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The most important milestone in spring 2009 was the set up of the T2S Programme Board, a
streamlined management body that will develop proposals for the Governing Council on key
strategic issues and execute tasks of a technical nature. This new governance structure will
ensure that T2S meets the needs of the market and is delivered not only on time, but also within
the agreed budget.To fulfil its mandate, the Programme Board immediately got to work on the
relevant issues.
On 16 July 2009, the CSDs and the Eurosystem signed the T2S Memorandum of Understanding (MoU).This was a remarkable event as the MoU was signed by 27 CSDs from 25 countries, and it represents a major step in strengthening the relationship between CSDs and the Eurosystem. The CSDs in all euro area countries signed the MoU, as well as nine non-euro area CSDs in Denmark, Estonia, Latvia, Lithuania, Romania, Sweden, the United Kingdom, Iceland and Switzerland. The CSDs of Denmark, Lithuania and Sweden – with the consent of their central banks and the support of their markets – also confirmed their intention to provide for the settlement of their national currencies in T2S, in addition to settlement in euro.The signing of the MoU reaffirms the CSDs’ support for the T2S programme.
The T2S team has always insisted that T2S is all about maximising the safety and efficiency of the settlement of securities transactions and is built for market stakeholders. It is therefore reassuring that the market sentiment with regard to T2S is excellent. Recent interaction with market participants (T2S Advisory Group, its sub-groups, conferences and bilateral meetings, etc.) suggests that market participants have started to build their business plans and investments on the assumption that they will use T2S as the technical platform for the settlement of their securities transactions as early as 2013. In addition, other T2S stakeholders, such as industry associations, public authorities and issuers, emphasise the envisaged go-live date of T2S as a major milestone on the way to achieving an integrated EU securities market.
It is no secret that European harmonisation is one of the core tasks of the Eurosystem and we are thus pleased that market participants have repeatedly emphasised this as a key aspect of T2S.The Governing Council has therefore mandated the T2S Advisory Group to continue the work on harmonisation in the field of T2S-related securities settlement, and to support implementation efforts in the market.
The T2S Advisory Group monitors developments in the work of CESAME22 and other fora and complements it where action is required at a pan-European level. Given the importance of the T2S programme for the integration of the securities market in Europe, the Chairman of CESAME2 – who is also a member of the T2S Advisory Group – has invited the Chairman of the Programme Board to become a member of CESAME2.This close interaction will ensure that work performed in the T2S environment does not duplicate that of other initiatives and is coherent with the general framework defined by CESAME2.
To clarify the strong interdependencies between the different T2S work streams, one of the first main objectives of the Programme Board has been to set up a single, detailed T2S programme plan for the ECB and the 4CB (Deutsche Bundesbank, Banco de España, Banque de France and Banca d’Italia). The plan will reflect the fact that some issues have become clearer over the past few months. It will also take into account the fact that some processes have not been finalised in accordance with the initial plan (e.g. the preparation of the General Functional Specifications) but that some tasks have been re-arranged to still allow a go-live date of June 2013. Once the Programme Board has fully assessed the plan, it will be shared and discussed with the T2S project managers appointed by the CSDs since the most critical milestones of the final T2S programme plan will become part of the Framework Agreement to be concluded between the Eurosystem and the CSDs.
Since the approval of version 4.0 of the User Requirements Document in July 2008, 187 requests for changes have been approved by the T2S Advisory Group. Many of these change requests were minor ones and could be considered to be “fine-tuning”. In June 2009 the T2S Advisory Group agreed with the Programme Board that the User Requirements Document should be regarded as “frozen” and change requests will only be accepted if they are indispensable for the smooth go-live and functioning of T2S in its start-up phase. Other change requests should in principle only be considered for, and implemented in, the second T2S software release.
After having received market feedback on the General Functional Specifications in spring 2009, experts from the ECB’s T2S team and the 4CB have worked intensively to find solutions for the issues identified. Publication of a final version of the General Functional Specifications is currently envisaged for early November 2009.
The General Technical Design of T2S is currently being validated and is expected to be finalised by the end of October 2009. Both the General Functional Specifications and the General Technical Design will then be validated with reference to the User Requirements Document and cost estimations.
On the development side, the 4CB have started preparing the User Detailed Functional Specifications, in particular with respect to: (i) the definition of the main building principles of the documentation; and (ii) the specification of messages to be exchanged between T2S and its users.
During 2009, workshops have been organised between the Eurosystem and CSDs to discuss T2S pricing issues.These workshops have deepened mutual understanding of pricing objectives and constraints.The main deliverables that the Eurosystem will have to provide to CSDs (and the market more widely) by early 2010 include:
The Programme Board has sought market opinion on possible volume discounts in T2S, with three options being considered: (i) no discounts; (ii) discounts at CSD level; and (iii) discounts calculated at the user level. The outcome will be discussed in the September T2S Advisory Group meeting.
The establishment of the Programme Board as a component for T2S internal governance also has an impact on external T2S governance, in particular as regards the interaction of the Programme Board with the CSDs and their users. It should be stressed that the current structure of the T2S Advisory Group has proven to be excellent in terms of promoting cooperation between the Eurosystem, the CSDs and their users, and the assistance it has provided to the ECB’s decision-making bodies has been highly appreciated. As the T2S Advisory Group’s mandate expires at the end of this year, the Programme Board has proposed that the T2S Advisory Group could evolve into the main T2S user forum, e.g. a pan-European T2S user group. Members of the T2S Advisory Group agreed that it might be sensible to continue the current T2S Advisory Group until the conclusion of an appropriate contractual agreement between the CSDs and the Eurosystem. A proposal for a new T2S Advisory Group mandate and a possible revised structure will therefore be formulated by September 2009 for discussion.
The idea of establishing a new CSD contact group as a link between the Programme Board and the chief executive officers of the CSDs has been welcomed by the T2S Advisory Group. Such a group should play a prominent role in view of future CSD contractual relationships with the Eurosystem. In this regard, it is important that users have a similar forum where matters of core concern can be discussed at an early stage. Users have therefore asked for a clear and transparent allocation of tasks between the T2S Advisory Group and the CSD contact group.
The criteria for CSDs to be eligible in T2S, in particular if their central bank does not (yet) allow their main operating currency to be integrated into T2S, are currently under discussion within the T2S Programme Board. A final decision by the Governing Council is expected by the end of October 2009.
Since the introduction of the euro on 1 January 1999, the Eurosystem has been offering services in an increasingly cost-effective way, mainly by allocating certain tasks to a group of a few central banks who perform these for the benefit of the whole system. Following this approach, the Governing Council of the ECB has assigned the development and operation of T2S to four central banks, namely the Deutsche Bundesbank, Banco de España, Banque de France and Banca d'Italia, commonly referred to as the 4CB.
More specifically, the 4CB will - based on the User Requirements agreed between the Eurosystem and the market - prepare the functional specifications, upon which they will also develop the T2S application. In addition, the 4CB will put in place the technical infrastructure that will host the application and will operate the T2S system within a framework to be agreed with the Eurosystem. Furthermore, the 4CB will support the Eurosystem in its relationship with the market in a variety of ways, in particular for user testing and migration.
