Service for against payment instructions in Euro within the CBF Investor CSD link to CBL

15.12.2017

Clearstream Banking AG, Frankfurt1 informs customers about the enhancement for against payment instructions in Euro settling between a CBF customer and a counterparty acting via Clearstream Banking S.A., Luxembourg (CBL). This applies for the service in the CBF Investor CSD link with CBL. Effective

19 December 2017

for securities that can settle via TARGET2-Securities (T2S) and are maintained via the interoperability link between CBF and CBL, the cash leg in Euro will settle via the Dedicated Cash Account (DCA) on T2S. This procedure will enable a broader application of Central Bank Money (CeBM).

The enhanced instruction flow between CBF, CBL and T2S is based on the established framework. Therefore, Clearstream is going to implement the solution that requires neither additional customer account settings nor an update of existing contracts.

CBF customers will benefit, as it will be possible to manage cash settlement activities entirely using the T2S liquidity management procedures. That is, the related against payment instructions will be covered in the cash forecast reporting of T2S and CBF. A customer who has subscribed for the CBF Cash Forecast service can manage their liquidity needs via the CASCADE Online functionality (HOST / PC).

In the following, the details for the settlement service for against payment instructions via the CBF’s depository account at CBL are outlined.

CBF’s depository account at CBL

The service enhancement will enable an against payment instruction flow in Euro (CeBM) via CBL where CBF acts as Investor CSD. This is applicable for delivery or receive against payment instructions against the depository account “4496 CBF W/CBL-AUSLAENDISCHE WERTE”, which is represented on T2S with the T2S Party BIC “CEDELULLCPI”.

CBF customers should consider whether it will become necessary to update their standing settlement instructions (SSI) as the instruction management on T2S will change. In future, against payment instructions in Euro will be executed on T2S as against payment settlement transactions. This is different from today, where such instructions are settled in Commercial Bank Money and follow the related free of payment (FoP) settlement procedure. Even though the against payment procedure will apply starting on 19 December 2017, CBF still recommends the use of the “common trade reference” to reduce the risk of a cross-matching.

CBF customers may wish to inform their counterparties about the enriched CBF service for the settlement in Euro.

Eligible securities

For the before-mentioned service enhancement the existing eligibility criteria will continue to apply to the CBF Investor CSD link with CBL.

Please find below the list of eligible security instruments as of 15 October 2017:

  • Selected New Global Notes (NGNs);
  • Selected Eurobonds;
  • Selected Eurex-eligible securities;
  • Selected French registered equities (Michelin S.A. ISIN FR0000121261, Lagardère S.C.A. ISIN FR0000130213 and Gecina S.A. ISIN FR0010040865);
  • Selected LU-ISINs (ETFs);Finnish securities (debt instruments, equity-linked securities, Finnish Depository Receipts (FDR) with the settlement location / depository Euroclear Finland;
  • Swedish equitiy TELIA, Telia Company, SE0000667925.

A full list of eligible securities is attached to this announcement.

Eligible instruction types

Starting on 19 December 2017, the CBF Investor CSD link with CBL will be updated to support a cash management in Euro via the T2S Dedicated Cash Account (DCA).
The table below shows the required setup for the enabled instruction types via T2S. Changes are highlighted.

Instruction type

Selected
currency

Customers using
ICP mode

Customers using
DCP mode

Free of payment (RFoP and DFoP)

Not applicable

FoP format and structure

FoP format and structure

Against paymenta (RvP and DvP)

Euro in Central Bank Money

DvP format and structure

DvP format and structure

Against payment (RvP and DvP)

non-
T2S Currencies

DvP format and structure

Instruction to be set up as FoP containing debit / credit indicator, currency and cash amount details

With payment (RwP and DwP)

Currently this instruction type is not supported.

Payment free of delivery (PfoD)

Currently this instruction type is not supported.

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a. The service is suspended until T2S Release 1.3.1 will be launched.

Instructions provided for a settlement via this link will follow the T2S Out-CSD link procedures set up by CBF. As today, the settlement on T2S will be conducted based on the T2S “Conditional Securities Delivery (CoSD)” logic. A rule will ensure that the settlement on an external platform is finalised before the settlement will be executed on T2S. Instructions matched on the Intended Settlement Date (ISD) will be automatically blocked by T2S. They will be released by CBF in due time upon finalisation on the relevant external platform. Based on the message subscription, the customer will receive the related status reporting in ICP and/or DCP mode.

Acting in ICP mode

In general, the instruction specifications defined for “CBF International” will remain unchanged. Delivery and receive against payment instructions (DvP/RvP) with the settlement currency “EUR” will be processed as any other against payment instruction entered in ICP mode. However, from 19 December 2017 the cash leg in Euro will no longer settle via the related 6-series cash account on Creation using Commercial Bank Money (CoBM). Instead, cash will settle in CeBM via the Dedicated Cash Account (DCA) defined on T2S.
If a customer transmits/enters an instruction in any other settlement currency, the procedure will follow the instruction flow for “DvP Settlement in non-T2S Currencies” as established with CBF’s migration to T2S.

Acting in DCP mode

Similar to the procedure for customers acting in ICP mode, customers acting in DCP mode can manage their against payment instructions in Euro using the sese.023. In future, instructions set up for the depository CBL (T2S Party BIC “CEDELULLCPI”) have to be entered with the against payment instruction details. The procedure to generate a FoP instruction with cash amount details will be applicable for any other non-Euro Currencies. That means, today’s procedures remain unchanged.

Deadline for instruction entry

The enhancement for the CBF Investor CSD link with CBL is based on the settlement procedures and schedule of T2S. The current deadlines will remain unchanged. However, customers must consider that the underlying settlement procedure for against payment instructions in Euro will change. Today, these instructions are executed using the “DvP Settlement in non-T2S Currencies” procedure; meaning that the FoP settlement procedure applies. In future, such instructions will be executed as DvP and hence the related matching criteria as well as the settlement deadline (T2S DvP cut-off time at 16:00) will be applicable.
In general, customers shall submit their instruction as early as possible to achieve a matching on T2S prior to the ISD. Only if an instruction against payment should be settled within the same day (today = ISD) and was not provided earlier or blocked for settlement, the related instruction must be presented not later than 15:40. This is valid for instructions provided in:

  • ICP mode via an automated connectivity channel (SWIFT, File Transfer or MQSeries) or CASCADE Online functionality (HOST / PC);
  • DCP mode using the T2S instruction entry functionality;
  • Creation (CBL).

Counterparties must also take this deadline into account.

After this deadline, instructions will be no longer accepted for the current settlement day and blocked automatically. They will be revalidated for a processing on the next business day; meaning that they are forwarded to the next possible processing cycle, which is the night-time processing. 

Cash management

From 19 December 2017, the Euro cash leg for against payment instructions set up against the CBF Investor CSD link with CBL will settle against the DCA. Instructions specifying the depository account “4496” will be processed via the T2S liquidity management. Pending instructions against payment will be part of the T2S and CBF cash forecast reporting. The amounts will be included in the reported total amount of the Cash Forecast. Therefore, no dedicated funding procedure is required. Any setting defined for a DCA will also be applicable for such instructions.

In addition, customers who have subscribed for the CBF Cash Forecast service will be able to manage their liquidity needs via the CASCADE Online functionality (HOST / PC). From a functional point of view, there is no need to change the existing settings.

As today, customers will need to ensure that sufficient liquidity is available on the related DCA. The CBL Treasury Management will ensure the funding for receive against payment legs via the depository account “4496”. This means, the cash leg will be processed via the CBF Omnibus Account. Internal procedures will allow for proactive cash management on the related DCA.

Cash blocking can be conducted on T2S, similar to the securities blocking procedure. For example, if securities settlement with a cash leg will be executed on an external platform. The T2S blocking logic does not allow a blocking of cash higher than the available amount on the DCA. On Intended Settlement Date (ISD), T2S will block the settlement amount of the receive against payment instruction (RvP) as soon as the status matched and release is achieved. Customers acting as Cash-DCP and ordered camt.068 (IntraBalanceMovementConfirmation) will receive a message about the blocking. Once the cash was blocked, a message will be sent to the relevant external platform and in the following a settlement confirmation will be provided. Based on this confirmation, CBF will initiate the CoSD release, so that the processing can be completed on T2S.

In the event of a settlement delay on the external platform, the cash blocking will be cancelled after the T2S DvP cut-off time. The amount will be transferred to the RTGS account with the T2S Cash Sweep at around 17:40. The RvP instruction is still subject to CoSD processing. Within the next night-time settlement (Cycle 1, Sequence 1), after the liquidity transfer on the DCA, the cash blocking will be re-created by T2S.

Upon message subscription for the MT942 “Interim Transaction Report” and the MT950 “Statement Message”, will receive a cash reporting that combines the movements from TARGET2 and from T2S. Against payment transactions settling on T2S DCAs via the CBF Investor CSD link with CBL will be included in these reports.

The current cash management procedure for foreign currencies remains unchanged and will not be affected by this service enhancement. 

Transition management

On Tuesday, 19 December 2017, customers can start to transmit their instructions (DvP/RvP) with a cash leg in Euro that shall settle via the depository account “4496” (BIC11 “CEDELULLCPI”, CBF W/CBL-AUSLAENDISCHE WERTE). According to the transition plan, customers acting in ICP mode can start to transmit their instructions on Tuesday, from 01:30. Customers acting in DCP mode can send their instructions to T2S with the start of the T2S Real-time Settlement (RTS) cycle, at 05:00.

Contact

The T2S Support team will be able to answer your questions regarding the service enhancement for DvP instructions in Euro within the CBF Investor CSD link to CBL.

Please note that after the successful deployment of T2S Releases our Client Services teams will be responsible for any questions of the customers pertaining to production processes.

Clearstream T2S Support Team

Email: T2S-Support@clearstream.com
Tel. +49 (0) 69 / 211 18 27 8
Fax. +49 (0) 69 / 211 60 80 60
Clearstream Migrated to T2S - We Will Support You

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1. This Announcement is published by Clearstream Banking AG (CBF), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500.

2. More details are available under  Instruction specifications -  CBF International.