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The negotiations on the Framework Agreement, i.e. the contract that defines the rights and obligations of the Eurosystem and the CSDs, have been progressing well and are now close to finalisation. Intensive discussions have taken place in recent months on all key aspects of the contract. Both parties have been able to settle many open issues and it is anticipated that the remaining aspects will be settled in dedicated workshops over the summer – which will again be a busy one. In June a draft of this contract was shared with the Advisory Group and the European Securities and Market Authority (ESMA) and their initial feedback was taken into account (see also the editorial).
The Advisory Group and ESMA may provide further comments over the summer so that this input can be taken into account when finalising the negotiations with the CSDs in September 2011. Following their meeting on 21 July, the Governing Council issued a press release confirming its intention to offer the Framework Agreement to the decision-making bodies of the CSDs in October 2011 and inviting them to decide whether to sign the contract before the end of 2011.
The Currency Participation Agreement governs the relationship between the Eurosystem and the non-euro area central banks that will make their national currency available for securities settlement in T2S. Over the past twelve months, intensive and constructive negotiations have been conducted with Danmarks Nationalbank, Sveriges Riksbank, Norges Bank, the Swiss National Bank, the Bank of England and the Central Bank of Iceland. The Currency Participation Agreement is to be finalised in parallel with the Framework Agreement and will thus be offered to the non-euro area central banks in October so that the Agreement can be signed before the end of the year. Clarity on the currencies available in T2S will benefit CSDs in their decision-making regarding the Framework Agreement. For more information, see our interview with Governor Hugo Frey Jensen from Danmarks Nationalbank.
After intensive discussions with market participants, the Programme Board decided earlier this year that T2S actors will be able to connect to T2S via two mechanisms, i.e. either via a value-added connection or via a dedicated link. In early July the selection process for (up to) two value-added network service providers was launched by the Eurosystem. The process is being managed by the Banca d’Italia on behalf of the Eurosystem. The full documentation is available on their website. Discussions on the selection process for the dedicated line provider are still ongoing and are anticipated to be finalised later this autumn.
In 2010 VP Securities, the Danish CSD, issued a request for a derogation from CSD eligibility criterion 5 in order to be able to settle a very limited number of delivery-versus-payment transactions in central bank money outside T2S. The Programme Board had intensive discussions with VP Securities, consulted the Advisory Group on the matter and, with the Advisory Group’s consent, suggested to the Governing Council that it grant a derogation. The Governing Council agreed to the derogation in April 2011. Compliance with the derogation will be carefully monitored by VP Securities, Danmarks Nationalbank and the Programme Board.
In April 2011 the Governing Council and the 4CB (Deusche Bundesbank, Banque de France, Banco de Espana, Banca d’Italia) signed the contract regarding the development and operation of T2S, referred to as the L2/L3 Agreement. This contract defines the legal relationship between the Eurosystem and the 4CB as provider of the T2S platform. As specified in this contract, the first two instalments for the 4CB’s development work in the amount of €104.5 million were due and paid at the end of May 2011. At the same time, the Eurosystem national central banks that are prefinancing the project made a payment of €31.5 million to the ECB by way of compensation for the cost it incurred between January 2008 and December 2010.
