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T2S made easy

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T2S • Single securities settlement platform for Europe with opportunities for centralised liquidity

• Intra and cross-CSD DVP settlement on links between CSDs connected to T2S

• Direct connectivity to T2S available for clients

• Clients keep legal and business relationship with CSDs

!But

• T2S only manages “lean” settlement and some market specifics will remain

T2S

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T2S planning remains stretched

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• Balance sheets will continue to structurally deleverage

• Funding will have to be collateralised

• OTC markets driven to central execution and clearing

• Growing pressure on cost

AIFMD EMIRT2S

FTT R&R CRD IV

UCITS V Basle 3

T2S is only part of the challenge

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making choices under uncertainty

Profile

•clients segment and size

•market proximity

•access to liquidity ?Business needs

•market coverage

•service level

•asset protection

•operating model

•operational efficiencyUncertainty & capacity

•cost (development, running)

•internal roadmap & timing

•flexibility and strategic agility

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a unique and flexible access to

harmonised services

reducing cost,

complexity,

and

uncertainty

harmonised services independent of asset location

access to all counterparties in Europe

single entry point with effective centralisation

Euroclear value proposition

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T2S made easy

3 ways to access

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• DVP multi-currency CoBM settlement with seamless cross-border access to T2S counterparties

• European & international securities

• Book-entry settlement

• Clearstream bridge

T2S made easy

3 ways to access

• DVP CeBM settlement in Euro

• Efficient cross-CSD settlement on T2S

• All European markets

• Remaining barriers (e.g. primary dealership / stock exchange) or client segment may require some firms to access markets directly

• Selected markets like ESES, Germany, Italy and Spain

+

global ICSD access

single CSD access for European markets

direct CSD access operated by Euroclear

any combination with a unique access point

1 2 3

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T2S made easy

managed as a single position

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T2S made easy

with common services

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T2S made easy

… supported by a unique interface

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Euroclear T2S timeline

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• Multi-market, harmonised value-added services regardless of asset location

- Efficient ISO-based end-to-end CA announcements & processing

- Competitive close-to-market CA election deadlines

• Comprehensive tax relief & reclaim management

• Automated market claims & transformations

• Efficient voting services

• Proactive & dedicated support by local market experts

asset servicing

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A single pool with Collateral Highway

• An open architecture with access to all features including AutoSelect, Open Inventory sourcing and full re-use

• Optimising and mobilising a single pool of collateral across time-zone and location

• Access to large range of C/P

- more than 90 central banks and major CCPs

Transformation du Collatéral

Custodians

CSDs

AgentsCCPs

Banques Centrales

Banques

collateral management

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communication

ISO messaging • Highly reliable computer-to-computer access for automated high-volume users

• Single connection for settlement and other (I)CSD services

• Choice of network provider

• ISO15022 or ISO20022 message format

• Scale benefits when using Euroclear for direct access to T2S

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communication

EasyWay • new end-to-end user experience

• web-based exception management tool

• top-down and risk-oriented (alerts, deadline manager)

• multi-market / multi-location / multi-entity

• consistent navigation across services

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connectivity

asset servicing

collateral management

safekeeping

liquidity

settlement

• Single screen & STP access

• Harmonized asset servicing

• Single pool of collateral

• Choice of asset location / holding thru a SSS

• Commercial or central bank money

• Settle against any counterparties, wherever they are

T2S made easy

recap

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T2S impacts on EB High level overview

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Euroclear Bank approach to T2S

• EB will not outsource settlement to T2S but will adapt its links to the T2S CSDs ► Align with each T2S CSD adaptation plan ► Ensure the highest level of interoperability ► Become a Directly Connected Participant (DCP) ► Cover T2S markets and instruments !

• In terms of client impacts our aim is to ► Shield you from major impacts ► Limit mandatory changes on external instructions ► Allow you to use T2S functionalities on external instructions ► Extend the use of T2S functionalities to internal instructions ► Continue to provide value added services

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Euroclear Bank approach to T2S.

Euroclear Bank offers you the flexibility to choose your own approach: •“Shield” •“Adopt” !

•“Shield”: ► You are keen to continue working as much as possible as today. ► Changes will be limited to the mandatory changes made by T2S:

– You should advise us of the BIC11 we need to use to identify you. – T2S doesn’t allow for dump instructions: we will ask you to always instruct a receipt instruction.

– T2S will use additional matching fields which influence market claims and transformations: discuss the use of these fields with your counterparties.

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Euroclear Bank approach to T2S.

• “Adopt”: ► You are keen to change your way of working to make full use of the T2S

functionalities. ► You can choose to make all changes or only part of them. ► You can implement the changes at your own pace. ► The changes are linked to

– The use of optional matching fields, – The availability of new settlement features in T2S (hold & release, partial settlement,…)

–A new allegement service ► To benefit from the new functionalities and the improvements to reporting,

an update to the connectivity channels will be required (EUCLID and SWIFT).

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For external use

Night Time

Settlement

Real Time S-1

REAL TIME SETTLEMENT

Mandatory Optional*

REAL TIME SETTLEMENT FOP

Pre-

posit

ioni

ng

T2S features - settlement Harmonised operational day

Night time settlement

Real Time

Cycle 1 Cycle 2

!18:00 19:30 05:0001:00 16:0003:00 18:00

18:45

Partial Settlement

Partial settlement

00:00 01:30 16:00 19:0019:00 22:00

Send inx Feedback

* Optional window for internal settlement at EB till 19:00 External settlement will take place till 18:00

!• Pre-positioning for

all T2S CSDs (external settlement) between 18:45 and 19:00 on S-1 !

• Intended alignment of Euroclear Bank internal settlement input deadline with T2S deadline

Partial settlement

Euroclear Bank

Start of the dayT2S

14:00

Maintenance window

T2S features - settlementInstruction types

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For external use

!•As today

► DVP and FOP !•New

► Receipt with payment (RWP)/ Delivery with payment (DWP)

► Payment free of delivery (PFoD) – cash only instruction

► Already matched instructions !•No longer available

► Dumps ► Bi-party repo instruction types !

T2S

Mandatory •Receipt instructions for all external instructions (change for ESES markets) •Instruct both legs of a bi-party repo (external instructions only)

Optional •New instruction types (RWP, DWP and PFOD) •New reporting to identify all new instruction types •Instruct both legs of a bi-party repo (external instructions only)

!

Euroclear Bank settlement

External Internal DVP/FOP ☑ ☑

RWP/DWP ☑ ☑

PFoD ☑ ☑

Dumps ☒ ☑

Already matched ☒ ☒

Bi-party repo inx ☒ ☑

T2S features - settlementMatching criteria in T2S

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For external use

3 types of matching criteria: !•Mandatory matching criteria :

► Required for validation !•Additional matching criteria

► For market claims and transformations ► Both parties to agree on use of fields ► If left blank, market claims/transformations will be triggered if eligible !

•Optional matching criteria ► To avoid cross-matching ► Can be used by 1 party only (matches against blank) !!!

T2S

T2S features - settlementBilateral cancellation

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For external use

!Matching is binding

cancellation is only possible if both sides send a cancellation request

T2S!

Existing service • Cancellation request forwarded to the market • Instruction in Euroclear Bank cancelled upon market

cancellation !New service • Advice of counterparty cancellation request • Status of your cancellation request

► Rejected - by T2S ► Recycling - pending counterparty cancellation

request ► Cancelled - instruction cancelled in T2S and in

Euroclear Bank

Euroclear Bank external settlement

Optional •Ensure system capability to correctly read new status reporting •EUCLID hotfix

!

T2S features - settlementPartial settlement

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For external use

!Three partial settlement windows • During last cycle of the night-time settlement • Between 14:00 and 14:15 • Between 15:45 and 16:00 !Partial settlement indicator • Partialling by default • Opt out possible – NPAR

!Booking of T2S partial settlement •Feedback upon confirmation from T2S • Instruction cancelled and replaced by 2 new ones – retaining

reference: • settled instruction • positioned (pending) instruction !

New ‘opt out’ service Opt out at account level i.e. for all T2S external instructions

T2S Euroclear Bank external settlement

Optional •Use opt out indicator – NPAR •Subscribe to the new ‘opt out’ service !

!

T2S features - asset servicing

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For external use

Lean settlement •no asset servicing as such but !Settlement instructions used for •Credits and debits of cash and securities •Market claims and transformations

► Created as independent instruction ► Same instruction details as the mother

instruction ► Eligible for partial settlement !! !

T2SNo impact for •Mandatory cash distributions •Mandatory securities distributions •Reorganisations •Voluntary events •Tax processing •Proxy voting !Impact on market claims and transformations •available for more instruments •additional matching fields •created as an independent settlement instruction •additional reporting as settlement instructions •same process for internal instructions

Euroclear Bank asset servicing

Mandatory •Advise your counterparty if you intend to use additional matching criteria

Standards cover •Mandatory cash distributions •Mandatory securities distributions •Mandatory and voluntary reorganisations (with and without options) •Voluntary events •Market claims •Transformations •Buyer protection !

CAJWG

!

Overview of changes and timelineMandatory changes

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For external use

June 2015 March 2016

- Always input a receipt instruction (change for ESES) !

- Instruct both legs of a repo (external inx only) – if you intend to use this service

- Advise us of the BIC11 we should use to identify you !

- Agree with your counterparty on the use of additional matching criteria

Overview of changes and timelineOptional changes

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For external use

June 2015 March 2016

- CCP settlement of Euronext equities (with LCH. Clearnet SA) become external instructions !

- Cross-CSD settlement: use BIC11(PSET) to indicate the remote market in case of a multilisted security !

TBC

- Send instructions on hold « PREA » and release via MT 530 – Sept 2016 !

- Start using buyer protection service - TBC

- Review your static data for DEAG/REAG !- Update your instruction formats if you do not

want partial settlement !- Update your instruction formats to use the

optional matching fields !- Take into account the upgraded reporting

for - allegements - partial settlement - cancellation - hold & release (CPTY hold, CSD hold) !

- Subscribe to the allegement service based on BIC11

Pre-T2S

- Install the EUCLID hotfix !

- Ensure system capability to correctly read new SWIFT reporting

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Euroclear Bank approach to T2SWhere to find more information?

• General information: ► T2S banner on www.euroclear.com (public part)

!• Towards T2S – quarterly publication at group level

► 1st issuance: March 2014 !

• Dedicated Newsletters on T2S adaptation ► Getting ready for T2S – what does it mean for you as Euroclear Bank client? (Oct 2013) ► Plan ahead to T2S – changes to input, reporting and connectivity (Feb 2014)