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Kluczowe problemy poruszane na Advisory Group: Pricing, Future T2s Governance

Kluczowe problemy poruszane na Advisory Group: Pricing, Future T2s Governance User Connectivity. Sławomir Panasiuk Wiceprezes Zarządu KDPW SA Warszawa 14 grudnia 2010. T2S Pricing. EUROPEAN CENTRAL BANK T2S Programme Office. T2S costs.

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Kluczowe problemy poruszane na Advisory Group: Pricing, Future T2s Governance

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  1. Kluczoweproblemyporuszanena Advisory Group: • Pricing, • Future T2s Governance • UserConnectivity Sławomir Panasiuk Wiceprezes Zarządu KDPW SA Warszawa 14 grudnia 2010

  2. T2S Pricing EUROPEAN CENTRAL BANK T2S Programme Office

  3. T2S costs • Development phase (total, from Jan. 2008 to Sep. 2014):4CB: € 256.4 millionECB: € 90.2 million • Migration and running phase (annual average, from Sep. 2014 to Sep 2022)4CB: € 51.0 millionECB: € 9.2 million • Capital cost over development and migration/running phase of eight years: € 88.9 million in total • Contingency provision during migration and running phase: € 41.1 million over eight years

  4. Volume estimates for future years Estimates of future annual growth rates based on March 2010 AG questionnaire:

  5. Changes to pricing proposal presented in September AG • The T2S Programme Board presented a range of prices to the September AG, depending on • which non-euro currencies are in T2S • the length of the cost recovery period • Depending on the scenario, the price ranged from 12 – 24 cents per DVP instruction. • Based on the feed-back of the AG, the T2S Programme Board modified several parameters : • Proportion of revenue to be generated from information services was increased from 20% to 25% • One year extension of the cost recovery period to 7 years of full operation (plus 1 year migration) • De-linking of the price from participation of particular non-euro currencies and instead targeting a certain volume share N.B. no support for step-wise pricing

  6. T2S pricing policy – I • Governing Council decided to fix the DvP price at 15 cent per instruction for the period Sep. 2014 to Dec. 2018 • Commitment not to increase T2S fees by more than 10% per year between 2019 and the end of the cost recovery period, i.e. September 2022 • This pricing policy is subject to the following conditions: • in addition to the euro settlement volume, non-euro currencies add at least 20% to the total volume; • the securities settlement volume in the EU is no more than 10% lower than the volumes projected by the T2S Programme Office, which are based on information provided by market participants; and • the tax authorities confirm that the Eurosystem will not be charged VAT for the T2S services it provides.

  7. T2S pricing policy – II For period Jan 2019 – September 2022: • Still many unknowns, which make a price guarantee difficult BUT • Expected volume increases caused by dynamic effects • Percentage of non-euro currencies likely to be higher than 20% The T2S Programme Board aims at further lowering settlement prices below 15 cents

  8. Price list – I

  9. Price list - II * These items will initially be set at a zero price, presuming that actual usage will be within an expected consumption pattern. However, should there be a stronger than expected use of the IT system resources which adversely affects T2S performance, it will be reconsidered to charge for these items. Such review will occur at regular intervals.

  10. Proposal for future T2S Governance EUROPEAN CENTRAL BANK T2S Programme Office

  11. Proposed T2S Governance structure Governors’ Forum ECB Governing Council Executive Board Non-euro central banks’governors / boards Non-euro Currencies Steering Group (non-euro area NCBs that signed Currency Participation Agreement) T2SBoard Eurosystem Informal GroupESCB/ Eurosystem Committees Advisory Group CSDSteeringGroup (CSDs that signed FrameworkAgreement) National UserGroups Information Sessions with all Stakeholders

  12. Changes in the remit of the CSG

  13. User Connectivity for T2S Update EUROPEAN CENTRAL BANK T2S Programme Office

  14. Status and plan • Formal launch of licensing of up to 3 providers (NSPs) at end of February 2011 • Delayed by two months to take account of feedback from Technical Dialogue held on 25 October 2010 • Licences to be awarded in Sep 2011 • Proof of concept, to prove feasibility of each NSP’s design, finishes Mar 2012 • Acceptance testing of full scale solution, finishes May 2013 • Then up to 3 licensed solutions are available for user testing by CSDs, DCPs and CBs.

  15. Design objectives • The solutions should be compliant with the Giovannini protocol recommendations and in line with the URD requirements • There should be competition between NSPs in order to achieve low prices, both at the start of, and during the life of, T2S • To support low prices, we should achieve: • As little value added service as possible provided by the NSPs, while consistent with T2S requirements • As much re-use of existing NSP products as possible, to keep their costs low

  16. Safety • Achieving safety is not free of cost! • NSPs must provide value-added security features • These have been minimised

  17. Safety and operational disruptions • The level of operational risk rises very rapidly as the number of channels for incoming and outgoing traffic is increased. That is why we have limited the number to “up to 3” NSPs (as already explained to the AG). • T2S is “built on TARGET2” – which has only one such channel. • Each NSP thus provides an essential value added service because concentrates traffic from many Actors into one stream of data arriving at T2S (and vice versa for outbound).

  18. The interpretation of “direct lines” • NSPs are acting as network traffic concentrators. • UR [T2S.12.290] is interpreted ensuring that an Actor can buy network capacity (bandwidth) rather than pay for each unit of traffic (message or file). • Each Actor can agree bilaterally on the level of service provided to him by the NSP. • And competition will ensure that the extra costs for the limited mandatory value added services will be recovered by the NSP via a fair economic price. • This interpretation is not new; it is inescapable in the context of the decision to limit the number of connections to up to 3, and has already been presented on several occasions.

  19. Interpretation of the “pull” service • The URD refers to Actors “pulling” data from T2S [T2S.12.260] • This business requirement is met on the technical level – as it is in many other systems – by Actors pushing a request to T2S which then pushes the data to the requestor. • This also simplifies the system build by Actors since they have only one operating model.

  20. Approval • The AG is asked to approve the preceding interpretations. • The AG may wish to consider whether the URD need to be formally revised, after appropriate consideration.

  21. www.kdpw.pl Krajowy Depozyt Papierów Wartościowych S.A. ul. Książęca 4, 00-498 Warszawa kdpw@kdpw.pl

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