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After intensive negotiation with the CSDs, the T2S Programme Board has prepared a first draft of the Framework Agreement, the contract regulating the relationship between the Eurosystem and the CSDs (see T2S OnLine, No 3, “Bayle’s view”). Some points, concerning for instance governance, liability and termination, require further discussion with the CSDs. Nevertheless, the Governing Council of the ECB has decided to submit the draft to the EU regulators now, to make sure that any regulatory and compliance issues that might prevent CSDs from signing the Framework Agreement are identified and addressed at an early stage. The EU regulators’ feedback is expected after the summer. The Eurosystem intends to finalise the agreement by early next year and to sign it with participating CSDs in the second quarter of 2011.
The Currency Participation Agreement will govern the relationship between the Eurosystem and the non-euro area central banks that will allow settlement of securities transactions in their currencies in T2S (see T2S OnLine, No 4, “Bayle’s view”). An ad hoc task force has recently been set up to negotiate the text of the contract, and will report directly to the T2S Programme Board. The discussion on the Currency Participation Agreement will be aligned and synchronised with the finalisation of the Framework Agreement to ensure consistency of the technical annexes and to make the CSDs located outside the euro area aware of whether their national currencies will be available in T2S or not. The Currency Participation Agreement is also expected to be finalised by early 2011.
The T2S Programme Board has continued its extensive debate with the market about the future T2S governance arrangements, which will enter into force after the signature of the Framework Agreement and the Currency Participation Agreement, and will be valid for both the remainder of the development phase and the operational phase. The latest proposal was discussed in June with the Advisory Group, the CSD Contact Group and non-euro area central banks. It was subsequently presented to the Governing Council of the ECB and to the European regulators for their comments. Further feedback from relevant stakeholders will be taken into account before finalising the proposal by the end of the year. In short, it is anticipated that the Advisory Group will continue to exist as a forum involving all stakeholders, and that CSDs and non-euro area central banks will be represented by a CSD Steering Group and a Foreign Currency Steering Group respectively, through which they will be able to have an appropriate level of influence on the T2S programme. The management of the project will rest with the T2S Board, the successor of the T2S Programme Board (for more details, see Jean-Michel Godeffroy’s Editorial in this issue of T2S OnLine).
Following the June meeting of the Advisory Group, the T2S Programme Board adapted its proposal for the pricing structure, based on the amount of IT processing capacity required by each service, in response to the market’s request for a simpler tariff structure. As a result, instead of being priced separately, several items will be included in the general settlement fee charged for each transaction. A complete financial dossier – outlining the new tariff structure, the updated volume estimates and the estimate of the project costs – should be ready in the autumn for discussion with the market.
Work on the T2S technical documentation by the 4CB and ECB teams has progressed substantially over the last few months. In its May meeting, the T2S Programme Board approved version 4.0 of the T2S General Functional Specifications (GFS [7.6 MB]). It is important to note that the GFS were published nearly half a year ahead of schedule, thanks to the efforts and efficient coordination of the 4CB and ECB teams. The document is based on version 5.0 of the T2S User Requirements Document (URD), which was “frozen” by the T2S Advisory Group in January and approved by the Governing Council in February. The GFS provide a comprehensive description of the functional design of the T2S platform. The document will also form the basis for the development of further technical documentation, such as the User Detailed Functional Specifications (UDFS), which will be published in the first half of 2011. More details on the GFS can be found in the article by Mehdi Manaa in the “Insight” section of this issue of T2S OnLine.
Significant progress has been made in this field since April, when the Governing Council decided that connectivity to T2S shall be provided by up to three competing network providers. The T2S Programme Board has agreed with the 4CB that the selection process will be conducted by Banca d’Italia on behalf of the Eurosystem and under the supervision of the T2S Programme Board, in the form of a public tender. The selection criteria are currently being defined in consultation with the market. The Eurosystem will launch the formal tender in the autumn, aiming to select the T2S network providers in the last quarter of 2011. For further information, see “Bayle's view” in this issue of T2S OnLine.
