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Sub-group Process Efficiency

About

The Sub-group on Process Efficiency is supporting the T2S Advisory Group by identifying and formulating proposals for harmonisation of processes in the T2S context and of processes that have an impact on T2S system specification.

Key documents

The Interim Report of the Subgroup on Process Efficiency (July 2009) download
The Final Report of the Subgroup on Process Efficiency (December 2009) download

Meetings
Members
Mandate
Mini-consultations

Meetings

Past

Members

Function	Name	Organisation
Chairman	Amend, Karla	Clearstream
Rapporteur	Sagar, Katrin	ECB
	Arraez Gonzalez, Maria Teresa	Banco de Espana
	Lázaro, Amado	BBVA
	Leidner, Michael	BNP Paribas
	Wennekes, Mieke	De Nederlandsche Bank
	Werner, Swen	Deutsche Bank
	Fair, Robert	Euroclear
	Bayo, Angel	European Savings Banks Group (ESBG)/ La Caixa
	Bury, Jon	Goldman Sachs
	Porfyris, Nicos	Helex
	Álvarez, Ignacio	Iberclear
	Ferrara, Francesco	IntesaSanPaolo
	Granata, Umberto	Monte Titoli
	Numminen, Anu	Nordea
	Oppitz, Martin	Oesterreichische Nationalbank
	Trüb, Martin	SIX SIS AG
	Person, Sylvain	Société Générale
	Hougaard, Niels W.	VP Securities Services
	Loscher, Dirk	Citi

Mandate

Introduction

The T2S User Requirements Document (T2S URD) represents a major consensus among securities market stakeholders on European settlement practices and processes. It reflects their agreement, which upon implementation will contribute to a 'lean' T2S settlement platform applicable to all joining markets.

However, in addition to this agreement, the Eurosystem has received a strong request and support to look for topics that could be further harmonised in the post-trade area. In light of such strong request the Eurosystem published a harmonisation proposal to the CSDs on May 23, 2008. In this proposal several T2S harmonisation candidates were listed under List B, the agreement and implementation of which could have direct impact on the T2S system specification (URD Annex 16).

Mandate

The Process Efficiency Sub-group should focus on the topics that could be harmonised in the T2S context and that have an impact on T2S system specification. The AG mandates the Sub-group to:

Assess the list of topics presented in the attached Annex;
Propose to the AG standardised T2S functional rules and practices on issues listed in the attached Annex taking into account the standards and recommendations developed by other European bodies and initiatives;
Interact with and monitor the work currently done by other bodies and initiatives that also seek to achieve harmonisation in those specific items;
Present a proposal for solutions to the topics in Annex to the AG by end of July 2009.

The outcome of the Sub-group work should represent the consensus of its members whereas the final validation of the proposals is the responsibility of the AG. The Chairperson of the Sub-group should report to the AG on the progress made and seek guidance where required.

The mandate of the Process Efficiency Sub-group expires at the end of 2009 and may be reviewed and renewed as required.

Composition

The Sub-group will be composed of:

The Chairperson, appointed by the AG Chairperson
The Chairperson shall (1) decide on the frequency, format and agenda of the meetings; (2) conduct the Sub-group meetings; (3) invite external experts and/or T2S Project Team members to the Sub-group meetings on specific topic; (4) represent the Sub-group in liaisons with other relevant European bodies and initiatives; (5) report to the AG.
The Rapporteur
The Rapporteur shall be a member of the T2S Project Team and (1) co-ordinate the organisation of the meetings and relevant documents; (2) support the Chairperson in preparations for the Sub-group's meetings; (3) draft the outcome of the meetings; (4) support the Chairperson in liaisons with other relevant European bodies and initiatives; (5) support the Chairperson in preparations for reporting to the AG.
Members, appointed by the AG Chairperson
Members shall (1) represent expertise on both functional and non-functional aspects of securities settlement processes relevant to the topics presented in Annex; (2) have good knowledge of the T2S URD, (3) preferably participate also in other relevant European bodies and initiatives.

Participants in the Sub-group shall provide adequate resources anticipated for achieving progress within a short time period. Participation to the Sub-group is on a strictly personal basis. Should a member be unable to attend a meeting, he/she will in general not be able to designate an alternate. Exemptions to this rule can only be granted in exceptional cases by the AG Chairperson. In addition, regular attendance is a pre-requisite for membership in the Sub-group and membership will cease should a member be absent for a total of more than two meetings.

Whenever a member has left the entity he/she represents, his/her membership will cease with immediate effect and his/her entity may propose a substitute member to the AG Chairman.

Working procedures

Meetings
The Process Efficiency Sub-group should meet as regularly as required to fulfil its mandate and upon invitation of its Chairperson. The exact frequency and form of the meeting is ultimately a decision of the Chairperson fo the sub-group. When considered feasible, written procedures may be applied.

Interactions with other initiatives and forums
The Process Efficiency Sub-group should liaise with relevant actors (e.g. securities industry associations) for the purpose of ensuring that their expertise in the topics presented in the Annex is taken into account. The Sub-group may consult relevant actors as considered necessary.

Mini-consultations
The Process Efficiency Sub-group may decide to issue mini-consultations or questionnaires and involve NUGs on dedicated topics in order to better reflect the market needs in standardising T2S functionalities.

Transparency
All documents that are discussed by the Process Efficiency Sub-group are posted on the ECB website to ensure full transparency. In exceptional cases, the Chairperson may decide not to post individual documents on the ECB website if she/he considers such documents to be of confidential nature.

Annex T2S harmonisation candidates

Issue reference	Business Area	Issue	Issue description	URD Chapter /Section	Relevant body (e.g. T2S Project Team, other external)	Harmonisation proposal	Priority	Current Status
B.02	LCMM	T2S handling of repo settlement	The handling of repo settlement can be initiated via one or two settlement instructions, depending on market practices. This can be harmonised to streamline the process in T2S.	Chapter 5	NUGs/European Repo Council (ERC)	AG has proposed that T2S supports both models via a splitting functionality. 3CBPlus to estimate cost for splitting functionality for AG's consideration.	High	Open
B.03	LCMM	Recycling rules for "hold" status	There is a need to define a single rule for recycling the hold status of an instruction/transaction.	Section 5.4.1	ECSDA/ESF/ NUGs		High	Open
B.03.1	LCMM	Recycling rules after matching	There is a need to define a single rule for recycling matched transactions. This is particularly relevant for cross-CSD transactions.	Section 5.4.3	ECSDA/ESF/NUGs	The current URD provides for CSDs to set their own recycling periods. One proposal would be to leave the recycling period open until bilateral cancellation. Another proposal would be to agree on a maximum period of recycling applicable to all markets.	High	Open
B.07	Settlement	Threshold for partial settlement	Currently, there is no harmonised threshold for partial settlement (managed unilaterally at CSD and CCP levels). This could be harmonised per asset type, to enable more system automation.	Section 8.1.6	ECSDA/ESF/ EACH/ NUGs	Harmonised threshold per asset type to be agreed	Medium	Open
B.08	Settlement	Auto-collateralisation	Procedures for transferring securities to NCBs as collateral are currently different. It refers to both functional and legal differences.	Chapter 8	Eurosystem/ CCBM2	Need to agree on a single procedure, especially on the functional level, for auto-collateralisation	High	Open
B.09	Settlement	Multilateral Settlement without a CCP	There are some markets with multilateral settlement model without the use of CCP.	Chapter 9 / Section 9.2.5		It would be optimal to have a single system functionality to support multilateral settlement without CCP in T2S. Some markets are already considering the possibility to make use of CCP services	High	Open
B.10	Non-functional requirements	Period for data archiving	Archiving obligations are not the same for all CSDs. Harmonisation at European level could help automation, reduce the size required for archiving databases and increase performance of data retrieval.	Section 17.1.3	NUGs/CESR	A working proposal would be a period of 10 years.	High	Open
B.11	Settlement	Single Framework for Fails management	Need to define an overall common framework for fails management. This could include various optimisation techniques: technical netting, partial settlement, self-collateralisation etc. End of day fails procedures such as buying-ins, securities lending would be assessed in this context. The issue of end of day fails procedures managed by some CSDs will also be assessed as part of an overall framework.		NUGs/ CESR (in case of regulatory impact)/ ECSDA	Agree on a single framework.	High	Open
B.12	LCMM	Amendment	CSDs have different approaches when instructions cannot settle as initially sent. Some will amend ("transform") instructions, changing part of their content, and others will cancel and re-instruct ("replace"). T2S enables both, but there is room for harmonisation, especially at business process level (to define when amendment is preferable to cancel/replace and vice-versa).	Chapter 5	ECSDA/NUGs	Agree on a common procedure	Low	Open
B.13	LCMM	Future dated transactions	Different markets have different practices, with respect to the maximum time period for the forward settlement date, for the second leg of the repo transaction.T2S encourages the market to define a maximum time period for the settlement date of the second leg of repo.	Chapter 5	ECSDA/NUGs/ ERC	Agree on maximum time period.	Medium	Open
B.14	LCMM	Validation	There is a need to define common harmonised national validation rules that are not covered by the current single set of T2S validations rules	Chapter 5	ECSDA		Medium	Open

Mini-consultations

Modification of settlement instructions (24 July until 28 August 2009)
CSDs additional validation rules (24 July until 28 August 2009)
Automatic partial settlement in T2S (29 June until 21 August 2009)
Auto-collateralisation operations (29 June until 21 August 2009)
Multilateral settlement without a CCP (29 June until 21 August 2009)
Single framework for fails management (29 June until 21 August 2009)
Period for data archiving (11-29 May 2009)
Future-dated and back-dated instructions (11-29 May 2009)
T2S non-mandatory matching fields (11-29 May 2009)
T2S handling of securities financing instructions (10-27 February 2009)
T2S system rules for recycling (10-27 February 2009)

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