Reminder - Belgium: NBB-SSS T2S adaptation plan

12.11.2014

Effective

Monday 1 December 2014

the Belgian National Bank’s Securities Settlement System (NBB-SSS) will implement the first phase of its adaptation to TARGET2-Securities (T2S).

In this first phase, NBB-SSS will launch a new platform that introduces most of the T2S features. The second phase, planned for March 2016, will be the outsourcing of their settlement activity to T2S.

Clearstream’s general response

Clearstream Banking1 will implement the required adaptation to its own systems in its enhancements for the November SWIFT Release, effective 17 November 2014, and customers will therefore need to adapt their instruction formats by that date.

Pending instructions received before end of day on 14 November with the current format that have not yet been released to the market will be rejected and will need to be reinstructed with the new formats.

Note: Some of Clearstream’s adaptations will only be effective as from the NBB-SSS launch date of 1 December 2014 and not as from 17 November 2014. Customers are therefore asked to check which of the detailed new features mentioned below can be applied as from 17 November 2014.

Impact on customers

The new features are described below, with the impacts to Clearstream and its customers:

  • Place of Settlement identification;
  • Identification of NBB-SSS participants through their full 11-character BIC;
  • T2S matching rules;
  • Allegements;
  • Linked instructions;
  • Hold and release;
  • New daily schedule/holiday calendar;
  • Partial settlement;
  • T2S recycling rules;
  • New cash tolerance;
  • Bilateral cancellation;
  • Instruction types.

Place of Settlement identification

Mandatory from 17 November 2014.

NBB-SSS will be identified in T2S by its BIC NBBEBEBB216. This will be the only Place of Settlement that Clearstream will accept on customer domestic instructions for NBB-SSS eligible securities.

The Place of Settlement proposed in CreationOnline will be amended accordingly.

Instructions received that specify a Place of Settlement other than NBBEBEBB216 will be rejected with status/reason IPRC//REJT REJT//DEPT in SWIFT ("Place of settlement disagreement/repair" in CreationOnline).

Identification of Receiving/Delivering Agent in SWIFT

Mandatory from 17 November 2014.

Only format :95P: with the full 11-character BIC will be accepted to specify the Receiving/Delivering Agent.

Currently accepted formats :95P: with an 8-character BIC and :95R: with NBB-SSS participant number will no longer be supported in the DEAG/REAG and the instruction will be rejected.

Note: The other settlement parties will be accepted in formats :95P: with 11-character BIC, :95Q: or :95R:.

The conversion table between a NBB-SSS participant id and its BIC is available on internet via on the NBB website.

T2S matching rules

Effective from 1 December 2014.

NBB-SSS will implement the T2S matching rules in phase 1. As a consequence, the following fields may, if present, be matching criteria:

Additional matching field:

The following additional matching fields are initially not mandatory but, when one of the counterparties provides a value for them in its instruction, matching values must be provided by the other counterparty:

:22F::STCO//NOMC - Opt-out indicator
:22F::TTCO//CCPN - CUM/EX indicator
:22F::TTCO//XCPN - CUM/EX indicator

Clearstream will configure its account at NBB-SSS to opt out of market claim and transformation detection and automatic retrocession, continuing to detect market claims internally and report these in the Custody Market Claims report.

The customer must therefore ensure that their counterparty indicates opt-out either at their NBB-SSS account level or at instruction level; otherwise, the instructions will not match.

The indicators above will be added to the CreationOnline Pre and Post Release screens.

Optional matching field:

The following optional matching fields must match when provided by both counterparties:

:20C::COMM - Common Trade Reference
:95a::SELL - Client of delivering CSD participant
:95a::BUYR - Client of receiving CSD participant
:97A::SAFE with :95a::DEAG - Securities account of the delivering party
:97A::SAFE with :95a::REAG - Securities account of the receiving party

Customers can use the above optional matching criteria to reduce the risk of cross-matching.

Note: Clearstream will adapt its best matching algorithm to take into account the additional matching criteria and report any mismatch accordingly. In the case of optional matching fields, a mismatch will only be reported if present on both allegements and customer instructions.

Allegements

Effective from 1 December 2014.

Clearstream will receive counterparty instructions alleged on its account at NBB-SSS. These will be reported to customers provided their CBL account is present and subscription is in place.

The allegements will contain the additional and optional matching criteria described above. These can be used to correctly format instructions to ensure matching if it has not yet been sent to Clearstream.

Note: Clearstream will also adapt its best matching algorithm to take into account the additional matching criteria and report any mismatch accordingly. In the case of optional matching fields, a mismatch will only be reported if present on both allegements and customer instructions.

Linked instructions

Effective from 1 December 2014.

Although NBB-SSS will introduce instruction linking compliant with T2S, this new feature will only be used in phase 1 for the current Back-to-Back (B2B) service. The format of customer B2B instructions remains unchanged.

Hold and release

Effective from 1 December 2014.

NBB-SSS will introduce the T2S hold/release service. In phase 1, Clearstream will use this new feature for pre-matching only. Therefore, once the customer’s instruction is provisioned and released to the market, it will no longer be possible to place the instruction on hold.

If the customer’s counterparty has placed its instruction on hold, we will report status/reason SETT//PENx PENx//PRCY in SWIFT (PRCY – Counterparty Instruction on Hold in CreationOnline).

New daily schedule/holiday calendar

Effective from 1 December 2014.

The customer deadline for free of payment instructions will be extended to 17:45. The deadline for against payment instruction remains unchanged.

During phase 1, NBB-SSS will align settlement with the TARGET2 (T2) calendar even for free of payment instructions such that free of payment instructions will not be accepted on T2 closing days.

Partial settlement

Effective from 1 December 2014.

NBB-SSS will introduce partial settlement such that customer delivery and receipt instructions will be able to settle partially.

Customers that do not want a transaction to settle partially must provide field :22F::STCO//NPAR in their instruction.

A new Partial Settlement Indicator will be introduced for this purpose in CreationOnline.

T2S recycling rules

Effective from 1 December 2014.

NBB-SSS will adopt the standard T2S recycling rules such that:

  • Unmatched instructions will be recycled for 20 business days (starting from the initial settlement date), after which they will be cancelled.
  • Unmatched cancellation requests will be recycled for 20 business days (starting from the date of receipt).
  • Matched instructions will have no cancellation limit and will be recycled until a business rule is violated (for example, security reaches maturity).

New cash tolerance

Effective from 1 December 2014.

Currently, NBB-SSS applies a unique cash tolerance (allowed countervalue difference) of EUR 25. With the implementation of phase 1, NBB-SSS will apply the cash tolerance that will be in effect in T2S, as follows:

  • EUR 2 for transactions with an amount less than or equal to EUR 100,000; and
  • EUR 25 for transactions with an amount greater than EUR 100,000.

Clearstream will adapt its best matching algorithm when comparing the settlement amount accordingly.

Bilateral cancellation

Effective from 1 December 2014.

Bilateral cancellation will be introduced by NBB-SSS in phase 1.

If the customer’s counterparty sends a cancellation first, Clearstream will report the status IPRC//CPRC on the customer settlement instruction.

If the customer sends the cancellation first, Clearstream will report status/reason CPRC//CANP CANP//CONF on the cancellation request in SWIFT (Cancellation processing – Pending in CreationOnline).

Instruction types

The new T2S instruction types RWP (receipt with payment) and DWP (delivery with payment) will not be supported in phase 1.

Although NBB-SSS will accept instruction type PFOD (against payment instruction with a zero quantity) and already matched instructions, Clearstream will, as today, reject such instructions received from customers.

Further information

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.

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1. Clearstream Banking refers collectively to 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 (CBF) and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).

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