1. finance
2. bank

I. 
What is T2S and why does Europe need it?
II. 
How will T2S work?
III.  Project organisation
IV.  T2S benefits
1
2
A single IT
technical
platform
Harmonised
Commoditised
DvP in CeBM
A solution
to the current
fragmentation
An entirely
new concept
Multi-currency
dimension
Core
Neutral
Borderless
securities
settlement
Reversed
integrated
model
Market participants
CSD A
CSD B
CSD C
direct access
Custodians
CSD x
One technical platform used by
CSDs for securities settlement
One integrated settlement process (domestic and cross-border)
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The Eurosystem had to choose between the two possible ways of settling
securities in central bank money:
•  Interfaced model
Two platforms: clients’ cash accounts are held with
central banks and the clients’ securities accounts are held with the CSDs
•  Integrated model
One platform: both central bank cash accounts and
securities accounts are held within the same platform
T2S will be based on the integrated model and ensure realtime DvP settlement in central bank money
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Notary function
Registration of
issuer indebtness
and investor holdings
Type of intermediation
issuer / investor
Custody and asset- e.g. coupon payments,
servicing function redemptions, stock splits
Settlement
function
Banking function*
*only in some (I)CSDs
Change of ownership
among investors
e.g. lending
and borrowing
buyer / seller
lender / borrower
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NBB-SSS
OeKB
EVK
CIK
NEGICEF
SITEME
INTERBOLSA
SIX SIS LTD
Euroclear UK and Ireland
Euroclear Sweden AB
KDD
Euroclear Finland Oy
Euroclear France S.A.
Clearstream Banking Ffm
KDPW
Iberclear – BME Group
Clearstream Banking Lux
HELEX
BOGS
VPS
Monte Titoli S.p.A.
CDCP
CSD of Lithuania, plc
VP SECURITIES
Malta Stock Exchange plc
Cyprus Stock Exchange
Latvian Central Depository
KELER
Depozitarul Central S.A.
Icelandic Securities Depository
7
I. 
What is T2S and why does Europe need it?
II. 
How will T2S work?
III.  Project organisation
IV.  T2S benefits
8
TARGET2
VALIDATION and MATCHING
VALIDATION
CSD A
CSD
A
SECURITIES
CENTRAL
BANK
CENTRAL
BANK
MONEY
MONEY
CSD A ACCOUNTS
NCB A ACCOUNTS
NCB
NCBAA ACCOUNTS
ACCOUNTS
NCB B ACCOUNTS
NCB
NCB BBACCOUNTS
ACCOUNTS
OPTIMISATION
OPTIMISATION
CENTRAL
BANK
CENTRAL
BANK
MONEY
MONEY
NCB
NCBAA
of
SETTLEMENT
CSD B
CSD B ACCOUNTS
SETTLEMENT
SETTLEMENT
NCB
NCBBB
and
REALIGNMENT
REALIGNMENT
CSD C
CENTRAL
CENTRALBANK
BANK
MONEY
MONEY
CSD C ACCOUNTS
NCB C ACCOUNTS
T2S
NCB
NCB CAACCOUNTS
ACCOUNTS
NCB
NCBCC
Other RTGS
T2S will bring on one technical platform all securities and cash
accounts to settle all securities transactions in central bank money
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  Optimised settlement model
• 
• 
CSD securities
CeBM cash
  Real-time gross settlement (RTGS),
combined with
• 
• 
• 
Auto-collateralisation
Continuous optimisation
Recycling mechanisms
  In addition, T2S provides e.g.
• 
• 
• 
• 
• 
• 
Matching services
Conditional securities delivery
Automated real-time realignment of
cross-CSD positions
Single account repository
Standardised interfaces
Message subscriptions and reporting
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18:45-19:30
Start-of-day
•  Change of Business Date
•  Static Data Update
•  Instruction Revalidation
based on SD maintenance
•  Settlement Eligibility
•  Liquidity transfers
(preparation for the night-time
settlement period, such as
arrange funding in the T2S
DCA)
19:30-03:00
03:00-05:00
05:00-18:00
Night-time
Maintenance
Daytime
settlement period
Window **
settlement period
•  Liquidity Transfers
•  Repeat n
Cycle & sequences
End of Cycle
reporting
Static Data Update*
Last Cycle:
•  Partial Settlement
•  Multiple Liquidity
Provider reimbursement
at end of cycle
•  Predefined/Standing
Liquidity Transfer Orders
•  End of Cycle Reports
•  Statement and Reports
•  Interface services
restricted
•  Other services
unavailable
•  Continuous real time
Settlement
•  Liquidity transfers
•  Partial Settlement window
•  Intraday DVP cut-off 16:00
•  Intraday FOP/BATM/
Central Bank operations
cut off 18:00
18:00-18:45
End-of-day period
•  Release of EoD cash
restrictions
•  EoD intraday credit
reimbursement
•  EoD Liquidity Transfers
(cash sweep) + forced
RTGS Liquidity Transfers
•  Technical bookings
•  Stop settlement
•  Recycling and purging
•  Securities Accounts
consistency check
•  Statement and reports
* Static Data updates are accepted throughout the night-time settlement but are implemented at the end of cycle sequences if they impact the settlement process
** There are considerations to align the maintenance window to the maintenance window timeline in T2
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Optimisation Features
Technical Netting
Partial settlement
Additional Optimisation Algorithms
(Identification of chains of transactions)
Auto-collateralisation
•  Technical netting reduces the need for cash and securities on transactions to minimise the use
of resources.
•  Partial settlement splits transactions if only limited resources remain available.
•  The additional optimisation algorithms look at all transactions in different ISINs to identify
chains of transactions, empty circles, etc.
•  Auto-collateralisation creates extra liquidity for settlement via collateral on flow and on stock.
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• Definition: An automated intraday credit operation in central bank money duly
collateralised aiming at facilitating the settlement of securities-related transactions and
triggered when cash is insufficient on the buyer’s side.
  Auto-collateralisation should be available
•  To all participating markets
•  During the whole settlement day at zero interest
•  In repo and in pledge environments
  Substitution of auto-collateral operations
•  If securities used for auto-collateral operations are needed for a securities transaction,
T2S will automatically release the securities for an equivalent amount of cash, or
automatically substitute them for other securities.
  Closing of auto-collateral operations
•  Settlement banks will have the choice to close all or part of their auto-collateral
operations on request.
•  Dedicate liquidity to close their auto-collateral operations.
•  All auto-collateral operations will be closed automatically at the end of day.
13
CSDs in T2S
CSD in T2S
Indirect
connection
T2S Parties
T2S Party
T2S
T2S
CSDs in T2S
Direct
connection
CSD in T2S
T2S Parties
T2S Party
Technical connection
Contractual relationship
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•  T2S brings de facto harmonisation to settlement (single
settlement procedure and schedule, ISO 20022 messages, etc.)
and also indirectly fosters further harmonisation of market
practices throughout Europe
•  Harmonisation progress is defined in association with T2S
stakeholders and builds on market initiatives
•  The Eurosystem co-operates with other relevant EU bodies and
groups, like CESAME2, to align market participants and public
authorities for the implementation of harmonised standards
within European local markets
T2S represents a unique opportunity to dismantle
Giovannini barriers and stimulate European
harmonisation in post-trading
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I. 
What is T2S and why does Europe need it?
II. 
How will T2S work?
III.  Project organisation
IV.  T2S benefits
16
17
Tariff Structure
Investment
cost
PLUS
Running
costs
Volume
estimates
TIMES
Prices
18
Preparation
phase
July 2006
Specification
phase
July 2008
Development
phase
User Testing
phase
Operational
phase
February 2010
January 2014
September 2014
Go-live
19
Specification phase
Preparation phase
July 2006
Development phase
User Testing phase
Feb 2010
June 2010
1Q 2011
3Q 2011
3Q 2011
3Q 2011
Publication
of frozen
URD
version 5.0
Publication
of final GFS
version 4.0
UDFS
Draft
version
Expected
signature
Currency
Participation
Agreement
Expected
Signature
Framework
Agreement
UDFS
Version
1.2
4Q 2011
1Q 2012
2Q 2013
Announcement User
UDFS
of chosen Handbook version 2.0
network version 1.0
providers
20
Development phase
Specification phase
Preparation phase
July 2006
January
2014
Start of
user testing
Operational phase
User Testing phase
September 2014
Go-live
Migration
planned in 3
waves of CSDs
21
I. 
What is T2S and why does Europe need it?
II. 
How will T2S work?
III.  Project organisation
IV.  T2S benefits
22
T2S Benefits
Investors
T2S
CSDs
Custodians
Issuers
Benefits of T2S
23
•  access to a technologically advanced, state-of-the-art, and
highly robust settlement engine
•  savings from no longer needing to invest in costly and risky IT
projects to update their settlement infrastructure
•  ability to take advantage of economies of scale from pooling
together settlement volume across the whole of Europe
•  new business opportunities and access to new markets for
asset-servicing
24
•  significantly lower settlement fees for domestic and, in
particular, cross-border transactions
•  Possibility to access all securities from potentially one CSD
•  possibility to optimise collateral and liquidity
management
•  reduced back-office costs by streamlining interfaces and
centralising settlement activity
•  new business opportunities and access to new markets
for asset-servicing
25
•  fostering a higher level of competition in Europe’s post-trade industry
•  contributing to harmonisation of clearing and settlement in Europe,
thereby promoting a Single Market for financial services
•  reducing the cost of capital for firms, thus contributing to economic
growth
•  positively impacting financial stability by reducing settlement risks on
cross-border transactions
•  offering easy portfolio diversification to investors
•  enabling issuers to easily reach European investors
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Cross-border
settlement as
inexpensive as
domestic
Reduced users´
collateral/liquidity
needs
Users will only need
an account at one
CSD to settle any
transactions in
securities within T2S
Harmonising
settlement to
make Europe a
true Single
Market
Create new
opportunities for
competition
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