1 t2s volumetric assumptions t2s advisory group meeting frankfurt, 18/19 november 2013 t2s programme...

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T2S Volumetric Assumptions

T2S Advisory Group MeetingFrankfurt, 18/19 November 2013

T2S Programme OfficeEuropean Central Bank

T2S volumetric assumptions

1 Objectives and background

2 Peak volume factor and volume growth

3 Transactional processing

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Volumetric analysis

Volumetric analysis for the sizing of the technical infrastructure for T2S• Assess peak volume factor• Estimate workload for peak end-of-day (EOD) and start-of-day

(SOD) period • Define a peak daytime processing hour• Determine values for various variables affecting processing

and workload Analysis requires input from CSDs, Central Banks and

Directly Connected Parties on their intended usage of T2S to derive a model• Continuous process over the previous 18 months with several

workshops Latest workshop held on 4 November to present and review

additional assumptions for the sizing of T2S, including EOD/SOD period

T2S Processing Volume Analysis to be updated in 2013 to provide a baseline for the sizing of T2S

AG members are invited to (i) assess if the statements (in red) in this presentation represent reasonable assumptions in view of the sizing of the T2S platform; and (ii) provide feedback on pending issues

Objectives and Background

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Peak volume factors

T2S must be able to process• a frequent expected variation of the average daily

settlement instruction volume; and• an infrequent exceptional variation of the average daily

settlement instruction volume.

The T2S User Requirements and the General Technical Design V2.2 require T2S to process a peak of 4.15 times the average settlement volume

The original assumptions for this peak• CSDs in direct holding markets would operate in T2S

with all end-investor accounts, resulting in a doubling of volumes through corporate actions and income events in large securities issues

• Simultaneous peaks in multiple markets, including the UK market

Background

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Peak volume factors

Standard peak volume factor• Defines the number by which the daily average

settlement instruction volume is multiplied in order to determine the standard volume baseline that T2S needs to process

• The assumption is that T2S must be able to process 2.5 times the daily average settlement instruction volume

Exceptional peak volume factor• Defines the number by which the daily average volume

is multiplied in order to determine the infrequent exceptional volume that T2S needs to process

• The assumption is that T2S must be able to process over 2.5 up to 4.15 times the average daily volume on an exceptional basis

• The maximum occurrences of an exceptional peak is four [4] times a year, probably at the start or end of a quarter

Terms, definitions and assumptions

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Growth ratesT2S volume assumptions

YearGrowth

Rate Addition

al volume

Total Growth

Rate

20130.03125

%0.00% 0.03125%

20140.03125

%0.00% 0.03125%

20150.03125

%7.72% 7.75125%

20160.03125

%0.00% 0.03125%

20173.75000

%0.00% 3.75000%

20183.75000

%0.00% 3.75000%

20193.75000

%0.00% 3.75000%

20203.75000

%12.00%

15.75000%

20213.75000

%0.00% 3.75000%

20223.75000

%0.00% 3.75000%

20233.75000

%0.00% 3.75000%

20243.75000

%0.00% 3.75000%

The results of the informal survey of the AG in June 2013 have been used to estimate the growth rates

Additional volume• New ISINs

(eurobonds, funds…)

• New currencies1

1DKK included in baseline and not considered as additional volume

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Distribution of settlement instructionsT2S volume assumptions

Distribution of settlement instructions%

Distribution

Settlement Instructions 100%

DVP w/o corporate actions instructions as percentage of total settlement instructions

78.9%

FOP w/o corporate actions as percentage of total settlement instructions

16.6%

Payment free of delivery (PFOD) for income events as percentage of total settlement instructions

2.1%

DVP and FOP corporate actions instructions as percentage of total settlement instructions

2.4% Distribution from the CSD Volume Survey in which some CSDs

included settlement instructions for corporate actions and income events in DVP and FOP total

An average of 4.5% of Settlement instructions for corporate actions and income events derived from CSDs that provided segregated figures.– 10% of total daily settlement instructions as peak (pending

validation)

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2017 settlement instruction volumesT2S volume assumptions

2017 settlement instructionsAverage

dailyStandard

PeakException

al Peak

Settlement Instructions 1,100,215 2,750,537 4,565,892

Delivery-versus-payment w/o corporate actions instructions as percentage of total settlement instructions 908,973 2,272,433 3,772,239

Free-of-payment w/o corporate actions as percentage of total settlement instructions 191,242 478,104 793,652

Settlement Instructions for corporate actions and income events 51,843 129,606 215,147

Payment free of delivery (PFOD) for income events as percentage of total settlement instructions 24,193 60,483 100,402

Corporate actions instructions as percentage of total settlement instructions - DVP and FOP 27,649 69,123 114,745

Total Settlement Instructions 1,152,057 2,880,144 4,781,038

Delivery-versus-payment with corporate action FOPs 933,167 2,332,916 3,872,641

Free-of-payment 191,242 478,104 793,652

Payment free of delivery 27,649 69,123 114,745

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Estimation modelInstruction life cycle communication

Instruction life cycle communication profile- Documents the T2S inbound and outbound responses

for instructions that T2S receives

Presents assumptions that underlie the estimation model- for the types and number of instructions that directly

connected actors, including Directly Connected Parties (DCPs) will send to T2S

- for the types and number of responses that T2S will provide

- uses the instruction volumes from the CSD Volume Survey

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Inbound instructionsInstruction life cycle communication profile

Distribution profile for T2S instructions

Percentage

Settlement instructions, of which are

Matched 60%

Unmatched 40%

The share of pre-matched settlement instructions is assumed to be 60% Settlement volume weighted average of pre-matched transactions is

54%, based on the feedback of euro area CSDs in the CSD volume survey

The introduction of further CCPs, potentially resulting in the move of at least some OTC trading volume to CCPs; and

Some CSDs will perform local matching and send pre-matched settlement instructions to T2S in particular at the beginning of T2S operations

Distribution file-based vs. message-based submission Entities, submitting pre-matched instructions, instruct in batches at

regularly scheduled intervals and will continue to do so in T2S Most directly connected actors (DCPs) will forward unmatched

instructions immediately to T2S during the day

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Hold and/or release instructions, including COSD, will be submitted for 30% of the settlement instructions.

Assumption is that participants will optimise processing: that they likely will send released instructions for their

proprietary accounts; and that the majority will send released instructions for their

customer accounts and hold before the settlement day if the customer does not have sufficient deliverable holdings to settle.

Distribution file-based vs. message-based submission CSD participants will hold or release most instructions before

the start of the new settlement day as part of a batch run in their securities back-office system. T2S will receive these instructions mainly as a files.


Percentage

Hold/Release of Settlement Instruction including COSD

30%

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The submission of amendments to settlement instructions will not exceed 0.5%

All amendments of settlement instructions will be messages, based on the consideration that an actor requires an immediate change to the instruction to ensure the update before settlement


Percentage

Message-

based

File-base

d

Amendment of settlement instruction 0.5% 100% 0%

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Percentage

Message-

based

File-base

d

Cancellation of settlement instruction 1.5% 90% 10%

T2S will receive cancellation instructions for a maximum 1.5% of the total number of settlement instructions

Distribution file-based vs. message-based submission T2S actor will identify the need to cancel a settlement

instruction during daytime business hours and send an immediate cancellation request to T2S

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Profile for the submission of instructionsT2S volume assumptions

Instruction type Percentage1

Settlement instructions, of which are

Matched 60%

Unmatched 40%

Hold/Release of Settlement Instruction including COSD 30%

Amendment of settlement instruction 0.5%

Cancellation of settlement instruction 1.5%

1As percentage of total settlement instructions

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Outbound notificationsInstruction life cycle communication profile

Distribution profile for T2S instruction life cycle % of inbound instruction

Notification for Acceptance of Settlement Instruction 50%

Notification for Match Confirmation of Settlement Instruction

100%

Notification for Confirmation of Settlement or Fail 120%

Notification for Acceptance of Amendment of Settlement Instruction

50%

Notification for Execution of Amendment of Settlement Instruction

100%

Notification for Acceptance of Hold/Release of Settlement Instruction including COSD

50%

Notification for Execution of Hold/Release of Settlement Instruction including COSD

100%

Notification for Acceptance of Cancellation of Settlement Instruction

50%

Notification for Execution of Cancellation of Settlement Instruction

100%

Notification for Cash Posting 100%

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Outbound notification copies for DCP instructionsInstruction life cycle communication profile

Distribution profile for T2S instruction life cycle % of DCP inbound

instructions

Notification for Acceptance of Settlement Instruction 100%

Notification for Match Confirmation of Settlement Instruction

100%

Notification for Confirmation of Settlement or Fail 120%

Notification for Acceptance of Amendment of Settlement Instruction

100%

Notification for Execution of Amendment of Settlement Instruction

100%

Notification for Acceptance of Hold/Release of Settlement Instruction including COSD

100%

Notification for Execution of Hold/Release of Settlement Instruction including COSD

100%

Notification for Acceptance of Cancellation of Settlement Instruction

100%

Notification for Execution of Cancellation of Settlement Instruction

100%

Notification for Cash Posting 0%

• The current assumption is that DCP volume is 50% of overall T2S volumes

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Message vs. file-based business itemsInstruction life cycle communication profile

DescriptionAs

MessagesIn Files/Reports

Total business

items

Estimated average per settlement instruction

4 4 8

Business item defines a settlement instruction life cycle related business event

Business items can be received or sent as single messages or bundled in files and report

• Average per settlement instruction =(business items received in files + business items sent in files +business items received as message + business items sent as message) /number of settlement instructions

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Current phases and indicative timingsT2S Schedule

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Start of Day

Night-time Settlement

Daytime Settlement

End of Day

18:45 – 19:30

19:30 - ~ 3:00

~ 3:00 – 5:00

18:00 – 18:45

Change of business date

2 night-time settlement cycles and end-of-night reporting

Continuous settlement with partial settlement periods & real-time settlement closure period

Close of business day

IndicativeTimings (CET) Phase Description

Maintenance window

5:00 – 18:00

System maintenance activities

End-of-day (EOD) and start-of-day (SOD) periods represent potentially the peak processing period; in any event a critical processing period

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EOD workload assumptions T2S Schedule

On a daily basis as part of their EOD, CSDs will perform full reconciliations of all types of pending and settled instructions

On a daily basis as part of their EOD, payment banks will require a full Statement of Account for each dedicated cash account

On a daily basis as part of their EOD, most CSDs will perform delta reconciliations for securities positions• Most CSDs will undertake full reconciliations outside of the EOD and

SOD periods using the query facility

Directly Connected Parties (DCPs) will subscribe to reporting in T2S and not through CSDs, thereby increasing reporting volumes by 50%

Pending issues• Percentage of positions affected on average during the settlement day

to estimate reporting volume for delta reconciliations• Reporting for pending instructions as a factor of daily volume• Number of payment banks intending to offer client collateralisation• Expected number of securities eligible for client collateralisation with

payment banks• Scheduling of valuation price feeds

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ParametersPeak daytime hour

Defining a peak hour during the daytime period requires further market input

Information available from CSDs from questionnaires concerning as-is, but limited information as to expectation after adaptation to T2S

Pending clarification• Percentage of settlement instructions that CSDs and DCPs will send during

the daytime concentrated in the peak daytime hour• Percentage of hold/release instructions that CSDs and DCPs will send during

the daytime concentrated in the peak daytime hour• Expected usage of U2A and A2A

Definition of the peak daytime hour will include• Receipt of settlement instructions• Receipt of hold/release instructions• Matching operations• Real-time settlement operations• Maximum number of securities reference data updates• Maximum number of application-to-application and user-to-application

requests• Maximum number of intraday liquidity transfers

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Thank you for your attention

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1 t2s volumetric assumptions t2s advisory group meeting frankfurt, 18/19 november 2013 t2s programme...

Documents

average settlement volume

volume growth

peak volume factors

daily average volume

average daily volume

additional volume slide

infrequent exceptional

t2s platform