T2S OnLine. P R O J E C T R E V I E W N o 2 1, M a y EDITORIAL FIFTH HARMONISATION PROGRESS REPORT INTRODUCING THE NEW

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1 T2S OnLine I No 20 19, December July T2S OnLine P R O J E C T R E V I E W N o 2 1, M a y EDITORIAL NEWS FROM THE T2S PROJECT COUNTDOWN TO T2S LAUNCH FIFTH HARMONISATION PROGRESS REPORT INTRODUCING THE NEW MEMBERS OF THE T2S BOARD

2 T2S OnLine I No 21 May Marc Bayle EDITORIAL T2S IS BECOMING A REALITY! It was early 2006, and the Eurosystem was in the final stages of preparing for the launch of Europe s new single technical platform for large value payments in central bank money TARGET2. This was a great step forward for European integration but it also sparked discussion on the need for more integration in the securities market. It was during these discussions that the idea of a single platform for Europe-wide securities settlement was born. On this platform both securities accounts and cash accounts would be integrated ensuring real-time delivery-versus-payment settlement across European borders. Naturally, it was not an idea that was immediately welcomed by everyone. But it was an idea which triggered thus far unheard of collaboration between market participants and public institutions. An idea which would have a profound impact on the post-trade landscape and help Europe move one step closer to an integrated financial market. Fast-forward nine years to today and we are at the final stage of turning this idea into reality: despite some media reports suggesting otherwise, we are less than two months away from launching this platform T2S. I therefore feel that it is worth both recalling the changes which have already been triggered by T2S and looking to the future. Harmonisation of the post-trade landscape at the level of the European Union and even beyond is now on everybody s agenda. Thanks to the close cooperation of market participants and regulators, market practices have been harmonised based on commonly agreed standards and their implementation has been pushed through by all involved stakeholders. It has been a market-driven process where the market participants have jointly identified activities, developed definitions and monitored the compliance of the T2S markets. Harmonisation has been a key objective during the whole life-span of the T2S project. The efforts to achieve it have been supported and the resulting standards applied by the T2S Community, the Governing Council of the ECB and the public authorities of the EU. Read about the success of the harmonisation activities in the Insight article Fifth Harmonisation Progress Report T2S's role as a catalyst in this newsletter. Thanks to the harmonisation activities and the T2S platform itself, the complexity of cross-border settlement will be reduced and efficiency thus increased. The European CSD Regulation complements the harmonisation efforts of the T2S Advisory Group and the Harmonisation Steering Group. The Regulation is creating a level playing field for CSDs from a legal perspective and will help support T2S by increasing competition among all market participants in the post-trade area, thus triggering the development of new services that will benefit the customers. What has been crucial for the progress of the project and what is so far unique is the governance structure of the T2S Programme: it is inclusive, meaning that all stakeholders (public and private) are involved. This required an arrangement which entails a certain level of complexity, but which has proven to work. As the T2S Community we have managed together to overcome many challenges and find solutions along the way. I believe this is one reason why all stakeholders remain strongly committed to the project and continue working hard towards our common goal the successful launch of T2S on 22 June.

3 T2S OnLine I No 21 May EDITORIAL Looking ahead, the experience gained with the T2S Programme, and more than anything the good collaboration between public and private stakeholders, may serve future initiatives aimed at strengthening the financial market infrastructure in Europe. I look forward to exploring how we can continue to work together to achieve a fully integrated market infrastructure in Europe. In addition to the article mentioned above, this newsletter edition features the regular update on the project, a countdown to the launch providing insight into the remaining activities, and an introduction to the new members of the T2S Board, who joined it in February I hope you enjoy this issue of T2S OnLine! Marc Bayle Chairman of the T2S Board

4 T2S OnLine I No 21 May Mehdi Manaa T2S Programme Manager NEWS FROM THE T2S PROJECT Two months ahead of the launch, the T2S Community has reached the final stage of preparations. The central securities depositories (CSDs) and central banks involved in wave 1 started uploading their static data to the platform on 23 March 2015, a process referred to as the pre-migration phase. We have also moved forward with user testing, as the wave 1 CSDs and central banks began involving their clients in testing activities as of 2 March In addition, the overall progress in harmonisation across the T2S markets was recently assessed by the Advisory Group and presented in the Fifth Harmonisation Progress Report. The launch of T2S is the greatest challenge in this project and the final stage to go-live will require the utmost effort of the Eurosystem and the community. As testing progresses we will have to continue addressing any problems to ensure the smooth operation of T2S. Every project entails some uncertainties and challenges until completion. However, with the continuous collaboration of the T2S Community I am confident that we will overcome the remaining obstacles before the launch. Progress on user testing The CSDs and central banks have been involved in bilateral interoperability testing since 1 October 2014, where they examine how well their internal systems interact with the T2S platform. In early January 2015 the wave 1 CSDs and central banks began testing settlement processes in interaction with the other participating CSDs and central banks of the same migration wave, known as multilateral interoperability testing. Another key milestone was achieved when the CSDs and central banks of wave 1 started community testing on 2 March 2015, as planned. In this phase, the CSDs and central banks have extended the testing activities and involved their users. Preparation for migration With the start of the pre-migration phase on 23 March 2015, preparations for the wave 1 migration are now well on the way. During this phase, all CSDs and central banks involved in wave 1 are setting up their static data in T2S, as required before T2S goes live. Preparations for the migration weekend are also continuing on track. Several migration weekend rehearsals were performed up until the end of April More testing activities are planned for May which will allow the involved CSDs and central banks, as well as the 4CB in its role as T2S operator, to further rehearse migration-related activities. Client Readiness Dashboard Each quarter the contracting CSDs and central banks prepare self-assessment reports with respect to their readiness to connect to T2S. The self-assessment is based on relevant Synchronisation Points that need to be achieved, and which form the key structure of the T2S Programme Plan. The Client Readiness Dashboard for 2014 Q4 was approved by the CSD Steering Group and published in early The dashboard for the first quarter of 2015 is in progress. More information on client readiness can be found in the Insight article entitled Countdown to T2S launch.

5 T2S OnLine I No 21 May NEWS FROM THE T2S PROJECT Eurosystem Acceptance Testing No critical defects have been identified during the quality assessment carried out by the European Central Bank and known as Eurosystem Acceptance Testing (EAT), and T2S is moving ahead towards the launch on 22 June 2015 as planned. The last EAT regression testing before T2S goes live will take place between mid-april and the end of May. It aims to ensure that the most recent changes to the platform, resulting from corrections of defects and the implementation of change requests, do not affect the overall functionality of T2S. Change requests Since November 2014 the T2S Board has approved 36 change requests. Please see the table below for more information. Approved change requests (CRs) since November 2014 Type Description Number 4CB testing T2S software changes stemming from the 4CB testing activities 17 Market requests T2S software changes requested by the market 8 Operational procedure Changes related to operational procedures affecting tools and scripts outside T2S core software T2S settlement day Changes with regard to the T2S settlement day 1 Editorial changes Changes of editorial nature which solely concern updates and clarifications to the T2S functional documentation 9 1 T2S harmonisation An important driver of post-trade harmonisation has been the CSD Regulation, which entered into force on 17 September Following its adoption, the European Securities and Markets Authority (ESMA) published a consultation paper on the final wording of the regulatory technical standards. In February 2015 the Advisory Group sent a letter to ESMA providing its contribution to the technical standards and the technical advice under the CSD Regulation. The Advisory Group published the Fifth T2S Harmonisation Progress Report on 13 April Two months ahead of the T2S launch, the report offers updated information on the work done by the Advisory Group to harmonise post-trade processes across T2S markets. The report presents the standards defined and endorsed by the Advisory Group in 17 different areas. The compliance of T2S markets with the standards of highest priority is assessed and presented using a traffic light approach. Harmonisation will ensure safe and efficient cross-csd settlement across 21 European markets encompassing 24 CSDs in T2S. See more in the article entitled Fifth Harmonisation Progress Report T2S s role as a catalyst.

6 T2S OnLine I No 21 May NEWS FROM THE T2S PROJECT In addition, the Advisory Group is preparing a response to the European Commission s public consultation on the capital markets union. The Advisory Group is of the view that the capital markets union could be a catalyst for removing a number of key barriers identified in the cross-border securities services (legal, tax and regulatory). The deadline for contributions is 13 May T2S Info Session On 16 April 2015 Euroclear France hosted the last info session before the T2S launch. Over 160 participants from all around Europe joined the event. Meike Ströter, from the ECB, and Philippe Leblanc, representing the 4CB, updated the participants on the current project status, focusing on the final preparations in the run up to the launch. James Cunningham, BNY Mellon, and Paul Symons, Euroclear, presented the findings of the recently published Fifth Harmonisation Progress Report, which provoked an interesting discussion in the panel that followed. The panel was moderated by Marc Bayle, T2S Chairman, and included Marcello Topa, Citi, Jennifer Robertson, European Commission, and Fabrizio Planta, ESMA. In another panel moderated by Meike Ströter, the T2S Community which was represented by Cristina Belotti, Société Général Securities Services, Marcello Topa, Citi, Philip Van Hassel, Euroclear, Guido Wille, Clearstream, and Alessandro Zignani, Monte Titoli spoke about their final preparations before the T2S launch. Finally, Sébastien Séailles presented the new services that Euroclear will offer to their clients thanks to T2S.

7 T2S OnLine I No 21 May INSIGHT COUNTDOWN TO T2S LAUNCH The launch of T2S is less than two months away. So far, all scheduled activities have been performed and all set milestones achieved. Now, wave 1 CSDs and national central banks are entering the home stretch, nearing the finishing line of going live as planned on 22 June. However, there are still things to be done, as you can see from the timeline below. What exactly are these remaining steps, why are they significant and what do they involve? This article will shed some light on these questions. Since 2 March user testing has been in the community testing stage, thus involving participants of wave 1 CSDs and central banks. The user testing phase will end on 12 June for wave 1 participants, marking another milestone. The phase involves a huge coordination effort spanning an overall period of almost three years, during which all actors are being accommodated in five testing stages, four migration waves and three environments. At the current juncture, user testing is on track, with some defects to be resolved before the launch of T2S. An important part of user testing is the migration testing. During the migration rehearsals, migration to the T2S platform is simulated. The rehearsals take place over a weekend and focus on varying aspects of migration such as validating procedures (e.g. how the dynamic data is migrated), checking processes and data quality on all sides, and confirming time estimations. The rehearsals have been jointly planned by all involved actors. The time between the rehearsals is used to tackle issues which appear during the tests. Another goal of the migration rehearsals is to validate and test the procedures for identified potential contingency scenarios. Migration rehearsals will have been conducted with wave 1 participants six times before the launch. So far, wave 1 participants have conducted four weekend migration rehearsals. Some small incidents occurred, but were resolved. So the overall result is positive, giving us confidence that the migration activities will be a success. However, user testing and migration will not be the only hot topics in the last two months before the launch. The preparations for operations of the T2S platform as of 22 June are in the final stages. The production environment was opened on 23 March to allow for pre-migration activities. Consequently, the T2S Manual of Operational Procedures (MOP) should now be applied (when appropriate), as agreed by all parties. The T2S Service Desk is fully operational and the respective supporting structures for the handling of any kind of incident have been set up. On an ongoing basis, tools and operational procedures are being tested and staff members are receiving the necessary training.

8 T2S OnLine I No 21 May INSIGHT For all the activities mentioned above it is not only of key importance that the Eurosystem as platform provider and operator has thoroughly done its homework but also that the CSDs, central banks and their clients are sufficiently prepared. Evidence of this is largely provided by the user testing results, but there are also other aspects that need closely monitoring such as the provision of all necessary documents for the final application of a CSD to access T2S. These activities are monitored and coordinated by the client readiness team. Apart from the monitoring of the fulfilment of mutual obligations, milestones and deliverables, this team also provides support and advice to the individual CSDs and central banks. As you can see, in close collaboration with all stakeholders in the T2S Community the remaining tasks are being performed with a strong commitment to achieve the successful launch of T2S on 22 June Christine Löser TIMELINE FOR WAVE 1 PARTICIPANTS 16/17 May: Migration rehearsal for all wave 1 participants 18 May: Start of business day testing 30/31 May: Migration rehearsal for wave 1 participants 5 June: CSDs and central banks to confirm that internal control mechanisms are in place and to inform their communities accordingly 12 June: CSDs and central banks to confirm that migration playbook has been integrated into internal plans; end of user testing for wave 1 participants 20/21 June: Migration of the first wave of T2S participants 19 June: Ready for T2S launch 22 June: Launch of T2S

9 T2S OnLine I No 21 May FIFTH HARMONISATION PROGRESS REPORT T2S S ROLE AS A CATALYST On 13 April 2015 the T2S Advisory Group (AG) published its Fifth T2S Harmonisation Progress Report. This report provides details of the work done by the T2S Community and the contribution it is making to the development of a single rulebook for post-trade services. But why the fifth? And why now? Some history Back in 2013 we published a short article in this newsletter about the T2S harmonisation agenda. The article was, partially, a story of a horse and a cart. It addressed any last doubts remaining from the early philosophical discussions about the right positioning of the post-trade harmonisation work within the T2S project timeline. Should harmonisation precede or follow the T2S project? Is T2S possible without harmonisation and vice versa? This was at the time of the Third T2S Harmonisation Progress Report. We are glad to discover that, two years later, we can avoid philosophy and focus on practical matters. No one is questioning the T2S harmonisation work anymore. No one is asking when to do it or why compliance with the T2S standards is necessary for all T2S stakeholders. In a panel discussion focusing on this topic at the T2S Info Session on 16 April, this sentiment was reiterated by the market participants. Progress in the T2S project has gone hand in hand with progress in the harmonisation work. Two months before the launch of T2S, the fifth report takes stock of the T2S Community s achievements in terms of definition of, as well as compliance with, the relevant T2S standards. Methodology and results In terms of methodology used, the AG continues with its initial modus operandi: to be modest and bold. Modest in focusing on what is a priority rather than striving for the unattainable, and bold in using, credibly and consistently across all markets, a transparent and Community-endorsed assessment guidebook. In the fifth report, the AG monitors the compliance of 21 T2S markets (covering 24 European CSDs) against 17 defined and endorsed standards. 1 A traffic light colour system (plus blue) is used to categorise the status of implementation. Red indicates that a national market will not be able to fully comply with a standard by the time its CSD(s) migrate to T2S. Yellow means that work is ongoing, but a major technical or regulatory barrier still exists and needs to be addressed. Green shows that the implementation plan is on track and full compliance is expected by migration. Blue is the European colour: it shows that the market is already operating in true European and harmonised fashion. The good news is that only two red statuses (2% of a total 85 wave 1 statuses) are identified in the report. These two instances have been carefully assessed by the AG and the T2S Board. The T2S Community is confident that the impact of these cases of non-compliance will be minimal for the rest of the T2S Community. In addition, the two markets in question have committed to a detailed implementation plan leading to full compliance. It seems, therefore, that there is no way out of the T2S harmonisation family! 1 The T2S harmonisation list includes 24 harmonisation activities aimed at defining 24 harmonisation standards (see Currently 17 standards are endorsed by the AG. Most of the remaining seven require further action, typically at regulatory level.

10 T2S OnLine I No 21 May FIFTH HARMONISATION PROGRESS REPORT What to expect next The T2S Community has already started planning for the next report. Expected to be published in early 2016 before T2S migration wave 2, the sixth report will obviously focus on the markets that are joining T2S in this wave. The AG has agreed to focus its attention on the remaining harmonisation activities. They are mostly priority 2 activities and usually require wider action that goes beyond the sole remit of T2S. Although the AG is not a regulator, it can nevertheless use T2S as a catalyst for public and private initiatives. At the same time, thanks to their expertise, T2S stakeholders can provide valuable feedback and support to the relevant public authorities, where required. A typical example is the pending finalisation of the level 2 provisions stemming from Regulation (EU) 909/2014 on CSDs (the CSDR). The AG has contributed extensively to the work carried out by the European Commission and the European Securities and Markets Authority to define the EU s single rulebook for CSDs (see Publications on the AG s webpage). The AG has, since the start, been a strong supporter of the approach taken by the public authorities to achieve harmonisation and a level playing field among CSDs. At the same time, the AG has identified a few very specific areas where the forthcoming regulatory framework could have unintended consequences and should therefore be addressed, at this stage, by the public authorities. Another area under the responsibility of the public authorities, but where the AG is planning immediate action is the contribution to the European Commission s capital markets union (CMU) initiative. While we are still awaiting the final action plan on the CMU, we are pleased to discover that some of the remaining T2S harmonisation activities, such as securities law, shareholder transparency and withholding tax procedures, are featuring, one way or another, in the CMU consultation paper. A word of clarification is needed here. The T2S harmonisation agenda is not advocating multiple new waves of EU regulation in the securities industry. Although some action may be required on the part of the public authorities to complete the regulatory puzzle within the securities industry, market initiatives and actions are at least equally important. One notable example of this is the challenge of harmonising corporate actions management across European (and thus T2S) markets. Moreover, addressing certain aspects relating to the implementation of existing EU regulation, rather than launching new regulation, could equally suffice. We do not have a crystal ball and cannot say today what might be written in an article on T2S harmonisation in the future. But we remain confident that the T2S Community will continue to make a substantial and concrete contribution to developing the single rulebook for post-trade services and a tangible CMU in the EU. George Kalogeropoulos

11 T2S OnLine I No 21 May INTRODUCING THE NEW MEMBERS OF THE T2S BOARD The T2S Board was established by the Eurosystem as a streamlined management body for T2S. Its responsibilities include developing proposals for the Governing Council on key strategic issues and executing tasks assigned to it by the Governing Council, as laid down in ECB Decision 2012/235/EU of 29 March 2012 on the establishment of the T2S Board. The T2S Board took up its responsibilities in July Since then, it has overcome several challenges, such as determining the composition and timing of the migration waves, and has so far managed to meet all milestones according to plan, ensuring that the launch of T2S will take place as scheduled on 22 June In January 2015 the Governing Council of the ECB formally renewed the mandate of the T2S Board members for another two years. Marc Bayle, Director General Market Infrastructure and Payments at the ECB, was appointed Chairman. With the renewal of the mandate, three new members joined the T2S Board. To get to know these three a little better, T2S OnLine asked them to introduce themselves. Ron Berndsen, Head of the Market Infrastructure Policy Department, De Nederlandsche Bank Professor R.J. (Ron) Berndsen is Head of the Market Infrastructure Policy Department of De Nederlandsche Bank, Amsterdam. Ron also supports the Department of Economics at the University of Tilburg as Professor of Financial Infrastructure and Systemic Risk. Ron Berndsen Besides being a member of the T2S Board, he is also a member of the Committee on Payments and Market Infrastructures at the Bank for International Settlements. Ron is also Editor-in-Chief of the Journal of Financial Market Infrastructures and a member of the Advisory Council of the Swift Institute. He has worked for De Nederlandsche Bank in various management functions in the field of monetary and economic policy since From 2003 to 2015 he was Head of the Oversight Department of De Nederlandsche Bank and, in that role, also a member of the Eurosystem s Payment and Settlement Systems Committee. Ron is also part of the cooperative oversight committees for CLS, EuroCCP, Euroclear, LCH.Clearnet and SWIFT. Ron was awarded a doctorate by the Faculty of Economics and Business Administration of the University of Tilburg in 1992 for his thesis entitled Knowledge representation and qualitative reasoning in economic models. Ron, what motivated you to apply to become a T2S Board member? Looking at Europe, I can see that the similarities that bind us are stronger than the differences that divide us. For me, it feels natural to cooperate with other people to further the economic development of Europe. I still see a lot of fragmentation in Europe s financial infrastructure, which brings risks and inefficiencies. T2S, as a central infrastructure linking central banks and central securities depositories together, is a very tangible contribution to European integration. It is exciting to take part in that process.

12 T2S OnLine I No 21 May INTRODUCING THE NEW MEMBERS OF THE T2S BOARD Maria Tereza Cavaco Maria Tereza Cavaco, Deputy Head of the Payments Systems Department, Banco de Portugal Maria Tereza Cavaco holds a Master s degree in Economics and is currently Deputy Head of the Payment Systems Department at the Banco de Portugal. She started at the Banco de Portugal 15 years ago and since then has been dealing with a multiplicity of issues related to payment systems. Securities and the latest retail payments have received her special attention. More recently, she has been involved in various aspects of the T2S project, namely the T2S progress reports, the Banco de Portugal s preparatory work for T2S and the activities of the Portuguese National User Group. Maria Tereza, what motivated you to apply to become a T2S Board member? The idea of playing an active part in the governance of the T2S project and thus contributing towards stronger financial integration in Europe was particularly appealing. In my current position, although already committed to the aims of this project, I have been more focused on the preparatory works underway at national level. Therefore, the appointment as a T2S Board member represents an opportunity to participate more actively in the project management itself (working together with different substructures, layers and stakeholders), benefiting from the valuable experience, know-how and views of the other Board members. I look forward to bringing to the T2S Board not only my technical skills in this field, but also my attention to detail, natural energy and enthusiasm! Joël Mérère, former member of Euroclear SA/NV s Management Committee After 20 years at the Banque de France (Directorate General Credit, Directorate General Foreign Services and Securities Division), Joël Mérère was seconded to Sicovam, the French CSD which merged with Euroclear in 2001, as Deputy CEO and Head of the RGV (Relit Grande Vitesse) Project in 1995, and then went on to become CEO in January He became a member of Euroclear s Management Committee in 2001 and was appointed as Chairman of the boards of the three ESES CSDs (Belgium/France/Netherlands) in Joe l Meŕe re As a Euroclear representative on the T2S project from 2006 to 2014, Joël was a member of several T2S steering and working groups. As chairman of the European Central Securities Depositories Association (ECSDA) from 2004 to 2013, Joël took an active role in multiple initiatives on post-trade, in the public as well as the private sector. Joël, what motivated you to apply to become a T2S Board member? My decision to send an application was motivated by a variety of factors: first, having devoted a lot of time and effort to the T2S project since the outset (in 2006), I did, honestly speaking, feel frustrated at the time of my retirement at the prospect of not being able to remain an active participant in the project till its operational launch.

13 T2S OnLine I No 21 May INTRODUCING THE NEW MEMBERS OF THE T2S BOARD Then, more broadly, I was driven by my conviction, as a strong believer in the merits of European integration, that T2S is not a purely technical project, but a fundamental condition for the achievement of a single European financial market. Finally, and I have no hesitation saying it, the pleasure of continuing to be part of the friendly atmosphere within this industry was a further factor in my decision. In addition, I strongly believe that the role played so far by T2S as a catalyst for harmonisation will not stop once T2S goes live; quite the contrary, and I am looking forward to continuing to contribute to reaching this strategic goal. You can find more information about the T2S Board, its mandate and its members on the dedicated webpage at We would like to congratulate the new members of the T2S Board on their appointment and thank them for introducing themselves!

14 T2S OnLine I No 21 May T2S IS ONLINE FOR YOU What is T2S OnLine? T2S OnLine is the T2S Programme s review. It provides you with updates on the project and insights into T2S as well as into related topics. We hope that you will find T2S OnLine an enjoyable tool for obtaining up-to-date information about T2S and more. 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, Antonia Hamova, Patrick Hess and Christine Löser, Communication team Follow us on Twitter@T2SECB T2S Youtube channel: European Central Bank, May 2015 Postal Address European Central Bank Frankfurt am Main, Germany Website