Central Securities Depositories (CSDs)

Central Securities Depositories (CSDs) will move their securities accounts to the T2S platform for settlement purposes. It is on these accounts that CSDs will hold all of their clients’ securities positions for settlement. Similarly, T2S will maintain dedicated central bank money accounts for CSD customers – through the national central bank chosen by the customer. Holding both securities and cash accounts on the platform will ensure delivery-versus-payment (DvP) in real-time.
To find out more about how T2S works, see also the T2S Animation video.

Hence, T2S will be a service offered to CSDs, and not a CSD itself. The mutual rights and obligations of the Eurosystem and CSDs relating to the use of the T2S settlement platform have been defined in the T2S Framework Agreement.

Framework Agreement

After more than two years of negotiations and numerous meetings at various levels, the Eurosystem has concluded its negotiations with CSDs on the Framework Agreement [8.69 MB] , the contract which governs the legal relationship between the Eurosystem and each CSD participating in T2S.The Framework Agreement represents a crucial milestone in the T2S project.

The Framework Agreement regulates the scope of control CSDs have over the IT functions outsourced to the Eurosystem, as well as issues such as liability, protection of intellectual property rights and confidentiality. The T2S Framework Agreement is comprised of the main document that contains all of the contractual provisions (the “core Framework Agreement”) and the more technical and operational schedules that are annexed to the agreement and form an integral part thereof. The schedules cover, inter alia, the T2S programme plan, user testing, user migration, the Service Level Agreement, governance, change management, pricing and exit management. Each CSD will enter into a separate but identical Framework Agreement with the Eurosystem, which will be represented by the relevant national central bank, or by the ECB (in the case of non euro area CSDs).

Following endorsement by the Governing Council on 17 November 2011, the Framework Agreement and the related schedules have been offered to all CSDs in Europe. In a letter, the President of the ECB, Mario Draghi, has invited the CSDs to sign the Framework Agreement by April 2012.

CSDs which require additional time to complete their feasibility studies should sign by June 2012 at the latest. The Governing Council decided to offer financial incentives to those CSDs who decide in favour of an early contractual commitment and early migration to T2S. The table below summarises the offer:

User connectivity

CSDs – as well as NCBs and other directly connected parties – will interact with the T2S platform by sending and receiving messages via a network. Network services will be supplied by a number of competing providers selected through a Eurosystem-led licensing procedure. T2S will act as an interface to each of the chosen providers and the connected participants will decide which of these they wish to use. (see also T2S Online No 10 - Bayle's view)

Adaptation plans

Preparations for T2S are also ongoing at the CSD level, and the CSDs are drafting their plans for adjusting their internal procedures to T2S. Some CSDs have published their adaptation plans on their websites.

CSD eligibility criteria

On 14 January 2010, after extensive discussion with the market, the ECB Governing Council adopted five criteria for eligibility of CSDs in T2S. These criteria aim at ensuring a level playing field between CSDs and preventing any free-riding behaviour. The criteria, which represent basic principles, are now defined in an ECB decision, thus ensuring improved transparency and legal certainty.

Nature of outsourcing in T2S

The CSDs will move their securities accounts to T2S for technical record-keeping and processing of settlement. However, they will remain the legal owners of these accounts and will be legally responsible for customer relations. The Eurosystem clarified its view on the nature of outsourcing in T2S in a note published by the Governing Council in October 2009, which has also served as basis for the negotiations of the Framework Agreement with CSDs. (Spotlight)

Memorandum of Understanding

A major milestone demonstrating the CSDs’ support for the project was achieved on 16 July 2009, when 27 CSDs signed the T2S Memorandum of Understanding (MoU) with the Eurosystem. (Bayle’s view)

Another three CSDs joined the MoU later on, between November 2009 and June 2010, namely VPS (the Norwegian CSD), KDPW (the Polish CSD) and KELER (the Hungarian CSD).

The signature of the MoU by 30 CSDs was evidence of the strong interest in and commitment to negotiating the T2S Framework Agreement that has now been offered to the CSDs.