TARGET2-Securities
Settlement services quick guide
Contents
Introduction05
T2S is getting closer. What you need to know
06
Settlement day schedule
Your securities account setup
Your connectivity with us
Your settlement instructions: mandatory changes
Your and your counterparty’s SSIs
06
06
07
07
10
Mandatory changes still under definition
10
Market specificities
Cross-border settlement
10
10
Enhanced T2S functionalities
11
Matching and reporting
11
Partial settlement
12
Linkage and pooling
12
Prioritisation13
Hold and release
13
Corporate actions
14
Corporate events “on stock”
Corporate events “on flows”
14
14
Liquidity and financing services
14
Introduction
The intent of this new quick guide is to allow you to easily assess how your activities and
developments should be adapted to the new settlement processes in TARGET2-Securities (T2S).
T2S implementation will require CSDs and participants to make significant investments to adapt to the
new platform to continue to offer competitive post trading services. BNP Paribas Securities Services has
always – and continues – to shield its clients, as much as possible, with respect to T2S adaptation cost.
Nevertheless, as we highlight in this document, our clients are required to implement some changes.
On top of becoming familiar with the new “settlement day schedule”, you need to understand and to
be able to manage the new matching fields, to be aware of the enhanced T2S functionalities and to
understand if they can create value for your business. In short, you need to be clear on what
BNP Paribas Securities Services can do for you, but also on what you have to do to take advantage
of the full potential of T2S.
This document will be complemented by updates to our swift booklet and direct interaction with your
relationship manager on details of the key areas of changes important to you.
This is therefore a simple manual for clients using BNP Paribas Securities Services in the traditional
“agent bank model”.
BNP Paribas Securities Services can also offer more sophisticated operational scenarios like “Asset
Servicing Only” and “Sponsored Settlement Access”. As they are complex scenarios that require
dedicated workshops and tailored made solutions, this document will not refer to them directly,
although some of the aspects covered would also be applicable to these solutions.
5
T2S is getting closer. What you need to know
Settlement day schedule
T2S will follow its own settlement day schedule which differs from the current settlement schedule of
the European CSDs. The T2S settlement day schedule will be organised as follows:
¡¡ A night-time settlement (NTS) organised in 2 batch cycles
¡¡ A real-time settlement (RTS) up to 6pm CET with two major cut-off times:
¡¡DVP cut-off time at 4pm CET
¡¡FOP cut-off time at 6pm CET
T2S will not be available from 3am CET to 5am CET due to a daily technical maintenance window.
We will adapt to these changes and are in the process of defining our future client settlement cut-off times.
19.30
03.00
05.00
14.00
15.45
End of
DvP
SoD
Cycle 1
16.00
Cycle 2
Realtime
Maintenance
18.00
End of
FoP
Real-time settlement
¡¡ The NTS process starts at 7.30pm CET on intended settlement date (ISD)-1
¡¡ The RTS starts after the completion of the NTS cycles
¡¡ Settlement instructions, which do not settle during the NTS, are automatically recycled for RTS
¡¡ Pending settlement instructions can be amended by users in both RTS or NTS
¡¡ Unmatched settlement instructions remain valid in T2S for 20 working days and then are
automatically cancelled by T2S
¡¡ Matched instructions remain valid for an unlimited period of time
Your securities account setup
BNP Paribas Securities Services will maintain the current direct account relationship with the issuer
CSDs. All CSDs have made the choice to map the securities accounts on a one-for-one basis for their
participants in T2S.
In the same way, we will not change your security account setups in our books.
Your current account numbers and account structure will remain in place.
In the markets where BNP Paribas Securities Services manages your activity in a “dedicated account
at the Issuer CSD”, we will continue to offer this service.
6
Your connectivity with us
We will be a direct connected participant (DCP) in T2S. This status requires us to use ISO 20022
messages for all our communications with T2S and to set up a dedicated technical link with T2S.
For your connectivity with us, we will maintain the possibility to use the ISO 15022 format
and the Swift FIN technical connectivity. You can also instruct us via NeoLink, our proprietary
communication tool and via dedicated communication lines (for example, by sending flat files).
Dedicated line
Files
CSD authorised format
Settlement (market specifities)
and asset servicing
BNP Paribas
Client
ISO 15022
ISO 20022*
CSDs
T2S
ISO 20022
Settlement
Web
Neolink
Your settlement instructions: mandatory changes
T2S will introduce multiple features that will contribute to harmonise and optimise the settlement
process. We are adapting our platforms so that you can reap the benefits of these features while
minimising the changes required.
Nevertheless, some changes are necessary in order to comply with the new T2S rules and procedures,
such as the new settlement instruction matching criteria .
Matching criteria
In the T2S detailed specifications, the Eurosystem states: “When a new instruction enters T2S, the
matching process compares each of the mandatory and non-mandatory matching fields of the
settlement instruction with the settlement instructions that remain unmatched in T2S”.
¡¡ Mandatory matching fields are those fields that must be present in all settlement instructions
and whose values must be the same in both settlement instructions for the transaction to match
and settle
¡¡ The only two exceptions are:
¡¡Settlement movement type deliver/receiver (DELI/RECE), whose values match with
opposite values
¡¡Settlement amount for DVP/PFOD instructions where a tolerance is applied and for
credit/debit code (CRDT/DBIT)
* We will also develop ISO 20022 settlement messages for clients that wish to use this format, while maintaining ISO 15022 for the others and for
asset servicing.
7
¡¡ Non-mandatory matching fields can be ‘additional’ or ‘optional’:
¡¡Additional matching fields are not mandatory, but their values must match whenever one
of the counterparties inputs a value for them. Hence, once an additional matching field
is used by one counterparty, the other counterparty should also complete the field and
match its value. An additional matching field cannot match with a field with no value.
These additional matching fields are new to settlement instruction messages
(and related matching reports)
¡¡Optional matching fields can match to a field with no value (unlike additional matching
fields). However, when both parties specify a value, then the values must match
Depending on the transaction type, the mandatory fields differ, as described in the table below. Our T2S
ISO 15022 booklets highlight the impacts in the messages.
Mandatory matching fields: DVP/DWP vs FOP
Mandatory matching fields
DVP/DWP
FOP
Payment type
Securities movement type
ISIN code
Trade date
Settlement quantity
Intended settlement date
Delivering party BIC
Receiving party BIC
CSD of the delivering party
CSD of the receiving party
Currency
n/a
Settlement amount
n/a
Credit/Debit
n/a
Trade date:
¡¡ Is always a mandatory field, even for FOP transactions (this is not the case in all markets today)
¡¡ Is one of the key indicators for the “corporate actions on flows” process in case of delayed settlement
¡¡ Combined with additional matching fields, it defines the eligibility of the underlying settlement
instruction for market claims and transformations
CSD of delivering/receiving party
¡¡ T2S requires proper identification of counterparty CSD for both intra-CSD and cross-CSD settlement
Today, CSD requirements differ on how the BIC code of the CSD counterpart should be completed for
cross-CSD settlement
8
Additional matching fields
Additional matching fields
DVP/DWP
FOP
Opt-out ISO transaction condition indicator
CUM/EX Indicator
¡¡ The ISO Swift transaction codes, combined with the trade date, allow CSDs to activate the
“corporate actions on flows” process
¡¡ To avoid the automated activation of the corporate action on flows process, the opt out Swift
code value “NOMC” must be used
¡¡ CSDs will not generate market claims for instructions with this Swift code value
¡¡ CUM/EX Swift code can also be used to establish an entitlement outside of regular
entitlement dates
¡¡“CCPN”: Cum coupon. The trade was executed cum coupon
¡¡“XCPN”: Ex coupon. The trade was executed ex coupon
Warning
¡¡ The use of these additional matching fields must be agreed with the counterparty. Any
discrepancy in the value of additional matching fields will prevent the trade from matching.
Optional matching fields
Optional matching fields
DVP/DWP
FOP
Common trade reference
Client of delivering CSD participant
Client of receiving CSD participant
Securities account of the delivering party
Securities account of the receiving party
Warning
¡¡ The use of these additional matching fields must be agreed between counterparts. Any
discrepancy in the value of additional matching fields may prevent the trade from matching.
¡¡ Very few markets currently allow their usage:
¡¡A common market practice across different markets is missing
¡¡The Eurosystem is still discussing the best and most effective usage of optional
matching fields
9
Your and your counterparty’s SSIs
T2S handles the securities accounts that T2S parties (i.e. custodians and settlement agents) have
opened in the books of their respective CSDs. In order to match the CSD accounts with the T2S accounts,
T2S needs a unique identifier for each account. The specific information required is:
¡¡ The BIC of the CSD
¡¡ The BIC 11 of the party/counterparty
You will have to provide your counterparties with our company’s BIC code and with the BIC code of the
CSDs where the BNP Paribas’ securities account is held.
Should you wish to use the optional matching fields, your SSI must include any value defined in future
market practice (for instance your BIC code). Your counterparts will have to supply the same information.
Currently, CSDs and national communities are still working to fine-tune the mapping of securities
accounts at T2S level to maintain the current account structure.
Mandatory changes still under definition?
Market specificities
While T2S is handling core settlement functions, some settlement-related processes may:
¡¡ Be performed in T2S provided that required market-specific processing or information is provided
¡¡ Require to be performed via the local market infrastructure platforms as not eligible in T2S
BNP Paribas Securities Services is contributing to the T2S NUG (National User Group) in every market we
are present.
We also regularly participate in dedicated working groups and CSD/NCB bilateral meetings.
We will continue to update you on the relevant market specificities as they become clearer.
So far, market infrastructures have not delivered enough detailed information to detect other possible
mandatory adaptations.
Cross-border settlement
The required information for cross-border settlement between two CSDs within T2S is already known
and does not differ from that required for domestic settlement.
It should be noted that the place of settlement (PSET) must be completed with the BIC 11 of the CSD
of the counterparty.
However, if one of the CSDs is not part of T2S, the required information is still being analysed. The
information may be different from that required in the T2S markets as it depends on the links the
T2S CSD maintains with the out-of-T2S CSD (e.g. direct account relationship/relayed link) and possible
specific practices. We will provide more on this topic as we get detailed specifications from each CSD.
10
Enhanced T2S functionalities
T2S introduces new functional features for the management of settlement processes.
We aim to provide our clients with all the benefits of the new services and to outperform the standard
T2S offer.
Below we highlight the new T2S functionalities and how we will extend them to our clients and create
additional value.
Matching and reporting
T2S service
As described in the previous section, T2S will introduce new matching criteria with mandatory,
additional and optional matching fields. T2S matching reporting is limited to essential information about
the status of each single settlement instruction (i.e. matched or unmatched). However, T2S will not:
¡¡ Report any reason code regarding unmatched instructions
¡¡ Recognise a potential pair of instructions (your trade and your counterparty’s trade) that did not
match for any reason
Our added-value services to outperform T2S will enable:
¡¡ An enhanced control of unmatched instruction management process via MT548 messages
¡¡We will combine the matching details of all your unmatched instructions with the
allegements received from T2S and will provide you reporting for matching failure. Please
note that Swift reason codes in MT548 will be enriched with unmatched reason codes
currently not used in the existing CSDs settlement platforms
¡¡We will inform you of the counterpart’s trade details in the Swift narrative fields
¡¡ A more effective management of cash tolerances
¡¡When T2S reports a matching failure caused by a cash discrepancy, based on your setting
we independently manage the cash adjustment in T2S
¡¡ An extended support in the management of bilateral cancellations
¡¡We will report the status update of your request of cancellation via MT548
¡¡When a counterpart requests the cancellation of an already matched settlement
instruction we will notify you via MT548
11
Partial settlement
T2S service
Partial settlement is a T2S process automatically activated during specific windows in the T2S
settlement day schedule. The process is driven by predefined T2S rules.
¡¡ It is allowed by default unless one of the 2 counterparties specifies the contrary
¡¡ It is performed once during the night cycle and twice during the real time settlement phase
T2S functionalities will also enable you:
¡¡ To specify the partial settlement indicator in your settlement instruction
¡¡ In case of partial settlement to automatically allow us to cancel the underlying transaction
and create 2 separate instructions (a settled leg and a pending leg)
¡¡ To receive full reporting during settlement cycles to allow full visibility on the partial
settlement chain
Our added-value service to outperform T2S will enable you:
¡¡ To provide us with your permanent partial settlement indicator. We will apply it to all of your
settlement instructions in T2S
Linkage and pooling
T2S service
Settlement Instructions can be linked via an “indicator” or a “pool reference” specified by a T2S actor.
The function aims to support the settlement of specific operations such as delivery-redelivery, pair-off
instructions, lending and borrowing, etc.
To benefit from linkage:
¡¡ You can instruct us with your linked settlement instructions via MT54x
¡¡ You can link settlement instructions during their lifecycle via MT530
Our added-value service to outperform T2S will enable you to:
¡¡ Control the chain of your linked instructions. In case the target instruction is missing we will
advise you via MT548
¡¡ Receive help in the pool creation. We will control the coherence between your pool counter
and your pooled instructions
¡¡ Be advised via MT548 in the event that the pool is not completed or your pool counter exceeded
¡¡ To receive MT548 messages enriched with Swift reason codes belonging to link and
pool functionalities
12
Prioritisation
T2S service
T2S allows parties (i.e. custodian and settlement agent) to set two levels of priority: normal and high
priority. T2S uses priority levels in case several settlement instructions, belonging to the same ISIN
code, compete for the same securities position.
T2S priority model is fairly basic. It does not provide multiple levels of priority for precise manipulation
of the settlement sequence.
Our added-value service to outperform T2S will enable you to:
¡¡ Book a quantity of securities needed for a specific settlement instruction. The other transactions
with lower priority will be eligible for settlement in T2S only if your securities position can
satisfy them
¡¡ Instruct us with your preferred sequence of “release” among your settlement instructions
¡¡ Opt for a default set up of permanent priorities per counterpart or per beneficiary
Hold and release
T2S service
The T2S “hold and release” process provides T2S actors with the functionality to hold and release “over
the counter” settlement instructions at any time during their lifecycle until they are settled or cancelled.
We offer you two different services:
¡¡ Hold and release for early matching
¡¡We will submit all your settlement instructions to T2S as soon as they are received in
status “hold”
¡¡We will release them for settlement in T2S according to your position management model
¡¡ Hold and release on your request
¡¡You can specify your own “hold” indicator directly in the MT54x settlement
instruction message
¡¡You can instruct us to change the status indicator via MT530
¡¡We will release your instructions for settlement in T2S according to your position
management model
¡¡ Our reporting for both hold and release services
We will report to you hold and release indicators via MT548 when T2S transmits it. As said for other T2S
functionalities MT548 will be enriched with proper Swift reason codes dedicated to hold and release.
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Corporate actions
Corporate events “on stock”
T2S will not have any direct impact on our corporate action services.
All processes for the execution of corporate events remain under the responsibility of the CSD.
Events are processed by the CSD based on the eligible securities position existing on record date in the
securities account.
The issuer CSD applies the existing rules to verify the entitlement of the securities account.
Corporate events “on flows”
This process is managed outside T2S by each CSD.
The Corporate Action Joint Working Group (CAJWG) has defined a consistent and coherent set of market
standards for the operational processing of all categories of corporate actions, including transaction
management. Corporate events “on flows” are applied on pending settlement instructions across a
corporate event. They trigger the creation of “market claims” and “transformations”. This concept is not
new to some markets but will be extended to all T2S countries.
¡¡ Market claim: is the process to reallocate the proceeds of a cash or securities distribution to the
contractually entitled party
¡¡ Transformation: is the process by which pending transactions, on or after key dates, are
cancelled and replaced by new transactions in accordance with the terms of the reorganisation
CSDs generate market claims and transformations and send them in T2S as settlement instructions.
CSDs are still defining their operating model.
We plan to introduce an harmonized reporting service among T2S countries. We will report the creation
of market claims and transformations linked to the “parent” settlement instruction.
Please refer to the previous section regarding “additional matching fields”.
Liquidity and financing services
To support the settlement process BNP Paribas will continue to extend credit and liquidity to its clients
as it does today.
The night-time settlement process will require participants to have adequate purchasing power to allow
settlement during the night period. T2S’ sophisticated auto-collateralisation mechanisms will allow
participants to benefit from the intraday financing services offered by the central bank. To reduce the
liquidity cost and constraints we will extend such auto-collateralisation mechanisms to our clients.
This will be formalised in a dedicated auto-collateral annex to the custody agreement.
We will continue to offer both “fail coverage” and “opportunity” securities lending services. The current
local deadlines will be reviewed and harmonised according to the new T2S settlement day schedule.
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or accuracy. Opinions and estimates contained herein constitute BNP Paribas Securities Services’ judgment and are subject to change without notice.
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