SII Operations Forum Euroclear Single Platform

1
SII Operations Forum Euroclear Single Platform
Funds in the UK
London 30 November 2007
2
Euroclear Single Platform FundsAgenda

• High-level description of Single Platform Custody
  scope and timeline
• Euroclear Group Consolidation strategy and
  projects
• Migration to SP Custody
• CCI
• Client readiness actions plan
• Funds
• Who are Euroclear?
• Objectives of the Euroclear and EUI funds
  solution
• Benefits of Market Infrastructure involvement
• Solution design and consultation

3
Consolidation of markets within Euroclear Group
Access / Communication
Common Communication Interface
Euroclear UK Ireland
Euroclear France
Euroclear Nederland
Euroclear Belgium
Euroclear Bank
Contract / Relationship
Domestic Service
Full Service
Service
Central Banks Payment systems
Full integration of legacy systems and
functionality
IT infrastructure
Single Settlement Engine
4
Timeline for platform consolidationClient impact
2006
2007
2008
2009
2010
CCI
Single Gateway
Early Harmonisation
SSE
SP Custody
SP Settlement
ESES
Harmonisation
Technical only
Euronextinstruments
Custody all Euroclear group markets
Settlementall Euroclear groupmarkets
Consolidation
Euronextmarkets custody settlement
Custody on a single platform
Settlement on a single platform
Settlement activity
5
Technical overview of consolidation phases
SSE
ESES
SP Custody
EBe
E NL
E F
CREST
E B
CCI
Legacy communication
ESES-CCI e-RGV - E2A
Legacy/ Settlements
ESES - RGV upgrade
SP / Custody
ESES - SP component
SSE
SSE
SSE
SP Settlement
6
Objectives of harmonisation and consolidation in
Europe

• Markets are resolved to address fragmentation
  issue
• Benefits
• Improved STP using ISO standards
• Reduction of costs and risks thanks to
• Removal of paper processes
• Standardisation of practices
• Consolidation / simplification of platforms and
  processing systems

7
The role of Euroclear Group in addressing
fragmentation issues

• Result of the Euroclear Group market
  consultation
• Play leading role in supporting key market
  initiatives to remove Giovannini barriers (e.g.,
  ECSDA, )
• Contribute to building a Single European
  Market single, harmonised platform for corporate
  actions and meetings in Belgium, France, Ireland,
  The Netherlands and United Kingdom
• Reduce X-border transaction costs thanks to
  harmonisation of market practices

8
Features of the Single Platform Custody functions

• Harmonisation
• Classification and simplification of Corporate
  Actions processes in four main categories
• Distributions
• Mandatory distribution
• Mandatory distribution with options
• Reorganisations
• Mandatory reorganisation
• Mandatory reorganisation with options
• Voluntary reorganisation
• Meetings
• Information
• E.g. certification name change
• Agreement on a single order of dates (ex-date,
  record date, payment date) for any event

9
Features of the Single Platform Custody functions

• Standardisation
• STP messaging
• between Issuer (Agent) CSD
• ISO 20022 for CA announcements and processing
• ISO 20022 for Meeting announcements and
  processing
• between CSD Client
• ISO 15022 for CA announcements and processing
• ISO 20022 for Meeting announcements and
  processing
• Standard processing in line with standardisation
  of announcements
• Increase efficiencies
• Real-time credit and reporting of cash proceeds
• Fewer Market Claims occurrence thanks to
  harmonisation of CA Dates (Ex-date, RD, PD)
• Out of scope
• Transaction management (Market claims,
  transformations, buyer protection)

10
SP CustodyKey improvement Euroclear UK Ireland

• Use of ISO 15022 formats and 20022 (Meetings)
• Harmonisation of Corporate Action processing in
  Euroclear UK Ireland
• Introduction of interim securities for all
  distributions with options
• Cash distribution
• Entitlement reporting
• Single announcement for multiple accounts or per
  account
• Standing instructions
• Standardisation of CA processes
• Extended use of ISO, STP for input and reporting

11
Euroclear Single Platform FundsAgenda

• High-level description of Single Platform Custody
  scope and timeline
• Euroclear Group Consolidation strategy and
  projects
• Migration to SP Custody
• CCI
• Client readiness actions plan

12
Migration to SP CustodyMigration steps

• Single Platform Custody functional releases
• Participants need to adapt their systems to
• Manage the new corporate action event lifecycle
  resulting from harmonisation of market practices,
• Connect to CCI,
• The Single Platform ISO formats for custody
  processes
• Gradual migration of events (under
  investigation)
• New event will start on the SP
• Live events on launch date would continue on the
  legacy platform
• Few remaining long-term live events would migrate
  to SP
• Single Platform Custody communications aspects
• Early Harmonisation
• CCI Networks and CCI gateway

13
Euroclear UK Ireland MigrationGradual
selective phased approach

• CAs started before the launch date continue LFC
  in legacy
• Selected CAs starting after the launch date start
  on SP Custody
• Before completion of the selected CAs in ,
  other CAs continue in legacy
• When the selected CAs in are successfully
  completed, all the CAs start on SP Custody
• After the end of a transition period, all CAs
  that started on legacy are end of life, or
  converted to SP Custody.
• Legacy CA is closed

14
Euroclear Bank MigrationGradual approach

• CAs started before the launch date in legacy must
  continue LFC in legacy
• All new CAs started after the launch date on SP
  Custody
• After the end of a transition period, all CAs
  started on legacy are end of life or, converted
  to SP Custody
• Legacy CA closed

1
2
3
4
15
Common CommunicationInterface

• CCI Principles
• CCI Migration

16
Three Channels

• Screen channel
• Mandatory for set-up and operator management
• Sole point of contact for smaller clients
• Back-up and exceptions for larger clients

• STP File Transfer (push)
• Files of messages
• For bulk message exchange
• Parameters to trigger outbound files
• Format identical to messaging

• STP Messaging (push)
• Individual messages
• Sent in real time
• Parameters to trigger outbound messages

STP channels (ISO15022 / 20022)
Messaging
File transfer
Screen interface
Pull recovery
Pull
Push
CCI
17
Multiple Network ProvidersBT and SWIFT
Client
Network
Euroclear group

Network Provider gateway
Network Provider gateway
Single Platform
18
Common CommunicationInterface

• CCI Principles
• CCI Migration

19
CCI - Migration Challenges
Three Levels Of Change
Connectivity

• Technical interfaces
• Network providers
• Access Method

Data Formats

• ISO Standards

Back Office

• Harmonised processes
• Training

20
Facilitating Migration
21
Euroclear Single Platform FundsAgenda

• High-level description of Single Platform Custody
  scope and timeline
• Euroclear Group Consolidation strategy and
  projects
• Migration to SP Custody
• CCI
• Client readiness actions plan

22
SP Custody Client readiness actions
planAwareness
19 June 2007 London 20 June 2007 Dublin
Roadshows
Visits and conferences
Ongoing since June 2007
CCI ongoing since July 2007 SPC ongoing since
October 2007
Webinars
23
SP Custody Client readiness actions
planPublications actions
?
November 2006
Blueprint edition 1
?
Service descriptions
Available
?
June 2007
SP Project implementation kit
?
June 2007
Documentation timeline
?
Detailed service descriptions
As of September 2007
?
As of September 2007
Data dictionnaries
?
October 2007
QA service
First Euroclear UKIR Implementation Forum
?
October 2007
24
SP Custody Client readiness actions planDSD
Timeline
25
SP Custody Client readiness actions
planwww.euroclear.co.uk
26
SP Custody Client readiness actions plan
www.euroclear.co.uk
27
SP Custody Client readiness actions plan
www.euroclear.co.uk
28
SP Custody Client readiness actions planE-mail
service

• How to stay informed of the latest news
• on SP Custody and CCI ?
• The e-mail service

29
SP Custody Client readiness actions plan
www.euroclear.co.uk
30
SP Custody Client readiness actions planQA
service, FAQ

• QA service
• EUI-SPCustody_at_euroclear.com
• SP.connectivity_at_euroclear.com
• FAQ Frequently Asked Questions
• www.euroclear.co.uk

31
Questions ?
32
Euroclear Single Platform FundsAgenda

• Funds
• Who are Euroclear?
• Objectives of the Euroclear and EUI funds
  solution
• Benefits of Market Infrastructure involvement
• Solution design and consultation

33
EuroclearEuropean funds exposure
Euroclear UK Ireland
34
Euroclear Single Platform FundsAgenda

• Funds
• Who are Euroclear?
• Objectives of the Euroclear and EUI funds
  solution
• Benefits of Market Infrastructure involvement
• Solution design and consultation

35
Market RequirementsMarket observations

• Demand for straight through processing
• Requirement for greater efficiency
• Is a plateau approaching?
• What is the true growth potential?

36
Market RequirementsTransaction volume growth as
a result of automation
37
Euroclear StrategyLong Term Vision

• European market infrastructure for pan-European
  Markets
• Order Messaging
• Settlement
• Servicing
• Separate Components
• Evolve into one environment
• Open Access

38
Euroclear strategy Integration plans
Buy side
Sell side
Scope of Euroclear Group Fund Services
Commission calculation
Record keeping in register
Order collection and order aggregation
Settlement
Order routing
Asset servicing
39
Euroclear Single Platform FundsAgenda

• Funds
• Who are Euroclear?
• Objectives of the Euroclear and EUI funds
  solution
• Benefits of Market Infrastructure involvement
• Solution design and consultation

40
Benefits of using Order RoutingEMXCo

• One Standard only one set of data required
• One connection no need to manage multiple
  connections to access many counterparties
• Reduced risk data entered once and re-used
  throughout
• Greater STP true straight through processing of
  your business processes

41
Benefits of using the UK Market
infrastructureEuroclear UK and Ireland (EUI)

• Economies of Scale
• Instructs the movement over 600bn of cash each
  day
• Cash Payments
• Central Bank Money
• Immediate irrevocable cash movements
• Payments move between the payment banks and not
  within EUI
• Multi currency payments possible in UK, US and
  Euro
• Settlement
• Guaranteed settlement on settlement date
• 80-85 of settlement occurs before 0830
• Settlement efficiency of 95
• Control over settlement and cash movements

42
Benefits of using the UK Market
infrastructureEuroclear Group

• Operational Risk
• Consultation process
• Market/Euroclear evolve together
• Build-up towards end solution
• Volume growth
• Reconciliation
• Live intra-day cash reconciliation information
• Reconciliation of Cash positions and movements

43
Euroclear Single Platform FundsAgenda

• Funds
• Who are Euroclear?
• Objectives of the Euroclear and EUI funds
  solution
• Benefits of Market Infrastructure involvement
• Solution design and consultation

44
Consultation and DesignGovernance

• Funds Liaison Group (FLG)
• New service strategy
• Market voice
• Service priority
• Market changes advice
• Technical Working Groups
• Standards committee
• New service design

45
Consultation and Design Funds Liaison Group

• Abbey Share Dealing
• APCIMS
• Bank of New York
• BNP Paribas Fund Services UK
• Brewin Dolphin Securities
• Charles Stanley
• Edward Jones
• Fidelity
• Halifax Share Dealing
• Hargreaves Lansdown

• IMA
• IFDS
• Invesco Perpetual
• JP Morgan Asset Management
• Mellon Global Securities Services
• New Star Investment Funds
• Northern Trust
• Old Mutual Asset Management
• PIMA
• Skandia

46
ProgressFLG Agreements

• Settlement of Funds should take place in EUI
• We should move towards cash and securities model
• Costs should be controlled as much as possible
• STP is the primary objective

47
ProgressLegislative and Regulatory

• Agreement with the Treasury and FSA to propose
  the alteration of regulations to allow electronic
  transfer of title
• Agreement with the Treasury and FSA to propose
  the changes to the Uncertificated Securities
  Regulations (USRs) to allow settlement of mutual
  funds in EUI
• Both of these will allow the movement of the
  market towards greater STP
• Combined with the IMA we are progressing these
  changes to a conclusion

48
Phase 1 Process flows in the UK marketCurrent UK
Order and Settlement Process
EMX
Distributor
Provider

• Benefits
• Enables direct input of transactions from EMX
  into EUI
• Allows the creation of cash settlement messages
  in EUI
• Facilitates the efficient movement of Cash
  between parties

EUI
49
Future phasesPriorities post phase 1

• Stock Settlement
• Reconciliation
• Transfers (a market acceptable standard)
• Own name to nominee
• Nominee to nominee
• Further STP

50
(No Transcript)