Liquidity Management - Functional overview
(Features in T2 and T2S to manage liquidity incl. T2S Interface in T2)
Information event for future DCA holders, 16 Dec 2013
Siegfried Vonderau, 3CB/4CB
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Features in T2 and T2S to manage liquidity
Functional and technical aspects
1
Overview
2
T2S Interface and its features in T2
3
Basics about T2S liquidity transfers
4
Information about liquidity transfers – monitoring functions
2
Integrated settlement in T2S
 T2 as liquidity provider for euro cash
TARGET2
SETTLEMENT INSTRUCTIONS
Securities
CSD A
CSD B
Accounts
CSD A
T2S
SETTLEMENT
ENGINE
Accounts
CSD B
CeBM
CeBM
Accounts
Central Bank A
Accounts
Central Bank A
Accounts
Central Bank B
Accounts
Central Bank B
Central Bank
A
Central Bank
B
CeBM
CSD C
Central Bank
Accounts
Central Bank C
Accounts
CSD C
T2S
Accounts
Central Bank C
C
Non - € RTGS
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Communication with T2S via T2S Interface
- T2: Communication via a new interface in T2 (T2SI)
- T2 - T2 customers: A2A, GUI (U2A) or FIN MT
- T2 – T2S: usage of ISO20022 standard messages including
business application header (BAH)
- T2S – T2S Actors: Via licensed Network Service Providers
(NSPs), i.e. VAN: A2A and (GUI) U2A
A2A ISO 20022
Messages
U2A Access
via T2S GUI
SWIFT /
SIA-Colt
T2S Actor
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Features in T2 and T2S to manage liquidity
Functional and technical aspects
1
Overview
2
T2S Interface and its features in T2
3
Basics about T2S liquidity transfers
4
Information about liquidity transfers – monitoring functions
5
T2S Interface in T2 (T2SI)
 T2S Interface in T2 (T2SI) will technically connect the eurodenominated DCAs in T2S with the RTGS accounts in T2
- New dedicated interface specially designed for T2S (T2 release 7.0)
- T2SI provides features for shifting easily and quickly liquidity from
RTGS accounts to dedicated cash accounts (DCAs) and vice versa
 Mandatory functionality (core services)
- Focusing on liquidity management with T2S for T2 direct participants
having migrated to the XML message standard required by T2S
 Optional value added services
- Envisaged for those T2 direct participants having not migrated to the
new XML message standard (still using legacy standards). The value
added services are only provided as whole package and priced
separately.
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T2SI core (mandatory) services
 Current order liquidity transfer ("push") to T2S (via
XML/A2A and ICM/U2A)
 Standing order liquidity transfer to T2S
 Current order liquidity transfer ("push") to T2S by so called
"T2S Actor in T2" (via XML/A2A)
 Debit notification (on optional basis) for liquidity transfer
("push") provided as FIN MT, XML/A2A:
- Current order (initiated via ICM/U2A or by T2S actor in T2) or via
- Standing order
 Credit notification (on optional basis) on incoming liquidity
transfer from T2S (FIN MT, XML/A2A, ICM/U2A)
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T2SI core service – liquidity transfer to T2S
 Flow of current order liquidity transfer to T2S initiated via XML message by T2 account holder
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T2SI core service – liquidity transfer to T2S
 Flow of standing order liquidity transfer to T2S
 Predefined in T2 static data (execution: start of
business day)
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T2SI core service – liquidity transfer to T2S
 Flow of current order liquidity transfer to T2S initiated by "T2S Actor in T2"
- To be authorised by the T2 participant
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T2SI core service – incoming LT from T2S
 Flow of incoming liquidity transfer initiated in T2S
(during the day or end-of-day)
- Credit notification (on optional basis) via MT 202 or XML
(camt.050)
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T2SI value added services
 Current order liquidity transfer ("push") via SWIFT FIN
message MT 202
 Current order liquidity transfer (“pull”) from T2S DCA to
RTGS account (FIN MT, XML/A2A, ICM/U2A)
 T2S DCA intraday balance
- Monitor the balances of the T2S DCA accounts linked to the RTGS
accounts directly in ICM (U2A) or
- Request the DCA balance via XML message (A2A)
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T2SI value added service – „pull“ liquidity
 Flow of liquidity transfer from T2S initiated in T2:
“pull liquidity“ via XML message
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T2SI value added service – „pull“ liquidity
 Flow of liquidity transfer from T2S initiated in T2:
“pull liquidity“ via MT message
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Failed liquidity transfers – features in T2
 Abnormal situations in processing liquidity transfers sent from
T2 to T2S and available procedures
- Negative functional ACK (Receipt – camt.025)
- Automatic reversal booking
- Missing functional ACK (Receipt – camt.025):
- Manual resend of liquidity transfer
- Simulate missing positive ACK
- Simulate negative receipt, i.e. manual reversal booking via ICM
- Technical NAK - negative ReceiptACK (admi.007)
- Resend of liquidity transfer
- Manual reversal booking via ICM
- Note: in all these "abnormal situations" a broadcast will be sent to T2S
transit account holder (ECB)
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Features in T2 and T2S to manage liquidity
Functional and technical aspects
1
Overview
2
T2S Interface and its features in T2
3
Basics about T2S liquidity transfers
4
Information about liquidity transfers – monitoring functions
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Role of liquidity within T2S
 Liquidity transfers are needed in order to provide T2S
DCAs with liquidity.
• Injection of
liquidity into
T2S
Start of Day
During the
Day
• Use of liquidity
within T2S for
settlement
• Reimbursement
to the RTGS at
the end of day
End of Day
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T2S liquidity transfer - definition
 A liquidity transfer is an instruction to transfer central bank
money from an RTGS account to a T2S dedicated cash
account (DCA) or vice versa from a T2S DCA to an
RTGS account.
 Under certain rules liquidity transfers are also used to move
cash between two T2S DCAs. As a general rule liquidity
transfers work only between accounts denominated in the
same currency.
 At the end of day all available liquidity on DCA is transferred
to the linked RTGS account (“automated cash sweep”).
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T2S liquidity transfer – direction
 Internal liquidity transfers (T2S DCA – T2S DCA)
 Outbound liquidity transfer (to T2)
 Inbound liquidity transfer (from T2)
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T2S liquidity transfer – execution time
 Immediate Liquidity Transfers
- Immediately executed as soon as the transfer is instructed and
entered in T2S
 Standing Liquidity Transfer Orders
- Internally triggered by T2S if a certain business event or time is
reached (defined by holder of account to be debited; valid until
deletion)
- Executed daily each time the business event or time is reached
- Either a specified amount or “all cash” can be transferred
 Predefined Liquidity Transfer Orders
- Internally triggered by T2S if a certain event or time is reached
- Executed only the first time the time or business event is reached
- Either a specified amount or “all cash” can be transferred
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T2S liquidity transfers – fundamentals
Liquidity
Transfers
T2 RTGS A/C
to T2S DCA
T2S DCA to
T2 RTGS A/C
T2S DCA to
T2S DCA
(Inbound)
(Outbound)
(Internal)
YES
YES
YES*
T2S - Partial
Execution **
Number of
Executions
NO**
As many as
needed
YES
Only once per
DCA per
time/event
Immediate
liquidity
transfer
order
Predefined
liquidity
transfer
order
N/A
YES
NO
Standing
liquidity
transfer
order
***
YES
NO
YES
One to many
at different
points in
time/events
*) DCAs shall be owned by the same T2S party (or) between DCAs linked to the same RTGS account
**) Partial execution can only take place if the instruction is placed by a T2S Actor (i.e. CSD) acting on behalf of an
account owner (valid for outbound and internal immediate liquidity transfer orders).
***) Standing order execution in T2 towards T2S only once at beginning of the T2 business day. from T2S
perspective considered as immediate liquidity transfer.
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T2S Multiple liquidity provider
 T2S enables its T2S Actors to receive liquidity from different
RTGS accounts (i.e. from different liquidity providers) to a
single T2S DCA.
 The multiple liquidity provider functionality can be used to
automatically retransfer the liquidity remaining at the end of
the night-time settlement phase from the T2S DCA of the
T2S Actor to the RTGS accounts of its liquidity providers.
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T2S Multiple liquidity provider
Automatic retransfer of the remaining liquidity on the
T2S DCA to the respective RTGS accounts at end of
night time settlement (defined in T2S static data)
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Features in T2 and T2S to manage liquidity
Functional and technical aspects
1
Overview
2
T2S Interface and its features in T2
3
Basics about T2S liquidity transfers
4
Information about liquidity transfers – monitoring functions
24
Features of T2S Liquidity monitoring
 Liquidity monitoring enables T2S Actors to receive
information available with relation to T2S DCAs,
especially
-
Settled amounts
Cash Balances
Blocking and reservations
Exceeding thresholds
Reports
Notifications
Queries
T2S Liquidity Monitoring
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T2S liquidity monitoring
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T2S liquidity – DCA balance
 GUI screen: T2S DCA balance details
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Features of T2 liquidity monitoring
 Notifications about debits of liquidity transfers from T2 to
T2S (core service)
- Initiated via ICM/U2A
- Initiated via standing order
- Initiated by authorised "T2S actor in T2"
 Credit notifications about incoming liquidity transfers (from
T2S) (core service)
 ICM/U2A liquidity information screens (value added service)
- Current liquidity RTGS account
- Current liquidity linked DCAs
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Features of T2 liquidity monitoring
 Display current liquidity RTGS account (value added
service)
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Features of T2 liquidity monitoring
 Display Current Liquidity on Linked DCAs (value
added service)
- Function available for single participants and
- Group of accounts (GoA) manager
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Reference documents
 More detailed information can be found in
- T2 UDFS v7.2:
- Chap 2.9 Interconnection with TARGET2 Securities
http://www.ecb.europa.eu/paym/t2/professional/nov_2013/html/index.en.html
- T2 UHB v7.0
- T2S key documents http://www.ecb.int/paym/t2s/about/keydocs/html/index.en.html:
- UDFS v1.2.1
- T2S UHB v1.0
- T2S Connectivity Guide v1.0
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Thank you for your attention
www.t2s.eu
www.target2.eu
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