USER REQUIREMENTS DOCUMENT DG – Market Infrastructure and Payments Date: 28 February 2020 Version: 8.0 Status: Final T2S User Requirements Contents MANAGEMENT SUMMARY 15 Purpose and expectations 15 The context – completing the single market in financial services 16 What is T2S? 17 The impact of T2S 20 What’s next? 22 1 GENERAL INTRODUCTION 24 1.1 Introduction 24 1.2 General Principles of T2S 24 1.3 Governance structure for preparing User requirements 29 1.4 Organisation and presentation of the user requirements 30 1.4.1 Presentation of the requirements 31 1.4.2 Glossary 32 1.4.3 Graph and model conventions 32 2 SCOPE 34 2.1 Stakeholders 34 2.1.1 Eurosystem 35 2.1.2 Issuers 35 2.1.3 Investors 35 2.1.4 Public authorities 35 2.1.5 Interest groups 36 2.1.6 T2S actors 36 2.1.7 T2S Owner 37 2.1.8 T2S System Users 37 2.2 Overall context diagram 38 2.3 Securities categories 40 2.4 Types of transaction 43 2.5 Settlement currencies 44 2.5.1 Cash settlement in T2S 44 2.5.2 Cash settlement outside T2S 45 2.6 Interaction with external CSDs 46 Version: 8.0 Page 2 T2S User Requirements 3 PROCESSING SCHEDULE AND CALENDAR 50 3.1 General structure of a settlement day 50 3.1.1 High-level T2S processing timetable 50 3.1.2 Main periods of the settlement day 53 3.1.3 Service availability 59 3.1.4 Specific deadlines 61 3.2 Calendar 63 4 ROLE REQUIREMENTS 66 4.1 T2S Operator 67 4.1.1 T2S system administrator 67 4.1.2 T2S business and operations support 68 4.2 Business role CSD 68 4.2.1 CSD system administrator 69 4.2.2 CSD business user 69 4.3 Business role T2S party 69 4.3.1 T2S party system administrator 70 4.3.2 T2S party business user 70 4.4 Business role NCB 70 4.4.1 NCB system administrator 70 4.4.2 NCB business user 70 4.5 Business role payment bank 71 4.5.1 Payment bank system administrator 71 4.5.2 Payment bank business user 71 5 INSTRUCTION LIFE CYCLE MANAGEMENT AND MATCHING REQUIREMENTS 74 5.1 High level description of life cycle management and matching 74 5.2 Instruction and life cycle types 79 5.2.1 Instruction types 79 5.3 Validation 79 5.3.1 Validation of incoming settlement instructions 79 Version: 8.0 Page 3 T2S User Requirements 5.3.2 Revalidation of instructions owing to updates of static data 87 5.4 Instruction maintenance 88 5.4.1 Hold and release mechanisms 88 5.4.2 Amendment of instructions 90 5.4.3 Cancellation of instructions 90 5.5 Matching 93 5.5.1 Requirements related to matching 94 5.5.2 Mandatory matching fields 95 5.5.3 Non-mandatory matching fields 96 5.6 Settlement eligibility 98 5.6.1 Requirements related to settlement eligibility 98 5.7 Examples of life cycle and transaction types 99 6 PROVISION OF LIQUIDITY, COLLATERAL MANAGEMENT AND MONITORING OF LIQUIDITY 111 6.1 Provision of liquidity 111 6.1.1 Cash account structure for T2S and types of cash transactions allowed in T2S 111 6.1.2 Types of transactions settling on T2S dedicated cash accounts 115 6.1.3 Sources of liquidity on T2S dedicated cash accounts 117 6.2 Liquidity Transfer Order Life Cycle Management 117 6.2.1 High level description of liquidity transfer order life cycle management 118 6.2.2 Liquidity transfer order business process 121 6.2.3 Business Validation of an immediate liquidity transfer order 128 6.2.4 Settlement of a Liquidity transfer order 130 6.3 Collateral Management 134 6.3.1 Specific requirements resulting from monetary policy operations and intraday credit (without auto-collateralisation) 134 6.3.2 Specific requirements resulting from intraday credit out of auto-collateralisation 134 7 SETTLEMENT PROCESSING REQUIREMENTS 137 7.1 Settlement processing overview 137 7.1.1 Context diagram 137 7.1.2 Process description 138 Version: 8.0 Page 4 T2S User Requirements 7.2 Sequencing and prioritisation 141 7.2.1 Sequencing 142 7.2.2 Prioritisation 146 7.3 Provision check for and the posting of settlement 148 7.3.1 Booking process 148 7.3.2 Validation and requirements for the provision check 149 8 PROCESSING REQUIREMENTS FOR SETTLEMENT OPTIMISATION AND AUTO-COLLATERALISATION 157 8.1 Settlement, optimisation and recycling procedures 157 8.1.1 Objectives of T2S settlement, optimisation and recycling procedures 158 8.1.2 Main features of optimisation procedure in T2S 160 8.1.3 Optimisation procedures during the night-time settlement window 161 8.1.4 Optimisation procedures during the daytime settlement window 162 8.1.5 Partial settlement procedures 167 8.1.6 Settlement and optimisation procedures applicable to non-euro-denominated transactions 170 8.1.7 Settlement and optimisation procedures applicable to sets of transactions denominated in several currencies 171 8.2 Auto-collateralisation 172 8.2.1 Central banks’ role in intraday credit provision through auto-collateralisation 172 8.2.2 Payment/settlement banks’ role in intraday credit provision through auto-collateralisation 172 8.2.3 Conditions for triggering auto-collateralisation 173 8.2.4 Settlement of the cash leg and securities leg of auto-collateralisation operations 173 8.2.5 Management and identification of eligible collateral in the settlement of auto-collateralisation operations 174 8.2.6 Conditions for the selection of collateral 176 8.2.7 Collateral movements in auto-collateralisation operations with central banks 176 8.2.8 Types of underlying transactions eligible for auto-collateralisation 177 8.2.9 Modification of auto-collateralisation limits during the settlement process 178 8.2.10 Reimbursement of credits provided through auto-collateralisation 179 8.2.11 Dynamic reimbursement of auto-collateralisation and automated substitution of collateral 181 9 SPECIFIC SETTLEMENT PROCESSING REQUIREMENTS 183 9.1 Settlement of specific categories of securities 183 9.1.1 Funds shares 183 Version: 8.0 Page 5 T2S User Requirements 9.1.2 Coupon stripping/reattachment 184 9.2 Specific settlement procedures 185 9.2.1 Settlement of linked transactions 185 9.2.2 Transfer of baskets of collateral 187 9.2.3 Blocking and reservation of cash or securities 188 9.2.4 Conditional securities deliveries 189 9.2.5 Settlement of multilateral instructions 191 9.2.6 Borrowing and lending operations in securities 192 9.3 Corporate actions settlement 192 9.4 Cross-CSD settlements and in/out T2S settlements 195 10 SECURITIES POSITIONS AND CASH BALANCES 208 10.1 Securities Positions 208 10.1.1 Attribute Requirements for Securities Positions 208 10.1.2 Process of Rebuilding of Securities Positions 210 10.1.3 Blocked, Reserved and Earmarked Positions 211 10.2 Limits 217 10.2.1 Defining Limits 218 10.2.2 Limit Utilisation 220 10.2.3 Journaling of Limit Utilisation 221 10.3 Cash Account Balances 222 10.3.1 Rebuilding of T2S Dedicated Cash Account Balances 223 10.3.2 Blocked and Reserved Cash Balances 223 11 CONFIGURATION REQUIREMENTS 226 11.1 Business date 226 11.2 Daily processing schedule 227 11.3 System entity management 227 11.4 Closing day calendar 231 11.5 Tolerance amount 231 11.6 Attribute domain management 232 11.7 Settlement priority defaults 239 11.8 Sequencing rules 239 11.9 Roles and privileges for authorisation 240 Version: 8.0 Page 6 T2S User Requirements 11.9.1 Privileges 240 11.9.2 Roles 242 11.9.3 T2S system users 243 11.10 Services and service configuration 246 11.10.1 Message subscription service 247 11.10.2 Restriction Types 251 11.11 SWIFT BIC directory 260 11.12 Partial settlement parameters and thresholds 262 11.13 Conditional securities delivery parameters 263 11.14 Recycling periods for pending settlement instructions 266 11.15 Acceptable time deviation between the intended settlement date and the reception of a settlement instruction in T2S 267 11.16 Outbound message bundling parameters 268 12 INTERFACES AND CONNECTIVITY REQUIREMENTS 270 12.1 Context diagram of interfaces 270 12.1.1 Context diagram 270 12.1.2 Process description 271 12.2 Interface requirements 273 12.2.1 Technical interface 273 12.2.2 Interface validations 277 12.2.3 Interaction with other T2S components 279 12.3 Connectivity requirements 280 12.3.1 CSDs and T2S parties 281 12.3.2 NCBs’ systems 282 13 MESSAGES AND REPORTS REQUIREMENTS 285 13.1 Message subscription requirements 285 13.2 Messages requirements 287 13.3 Detailed message flows 291 13.3.1 Flow of settlement related activities 294 13.3.2 Flow of non-settlement related activities 314 13.4 Messages glossary 316 13.5 Requirements for Reports 323 Version: 8.0 Page 7 T2S User Requirements 13.5.1 General Report Requirement and Rules 323 13.5.2 Report types 325 14 QUERIES REQUIREMENTS 329 14.1 General query requirements and default rules 329 14.1.1 General query requirements 329 14.1.2 Default rules 329 14.2 Securities Balance Queries 331 14.2.1 Query types 331 14.2.2 Availability of query and response mode 332 14.2.3 Query parameters 332 14.2.4 Securities Balance Query by CSD or T2S party 333 14.2.5 Securities Balance Query by T2S party account 333 14.2.6 Parameters for querying securities balances 333 14.2.7 Querying Securities Balance History 334 14.2.8 Securities Balance History Query by Security or Country of Issuance 335 14.2.9 Securities Balance History Query by T2S party 335 14.2.10 Securities Balance History Query by T2S party Account 335 14.2.11 Content of the responses 337 14.3 Settlement Instruction Queries 338 14.3.1 Settlement Instruction Query 338 14.3.2 Settlement Instruction Current Status Query 340 14.3.3 Settlement Instruction Status Audit Trail Query 342 14.3.4 Settlement Instruction Audit Trail Query 343 14.4 Static Data Queries 344 14.4.1 Securities Reference Data Queries 345 14.4.2 Party Reference Data 346 14.4.3 Securities Account Reference Data