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SII Operations Forum –
Euroclear Single Platform &
Funds in the UK
London
30 November 2007
Euroclear Single Platform & Funds
Agenda

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
2
Consolidation of markets within Euroclear Group
Customer
Agent
Access /
Communication
Common Communication Interface
Contract /
Relationship
Service
Euroclear UK
& Ireland
Euroclear
France
Euroclear
Nederland
Euroclear
Belgium
Domestic Service
Euroclear
Bank
Full Service
Full integration of legacy systems and functionality
IT
infrastructure
Single Settlement Engine
Central
Banks
&
Payment
systems
3
Timeline for platform consolidation
Client impact
2006
2007
2008
2009
2010
CCI
Single Gateway
Early Harmonisation
SSE
ESES
SP Custody
SP Settlement
Harmonisation
Technical
only
Euronext
instruments
Custody all
Euroclear
group
markets
Settlement
all Euroclear
group
markets
Consolidation
Settlement
activity
Euronext
markets
custody &
settlement
Custody
on a single
platform
Settlement
on a single
platform
4
Technical overview of consolidation phases
SSE
EBe
ESES
E NL E F CREST E B
EBe
E NL
SP Custody
EF
CREST E B
EBe
CCI
ESES-CCI – e-RGV - E2A
SSE
E NL
EF
CREST E B
Legacy
communication
ESES - RGV upgrade
Legacy/ Settlements
ESES - SP component
SP / Custody
SSE
SSE
SP Settlement
EBe
E NL
EF
CREST E B
Legend
Client Communication Interface
CCI
Positioning & booking
Core Processing
Legacy
Legal record
Country boundary
Single Platform
SSE
5
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
6
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
7
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
8
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)
9
SP Custody
Key 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
10
Euroclear Single Platform & Funds
Agenda

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
11
Migration to SP Custody
Migration 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
12
Euroclear UK & Ireland Migration
“Gradual selective phased” approach
(*) : from 1 Wk to 1 Mth
1
2
3
4
5
6
3
6
CA LFC
end
2
4
Activation
period(*)
End of transition
1
SP launch date
Old market
practice
CA LFC
start
New market practice
5
Transition period (from 2 M to 3 M)
– 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 2 , other CAs continue in
legacy
– When the selected CAs in 2 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
13
Euroclear Bank Migration
“Gradual” approach
CA LFC
end
2
End of transition
Old market
practice
CA LFC
1
start
SP launch date
4
3
New market practice
Transition period : min 3 months
1
– CAs started before the launch date in legacy must continue LFC in legacy
2
– All new CAs started after the launch date on SP Custody
3
– After the end of a transition period, all CAs started on legacy are end of
life or, converted to SP Custody
4
– Legacy CA closed
14
Common Communication
Interface
CCI Principles
CCI Migration
Three Channels

STP File Transfer (push)






Files of messages
For bulk message exchange
Parameters to trigger outbound files
Format identical to messaging
STP Messaging (push)
Screen channel
 Mandatory for set-up and
operator management
 Sole point of contact for
smaller clients
 Back-up and exceptions for
larger clients
 Individual messages
 Sent in real time
 Parameters to trigger outbound
messages
STP channels
(ISO15022 / 20022)
Messaging
File transfer
Screen interface
Pull
recov
ery
Push
Pull
CCI
16
Multiple Network Providers
BT and SWIFT
Client
Network
Network
Provider
gateway
Euroclear group
Network
Provider
gateway
Single
Platform
17
Common Communication
Interface
CCI Principles
CCI Migration
CCI - Migration Challenges
Connectivity
Three
Levels
Of
Change
•Technical interfaces
providers
•Network
•Access Method
Data Formats
•ISO Standards
Back Office
processes
•Harmonised
•Training
19
Facilitating Migration
20
Euroclear Single Platform & Funds
Agenda

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
21
SP Custody – Client readiness actions plan
Awareness
Roadshows
19 June 2007 London
20 June 2007 Dublin
Visits and conferences
Ongoing since June 2007
Webinars
CCI: ongoing since July 2007
SPC: ongoing since October 2007
22
SP Custody – Client readiness actions plan
Publications & actions
Blueprint – edition 1
November 2006

Service descriptions
Available
SP Project implementation kit
June 2007
Documentation timeline
June 2007
Detailed service descriptions
As of September 2007
Data dictionnaries
As of September 2007
Q&A service
October 2007






First Euroclear UK&IR
Implementation Forum
October 2007

23
SP Custody – Client readiness actions plan
DSD Timeline
24
SP Custody – Client readiness actions plan
www.euroclear.co.uk
25
SP Custody – Client readiness actions plan
www.euroclear.co.uk
26
SP Custody – Client readiness actions plan
www.euroclear.co.uk
27
SP Custody – Client readiness actions plan
E-mail service
How to stay informed of the latest news
on SP Custody and CCI ?
The e-mail service
28
SP Custody – Client readiness actions plan
www.euroclear.co.uk
29
SP Custody – Client readiness actions plan
Q&A service, FAQ

Q&A service
– [email protected]
– [email protected]

FAQ – Frequently Asked Questions
– www.euroclear.co.uk
30
Questions ?
31
Euroclear Single Platform & Funds
Agenda

Funds

Who are Euroclear?

Objectives of the Euroclear and EUI funds solution

Benefits of Market Infrastructure involvement

Solution design and consultation
32
Euroclear
European funds exposure
Euroclear Group CSD markets
42% of European funds market
Non Euroclear Group CSD markets
48% of European funds market
Euroclear Belgium
Euroclear UK & Ireland
Euroclear Nederland
Euroclear Bank
Euroclear France
EMXCo
33
Euroclear Single Platform & Funds
Agenda

Funds

Who are Euroclear?

Objectives of the Euroclear and EUI funds solution

Benefits of Market Infrastructure involvement

Solution design and consultation
34
Market Requirements
Market observations

Demand for straight through processing

Requirement for greater efficiency

Is a ‘plateau’ approaching?

What is the true growth potential?
35
Market Requirements
Transaction volume growth as a result of automation
700000
Average daily transactions
600000
500000
400000
CREST
Fundserv
300000
200000
100000
0
1996
1997
1998
1999
2000
2001
2002
Year
2003
2004
2005
2006
2007
36
Euroclear Strategy
Long Term Vision


European market infrastructure for pan-European Markets

Order Messaging

Settlement

Servicing
Separate Components

Evolve into one environment

Open Access
37
Euroclear strategy
Integration plans
Buy side
Order collection
and order
aggregation
Scope of Euroclear Group Fund Services
Order
routing
Settleme
nt
Asset
servicing
Sell side
Recor
d
keepi
ng in
registe
r
Commissi
on
calculati
on
38
Euroclear Single Platform & Funds
Agenda

Funds

Who are Euroclear?

Objectives of the Euroclear and EUI funds solution

Benefits of Market Infrastructure involvement

Solution design and consultation
39
Benefits of using Order Routing
EMXCo




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
40
Benefits of using the UK Market infrastructure
Euroclear 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 08:30
 Settlement efficiency of 95%+
 Control over settlement and cash movements
41
Benefits of using the UK Market infrastructure
Euroclear 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
42
Euroclear Single Platform & Funds
Agenda

Funds

Who are Euroclear?

Objectives of the Euroclear and EUI funds solution

Benefits of Market Infrastructure involvement

Solution design and consultation
43
Consultation and Design
Governance


Funds Liaison Group (FLG)
 New service strategy

Market voice

Service priority

Market changes advice
Technical Working Groups

Standards committee

New service design
44
Consultation and Design
Funds Liaison Group
Abbey Share Dealing
IMA
APCIMS
IFDS
Bank of New York
Invesco Perpetual
BNP Paribas Fund Services UK
JP Morgan Asset Management
Brewin Dolphin Securities
Mellon Global Securities Services
Charles Stanley
New Star Investment Funds
Edward Jones
Northern Trust
Fidelity
Old Mutual Asset Management
Halifax Share Dealing
PIMA
Hargreaves Lansdown
Skandia
HSBC
State Street
Threadneedle Asset Management
45
Progress
FLG 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
46
Progress
Legislative 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 (USR’s) 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
47
Phase 1 Process flows in the UK market
Current UK Order and Settlement Process
Distributor
EMX
Provider
Benefits
•Enables direct input of transactions
from EMX into EUI
EUI
•Allows the creation of cash
settlement messages in EUI
•Facilitates the efficient movement of
Cash between parties
48
Future phases
Priorities post phase 1

Stock Settlement

Reconciliation

Transfers (a market acceptable standard)



Own name to nominee
Nominee to nominee
Further STP
49
50