T2S Release 5.0: Possibility of submitting already matched cross-border instructions
Clearstream Banking1 informs customers that, following the implementation of TARGET2-Securities (T2S) Release 5.0, effective
14 June 2021
customers will be able to generate “already matched” cross-border instructions.
OneClearstream will streamline the Clearstream Banking AG (CBF) service offering and adopt the functional enhancements provided by T2S. In June 2021, T2S will introduce the change request “Possibility of submitting already matched cross-CSD settlement instructions (T2S-0383-URD)”. The updated “already matched” functionality will meet the objective of a harmonised pan-European settlement.
In future, customers will be able to send already matched instructions against T2S In-CSD linked to CBF. Therefore, in addition to the T2S mandatory matching criteria, customers also need to present the counterparty CSD account and the counterparty details in Party Level 1.
Customers that would like to create cross-border instructions with the “already matched” flag, need to dispose of a Power of Attorney (PoA) for the counterparty’s account with the T2S In-CSD involved. In order to ensure that the authorisations of all T2S actors are sufficiently secured, T2S will extend its rights management. Customers and their counterparties must inform the central depositories (CSD) involved of their intention to send already matched cross-border instructions, so that the CSDs can assign them the related rights with T2S. The CSD can set up the PoA for a T2S Party or for a T2S Securities Account (SAC). Once a related customer order has been received, Clearstream Banking will set up the privilege for a T2S Party. Hence, the PoA is given for the CBF account master and can be used for the CBF main account (“000”) and all related subaccounts. The setup requires two steps. The PoA needs to be established with CBF as well as with the CSD of the counterparty.
Clearstream Banking will offer this service for customers acting in ICP or DCP mode. Similar adaptations are required from all T2S In-CSD if service is to be offered. The market readiness of T2S In-CSD will be communicated progressively and market link guides will be updated accordingly. Clearstream Banking will inform about the necessary documentation to be provided by the customers and their counterparties, so that the PoA can be stored in T2S in due time.
An additional flag for sending already matched cross-border instructions will be added to the account master data. Based on this flag, customers have the possibility to create, modify or cancel ALM instructions:
- Free of payment (FoP);
- Versus payment (DvP) against settlement currency EUR;
- Payments free of delivery (PFoD) resulting out of a netting.
Customers acting in DCP mode and receiving a copy of the sese.023 sent by CBF, need to consider that this copy is always provided by T2S, even if the instruction was created in ICP mode via CBF.
Already matched cross-border instructions can be modified or cancelled according to the related T2S rules. For this purpose, the existing online functionality or message types in ICP or DCP mode can be used.
Customers acting in ICP mode can transmit a modification (MT530 Transaction Processing Command) or a cancellation (MT54x “CANC”) message for already matched cross-border instructions.
Customers acting in DCP mode can request the modification or cancellation via CBF or T2S. In T2S, the transaction can be modified using the “Securities Settlement Conditions Modification Request (sese.030)” or cancelled using the “Securities Transaction Cancellation Request (sese.020)”. The following references can be used for instruction maintenance:
- At CBF, via the field previous message reference (“PREV”) providing the sender’s message reference (“SEME”);
- At T2S, if the instruction has been created by the DCP, the T2S Actor Reference;
- At T2S, if the instruction has been created by a third party of the DCP or another T2S In-CSD, the T2S Market Infrastructure Transaction Identification (MITI).
In general, if an already matched cross-border instruction was sent by another T2S In-CSD, then the leg to be settled with the T2S In-CSD cannot be modified or cancelled in the CBF instruction management. The modification or cancellation must be instructed via the responsible CSD.
The settlement and status reporting by CBF and T2S is not affected by the modifications related to already matched cross-border instructions. At present, customers continue to receive the reporting for the CBF-account related instructions based on the connectivity settings of the related CSD and T2S. Hence, CBF will set up a reporting only for instruction legs to be processed by CBF. For instructions with the already matched flag, CBF will not generate any Allegement Reporting (MT578 Settlement Allegement or a display in the MT586 Statement of Settlement Allegements).
Furthermore, no status reporting for unmatched instructions (MT548 Settlement Status and Processing Advice “MTCH//NMAT”) will be provided.
This procedure will also apply to already matched cross-border instructions sent in DCP mode or by another T2S In-CSD on behalf of a CBF customer. However, currently CBF will set up realignment instructions for cross-border instructions in CASCADE.
For the settlement of already matched cross-border instructions, the validation rules of T2S and of the CSDs involved are applicable. According to the current settlement procedures, an instruction accepted by CBF can be rejected by T2S, as T2S applies its own rules and those of the involved T2S In-CSD.
The usage of this new service is optional for customers. It has been designed to ease the securities realignment among T2S In-CSDs. In addition, T2S will not charge the matching fee for instructions with the already matched flag.
Customers will have the possibility to activate the new service at any time after the implementation of the release in June 2021. As a first step, customers should send already matched cross-border instructions only for securities with no special settlement rules (“Plain Vanilla”). Due to the additional information needed for the customers and their counterparties, the settlement of Italian or Belgium bonds, Spanish securities or French registered shares has not been defined by T2S yet.
Impact on transaction management
Clearstream Banking will detect already matched instructions for transformation. The pending instruction at CBF subject to transformation will be cancelled and the re-instruction will be initiated for this leg with status “NMAT”. The pending leg at the linked T2S In-CSD will be managed under the conditions of this CSD. Therefore, the customer and the counterparty are requested to check, if the matching will occur, if applicable. The usage of the opt-out flag could be considered between both parties.
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.