: Emil Paulis, Director of Internal Market and Services, and Patrick Pearson, Head of Financial Markets Infrastructure. We report here their answers concerning the CSD Regulation. The videos of their full interviews, touching also upon more general regulatory and collateral issues, are available on the ECB YouTube channel (in the T2S section). How important is the CSD Regulation for the regulation of the post-trade industry in the context of the current financial crisis? Emil Paulis: It is important because it ensures discipline in settlement; it ensures the finalisation of settlements in the sense that the transactions, which involve huge amounts of money and collateral, are safe they are actually finalised, completed, executed in a safe way and there is no interruption in the flow of activities. So it is actually extremely important, something which we only realised as we went through the transaction chain, and through the different crises such as the Lehman Brothers collapse and others. Patrick Pearson: It s absolutely critical it s the missing link. We ve regulated the trade repositories, we ve regulated the clearing houses, and now we need to regulate the CSDs, so that the whole chain from top to bottom is regulated. If you don t regulate the CSDs, you also miss out on huge opportunities for opening up the market. Issuer choice in which CSDs they issue their securities, for instance is absolutely critical, and the second pillar is just as important: we need the CSD Regulation in place to be able to get TARGET2-Securities up and running. They go hand in hand, so it is an absolutely vital piece of legislation. The people here, gathered at this conference, seem to think that the CSD Regulation really needs to be in place by Is that feasible? Emil Paulis: That is very feasible, because we have a very good understanding, a shared understanding, with the EU Council and the European Parliament, about how to deal

13 T2S OnLine I No 15, April INSIGHT with the big issue, which is the separation of settlement activities and banking activities. We talk about the details of the methodology used to achieve this objective, but we all agree that there should be a separation of these activities. Patrick Pearson: The European Commission has done everything possible to get its proposal on the table in time, and the European Parliament has done its work. Kay Swinburne, the rapporteur from the Parliament, has delivered an excellent report which improved on the Commission s proposal in many respects. We now need to wait for input from the Presidency of the EU Council, and we have heard recently from the Irish Presidency that they re making this a priority, and they re starting meetings again to discuss this proposal and hopefully bring it to a close in time. Because what many people forget is that, after adoption of the proposal, we still need a number of technical standards to be developed by the European Securities and Markets Authority (ESMA) and then adopted by the Commission. These need to be in place before the end of 2014.

14 T2S OnLine I No 15, April Ignacio Terol Head of the T2S External Stakeholder Management Section INSIGHT IMPROVING THE MIGRATION PLAN Everything is subject to improvement. When the Governing Council of the ECB agreed to a three wave migration plan in November 2012, it kept the door open for the possibility of agreeing a better alternative with the CSDs. Now, the Governing Council has agreed to a four wave migration plan, following a proposal from the CSD Steering Group. How does the revised migration plan compare with the old one? On the one hand, it means that the T2S migration will take longer than was initially foreseen 21 months instead of 18. This was the necessary price to pay in order to accommodate four migration waves and to allow for a minimum of four months between each wave. On the other hand, the migration of Clearstream Banking Frankfurt and Euroclear ESES has been brought forward compared with the previous plan. This reduces the time between the first and second migration waves from 13 months to a more reasonable nine months. The end result is a more balanced distribution of CSDs across the migration period (see diagram below), which in turn reduces the operational risk associated with the migration process. A more balanced migration plan Percentage of volumes migrating to T2S WAVE 3 WAVE 22/06/ /03/ /09/ /02/2017 Does this mean that, for nine months, T2S will operate at 15% of its processing capacity? I do not think so. During the course of the migration period, market participants active in multiple CSDs might wish to benefit from having full use of T2S sooner rather than later. In this respect, CSDs which are migrating earlier may exploit their first-mover advantage while, for CSDs that migrate later, the longer adaptation period might present a risk. The Migration sub-group, set up by the Project Managers Group, has already begun detailed work to reach agreement on issues such as how to organise the migration weekends. The plan is to present this work to a wider audience in a dedicated information

15 T2S OnLine I No 15, April INSIGHT session before the end of June 2013, in order to ensure that information is available at an early stage to all parties involved in the migration activities, i.e. CSDs and central banks, their customers, and network providers. More details on the information session will soon be available on the T2S website. To conclude, setting in stone the migration wave dates is an important achievement, as everyone involved can now plan their migration activities with certainty. By last July, CSDs had already indicated in their feasibility studies the earliest date by which they considered it feasible to migrate. No CSD can be required to bring forward this date. Now, each individual CSD has a reference date by which they must ensure they have implemented their internal T2S adaptation plans. First wave 22 June 2015 Second wave 28 March 2016 Third wave 12 September 2016 Fourth wave 6 February 2017 Bank of Greece Securities Settlement System (BOGS) Euroclear Belgium Clearstream Banking (Germany) Centrálny depozitár cenných papierov SR (CDCP) (Slovakia) Depozitarul Central (Romania) Euroclear France KELER (Hungary) Eesti Väärtpaberikeskus (Estonia) Malta Stock Exchange Euroclear Nederland LuxCSD (Luxembourg) Euroclear Finland Monte Titoli (Italy) Interbolsa (Portugal) Oesterreichische Kontrollbank (Austria) Iberclear (Spain) SIX SIS (Switzerland) National Bank of Belgium Securities Settlement System (NBB-SSS) VP LUX (Luxembourg) KDD - Centralna klirinško depotna družba (Slovenia) VP SECURITIES (Denmark) Lietuvos centrinis vertybinių popierių depozitoriumas (Lithuania)

16 T2S OnLine I No 15, April T2S IS ONLINE FOR YOU What is T2S OnLine? T2S OnLine is the T2S Programme s review. It provides you with project updates, insights into T2S and details on the current outlook of the project. We hope you will find T2S OnLine to be an enjoyable tool for obtaining up-to-date information about T2S. Where can you find T2S OnLine? T2S OnLine is published on the T2S website ( with the option to print if you would like to have a hard copy. How can you contribute? We are happy to hear your views on T2S OnLine. If you have any comments, or if you would like to propose a subject for an article, please contact us by at mb-t2scommunication@ecb.europa.eu Elin Amundsen, Anna Nuzzolo and Stefania Secola, T2S Programme Office 1 European Central Bank, April 2013 Address European Central Bank Kaiserstrasse Frankfurt am Main, Germany Postal Address Postfach Frankfurt am Main, Germany Website