corporate actions business process description - European Central

1

CORPORATE ACTIONS 2

BUSINESS PROCESS DESCRIPTION 3

4

5

6

7

8

T2S Programme Office 9

Reference: 09.04.01/2011/00246909.04.01/2011/000575

Date: 04 April 201101 April 201129 March

201118 March 2011

Version: 1.12

Status: Draft

10

11

CA – Business Process Description

Page: 2 of 108 Status: Draft

TABLE OF CONTENTS 1

1 Introduction 4 2

1.1 Objective and Scope 4 3

1.2 Structure of the Document 5 4

1.3 References 5 5

2 Distributions 6 6

2.1 Cash Distributions 6 7

2.1.1 Process Diagram 6 8

2.1.2 Process Description 6 9

2.1.3 T2S Service Description 14 10

2.2 Securities Distributions 18 11

2.2.1 Process Diagrams 18 12

2.2.2 Process description 18 13


2.3 Distributions with options 24 15

3 Reorganisations 25 16

3.1 Mandatory Reorganisations with options 25 17




3.2 Mandatory Reorganisations 39 21




3.3 Voluntary Reorganisations 4948 25




4 Transaction Management29

5755 30

4.1 Market Claims 5755 31






4.2 Transformations 7169 4




4.3 Buyer Protection 8179 8




5 Annex A - Methodology and drafting principles12

8886 13

5.1 Principles of Business Process Modelling 8886 14

5.1.1 First Level Diagram – Process Layer 8886 15

5.1.2 Second Level Diagram – Activity Layer 8987 16

5.1.3 Third Level Diagram – Task Layer 9189 17

5.2 Drafting Methodology 9290 18

5.3 Diagram Conventions and Standards 9492 19

5.3.1 Basic diagramming concepts 9492 20

5.3.2 Advanced diagramming concepts 107105 21

22


Objective and Scope


1 Introduction 1

1.1 Objective and Scope 2

This document‟s objective is to describe how T2S instructing parties (CSDs, CCPs, other) interact with T2S 3

for settling corporate actions (CA) entitlements in T2S. 4

The document‟s scope covers for each CA: 5

the definition; 6

the business actors; 7

the business process diagrams of those process which are relevant for the interaction with T2S; 8

the business process description of the above processes; 9

the T2S service description relevant for these processes. 10

The document‟s scope does not cover: 11

the T2S instructing party‟s internal processes (e.g. details of calculations of entitlements process); 12

the T2S instructing party‟s external interactions (e.g. CSD interaction with its participants); 13

the external to T2S service level descriptions (e.g. between the CSD and its participants) 14

However, the business process descriptions and diagrams include, for reasons of completeness, certain steps 15

in the CA management chain (e.g. the capturing of the CA announcement details) which take place outside 16

T2S. These descriptions have been kept short. The description of the CA management entities interactions 17

outside T2S is not part of the scope of this documentation. 18

In line with the CAJWG standards, the document covers the two categories of CA events Distributions, 19

Reorganisations as well as Transaction Management processes. Each category includes the following sub-20

categories: 21

Distributions 22

Cash Distributions (e.g. cash dividend, interest payment) 23

Securities Distributions (e.g. stock dividend, bonus issue) 24

Distributions with Options (e.g. optional dividend) 25

Reorganisations 26

Mandatory Reorganisations with Options (e.g. conversion) 27

Mandatory Reorganisations (e.g. stock split, redemption) 28

Voluntary Reorganisations (e.g. tender offer) 29

30

Transaction Management 31


Structure of the Document


Market Claims (Distributions) 1

Transformations (Reorganisations) 2

Buyer Protection (Reorganisations with options, Voluntary) 3

1.2 Structure of the Document 4

Section 1: Introduction 5

Section 2: Distributions 6

Section 3: Reorganisations 7

Section 4: Transaction Management 8

Annex 1: Methodology 9

Annex 2: Glossary 10

1.3 References 11

This document draws heavily in the work already conducted in other forums and T2S and industry 12

deliverables: 13

CA issues for CASG (published working document: 14

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_mtg16_item5.pdf?083401356e6793cc7c321f8a5f86438c) 15

CASG standards (published final, 16

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_market_claims.pdf?e7720cf2116e69f3bbaef0ff654b20b2 , 17

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_claim.pdf?be6c40b843cdb49303f2819ad80eb6e9 , 18

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_transform.pdf?7fdc2c8eb4cc19faa6563c36be4585f9 , 19

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_protection.pdf?e81f221253e62e96cf810d03b90db0da) 20

CAJWG standards. Final and published in October 2009 http://www.afme.eu/document.aspx?id=3182 21

T2S Schedule of the settlement day. Published in the URD and GFS. A more detailed draft version 22

has been published in October 2010 23

(http://www.ecb.int/paym/t2s/progress/pdf/extmtg/mtg16/detailed_description_v2.pdf?a85311c85a9df040ba13a12f2de0cdc9) 24

T2S Service Description Document 25

ISSA global corporate actions principles, published on May, 2010 26

27

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_mtg16_item5.pdf?083401356e6793cc7c321f8a5f86438c

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_market_claims.pdf?e7720cf2116e69f3bbaef0ff654b20b2

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_claim.pdf?be6c40b843cdb49303f2819ad80eb6e9

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_transform.pdf?7fdc2c8eb4cc19faa6563c36be4585f9

http://www.ecb.europa.eu/paym/t2s/progress/pdf/subcorpact/ca_key_standards_protection.pdf?e81f221253e62e96cf810d03b90db0da)

http://www.afme.eu/document.aspx?id=3182

http://www.ecb.int/paym/t2s/progress/pdf/extmtg/mtg16/detailed_description_v2.pdf?a85311c85a9df040ba13a12f2de0cdc9


Cash Distributions


2 Distributions 1

Distribution is a CA event whereby the issuer of a security delivers particular proceeds to the holder of the 2

underlying security1 without affecting the underlying security. 3

2.1 Cash Distributions 4

In cash distributions, the proceeds of the CA consist only of cash. Capital gains, cash dividends, interest 5

payments and share premium dividends are typical examples of such events. This section covers the standard 6

steps in a cash distribution within the context of a CSD2. It covers both the domestic and the cross CSD 7

scenarios. 8

2.1.1 Process Diagram 9

Figure 2.1-1 Business Process ‘Cash Distribution’ (Process Layer) 10

CAPTURE

CA

[T2S.BP.CORP.CSHD.010]

CSD

ENTITLED

HOLDERS AND

POSITION

DETAILS

Until

Record Date

CA DETAILS

Receipt of CA Details

Current

Date =

Record

Date

NOTIFY

CA


CALCULATE,

INSTRUCT AND

SETTLE

CA PROCEEDS[T2S.BP.CORP.CSHD.030]

11

2.1.2 Process Description 12

Capture CA 13

Reference ID T2S.BP.CORP.CSHD.010

This process (see Figure 2.1-1Figure 2.1-1) captures the cash distribution details received by the CSD (CA 14

announcement). 15

1 Underlying security is the security that is the subject of the corporate action.

2 „CSD‟ refers to both issuer CSD and investor CSD, unless specifically mentioned otherwise.


Cash Distributions


Notify CA 1


Business Actors: CSDs, CSD participants, T2S 2

Business Object: 3

- CA details 4

- Securities positions 5

- T2S Settlement instructions 6

T2S Service Class Name: Information Services (T2S.SD.INF) 7

T2S Use Case Name: 8

- Send Query (see T2S UDFS, Chapter 2) and/or 9

- Receive Report (see T2S UDFS, Chapter 2) 10

Trigger. 11

- CSD captures CA announcement3; 12

Preconditions 13

- Current date is on or before the CA record date 14

This process (see Figure 2.1-2Figure 2.1-2) identifies the eligible recipients based on the CA details and the 15

T2S information. This process runs until the record date of CA for identifying: 16

participants obtaining a new holding in the underlying security after the announcement, but before the 17

record date; and 18

participants creating a new open position (pending instructions)4 in the underlying security after the 19

initial announcement. 20

3 It includes new CA, amend or cancel CA.

4 These are settlement instructions which do not have a status with value “settled” or “cancelled”. In a typical DVP/FOP

transaction, two pending and matched instructions refer to one pending transaction.


Cash Distributions


Figure 2.1-2 Decomposition of the process ‘Notify CA’ into activities (Activity Layer) 1

NOTIFY CA

IDENTIFY & INFORM ELIGIBLE

RECIPIENTS

[T2S.AC.CORP.020]

CSD

OBTAIN SECURITIES POSITION AND PENDING

INSTRUCTION DETAILS

[T2S.AC.INF.010]

Either T2S query responses or data

extracted from T2S reports (or both

forms of data) may be used to identify

and inform entitled position holders

Indicates that the activity can be

further decomposed into tasks

Until

Record Date

Current

Date =

Record

Date

NOTIFY

CA


CALCULATE,

INSTRUCT AND

SETTLE


2

The process „Notify CA‟ consists of the following two activities (see Figure 2.1-2Figure 2.1-2): 3

1. Obtain securities positions and pending instructions details 4

2. Identify and inform eligible recipients 5

6

Obtain Securities Positions and Pending Instructions Details (Activity 1) 7

Reference ID T2S.AC.INF.010

The CSD has the option to: 8

either receive these details through predefined reports generated by T2S at close of business of 9

settlement day (End of Day reporting) [ see Task 3, Task 4 below] or 10

query T2S specifying the underlying ISIN as a filter criterion [See Task 1, Task 2 below]5 11

This activity consists of the following four tasks (see Figure 2.1-3Figure 2.1-3): 12

CSD queries T2S for securities positions related to the underlying ISIN (Task 1) 13

CSD queries T2S for pending settlement instructions related to underlying ISIN (Task 2) 14

based on its report subscription set up in T2S, the CSD can receive periodically statement of 15

holdings, delta statement of holdings, statement of pending instructions and delta statement of 16

pending instructions reports (Task 3) 17

CSD filters the reports in order to extract details relevant to the underlying ISIN (Task 4) 18

In the cross-CSD scenario, both the issuer and the investor CSDs will run the process of obtaining positions 19

and pending instructions from T2S. 20

5 See section on T2S Services Description for details about T2S Report Generation Services and T2S Query Services


Cash Distributions


Figure 2.1-3 Decomposition of the activity ‘Obtain Securities Position and Pending Instruction’ into tasks (Task Layer) 1

QUERY SERVICES[T2S.SD.INF.030]

NOTIFY CA

T2S

CSD OBTAIN SECURITIES POSITION AND PENDING INSTRUCTION DETAILS

REPORT

GENERATION

SERVICES

[T2S.SD.INF.020]

FILTER REPORTS FOR

UNDERLYING ISIN

DETAILS[ 4 ]

RECEIVE REPORTS -

POSITION AND PENDING

INSTRUCTIONS[ 3 ]

QUERY SECURITIES

POSITIONS FOR

UNDERLYING ISIN[ 1 ]

QUERY PENDING

INSTRUCTIONS FOR


Query Request Query Request

Query Response -

T2S Settlement Instructions

T2S Reports - Securities Positions

and T2S Settlement Instructions

SECURITIES

BALANCE

QUERY

SETTLEMENT

INSTRUCTION

QUERY

Query Response -

Securities Positions

NOTIFY CA


RECIPIENTS

[T2S.AC.CORP.020]


INSTRUCTION DETAILS

[T2S.AC.INF.010]

2

3

Identify and Inform Eligible Recipients (Activity 2) 4

Reference ID T2S.AC.CORP.020

5

CSD informs eligible recipients (received/queried in the previous activity Obtain Securities Positions 6

and Pending Instruction Details) about the CA details (see Figure 2.1-2Figure 2.1-2). 7

Calculate, Instruct and Settle CA proceeds 8


Business Actors: CSDs, T2S 9

Business Object: 10

- CA details 11

- T2S settlement instructions 12

- T2S Status Advice and Settlement Confirmations 13

T2S Service Class Name: Settlement Services (T2S.SD.SETT) 14


Cash Distributions



- Send Settlement Instruction (see T2S UDFS, Chapter 2) 2

Trigger: 3

- The CSD receives information on final holdings in the underlying ISIN 4

Precondition: 5

- Current date is record date of the CA 6

- Necessary cash proceeds are available to the CSD 7

CSD6 calculates CA entitlements based on securities positions at the close of business of the CA record date 8

and sends settlement instructions to T2S. The CSDs will handle the CA entitlements on the pending 9

settlement instructions as market claims. See section 4.1 on market claims processing in the context of T2S. 10

6 In certain registered markets, the paying agent does the calculation of entitlements.


Cash Distributions


Figure 2.1-4 Decomposition of the process ‘Calculate, instruct and settle CA proceeds’ into activities (Activity layer) 1

CALCULATE, INSTRUCT AND SETTLE CA PROCEEDS

T2S

CSD

SETTLEMENT SERVICES: LIFE CYCLE MANAGEMENT SERVICES

CALCULATE CA

ENTITLEMENTS

[T2S.AC.CORP.040]

INSTRUCT AND SETTLE IN T2S

[T2S.AC.SETT.040]

SETTLEMENT

POSTING

SERVICE[T2S.SD.SETT.050]

LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE

SETTLEMENT

CONFIRMATIONS

CSD

PARTICIPANT(T2S DIRECTLY

CONNECTED

PARTIES)

STATUS

MANAGEMENT

SERVICE[T2S.SD.INF.010]

Settlement Instructions

Status Advices and

Settlement Confirmations

Settlement

Confirmations

CORPORATE

ACTION CASH

SERVICE[T2S.SD.LIM.040]

BUSINESS

VALIDATION


RECEIVE LIQUIDITY

TRANSFER

INFORMATION

NCB /

PAYMENT

BANKS(T2S DIRECTLY

CONNECTED

PARTIES)

Liquidity transfer

information

Until

Record Date

Current

Date =

Record

Date

NOTIFY

CA


CALCULATE,

INSTRUCT AND

SETTLE


2

The process „Calculate, Instruct Entitlements and settle‟ consists of the following two activities (see Figure 3

2.1-4Figure 2.1-4): 4

1. Calculate CA Entitlements 5

2. Instruct and Settle in T2S 6

7

Calculate CA Entitlements (Activity 1) 8


The CSD calculates the entitlements based on the securities positions held at the close of business of the 9

record date and based on the CA details. 10

11


Cash Distributions


Instruct and Settle in T2S (Activity 2) 1

Reference ID T2S.AC.SETT.040

As per the CAJWG and CASG standard, cash payments resulting from corporate action events should be 2

paid via the same „payment mechanism‟ as any standard DVP activity (i.e. T2S dedicated cash accounts 3

- DCA).7 4

At the latest by the start of business on the payment date (prior to NTS settlement sequence 1), the CSD 5

creates and sends to T2S the settlement instructions for crediting the cash to the entitled position holders 6

(See section 2.1.3 on T2S Settlement Services). 7

8

The CSD sends to T2S, “already matched” payment free of deliveries settlement instructions (PFOD). 9

The indicative instruction type (from CSD‟s/ PA‟s issuer/ issuer‟s agent perspective) is 10

Proceeds type Instruction Type ISIN Quantity Amount

Cash DVP Underlying ISIN Zero Cash proceeds

11

Typically, a matched PFOD consists of the following two legs: 12

- RVP instruction for delivery of cash 13

- DVP instruction for receipt of cash 14

The instructions should contain the following information (non-exhaustive list of details); 15

the DCA of the CSD or any other T2S party distributing the cash proceeds; 16

the DCA8 of the CSD participant (receiving the cash proceeds); 17

the Securities account9 of the CSD or the T2S party distributing the cash proceeds; 18

the Securities account of the CSD participant which receives the cash proceeds; 19

the underlying securities (i.e. ISIN); 20

the (securities) settlement quantity as zero; 21

the cash amount 22

During this process, the CSD receives the status advices and settlement confirmations from T2S. If the 23

CSD participant‟s payment bank has set up a standing instruction to move cash proceeds to an RTGS 24

account (outside T2S), T2S will create an immediate liquidity transfer. The relevant NCB and the 25

payment bank will receive the status advices for this liquidity transfer. 26

7 In case of currencies not eligible in T2S, cash payments will take place outside T2S.

8 If DCA is not specified in the settlement instruction.T2S will use the default DCA linked to the securities account.

9 As per ISO 20022, the delivering or receiving securities account is a mandatory field in the settlement instruction


Cash Distributions


In a link arrangement (cross-CSD settlement), both the issuer CSD and the investor CSD will perform this 1

process in order to generate the cash entitlements for their respective CSD participants. 2

For distribution of cash to its participants, the issuer CSD sends settlement instructions to T2S. T2S 3

debits the dedicated cash account of the issuer/issuer‟s agentpaying agent (issuer agent, CSD) and credits 4

the CSD participants‟ cash accounts. (see step 1 in Box 2.1-1Box 2.1-1) 5

The investor CSD being a participant of the issuer CSD receives the cash proceeds in its DCA. In turn, 6

the investor CSD should ensure that these proceeds are distributed within its own books to the DCAs of 7

its own participants (see step 2 in Box 2.1-1Box 2.1-1) 8

9

The CSD has the possibility to send all cash-distribution settlement instructions to settle on an “All or 10

none” basis in T2S. 11

Box 2.1-1Cash distribution in the context of T2S 12

13

(1) Step 1: An issuer Agent A (or the CSD A itself) is responsible for distributing the cash 14

entitlements in the environment of the issuer CSD A. The payments are made in the DCA in the 15

issuer CSD A. The investor CSD B may be using a settlement bank (SB) for managing its 16

liquidity in the environment of issuer CSD A (SB receives EUR30 for investor CSD B). 17

(2) Step 2: The investor CSD B has received EUR 30 in its DCA operated by its SB (presumably, 18

but not necessarily, the same SB used in step 1). Cash distributions in the form of cash payments 19

are made towards the participants (B, C and D) of investor CSD B (movement 2) 20

21

NCB A (Issuer CSD A) NCB B (Investor CSD B)

CSD A (PA)

DCA

Participant A

DCA

CSD B

DCA

30

20

30

20

Participant B

DCA

Participant D

DCA

5

15

1 2

T2S

CSD B

DCA

5

15

Participant C

DCA

10

10


Cash Distributions


2.1.3 T2S Service Description 1

Information services 2

Status management service 3

T2S Service Name Status management Services

T2S Service Reference ID T2S.SD.INF.010

T2S Service Class Information Services

Trigger Any change of the status of the T2S instructions

Status management service communicates the status of the instructions to the authorised T2S actors. The 4

T2S actors must have subscribed in advance to the status management service in order to receive the advice 5

messages. 6

7

Report Generation Service 8

T2S Service Name Report Generation Services



Trigger Automatic initiation at a specific time based on the report subscription set

up in T2S

This T2S business service facilitates the Notify CA process by generating and sending to CSD statement of 9

holdings, delta statement of holdings, statement of pending instructions and delta statement of pending 10

instructions reports after the close of daytime settlement (or at any other time as specified by the CSD in its 11

report subscription). 12

Statement of Holdings – This report includes details of all securities positions of all ISINs held in the 13

respective CSD securities accounts. 14

Delta statement of holdings – This report includes changes in the quantity of securities positions, i.e. the 15

net quantity which has been debited or credited on the reported positions since the creation of the 16

previous Statement of Holdings. 17

Statement of Pending Instructions - This report includes details of all pending instructions related to the 18

respective CSD‟s securities accounts, that T2S has accepted. 19


Cash Distributions


Delta Statement of Pending Instructions - The report lists instructions created/amended since the creation 1

of the previous Statement of pending instructions. This report covers: 2

new pending settlement instructions; 3

pending settlement instructions which were modified; 4

settlement instructions which were formerly pending but are now cancelled; 5

settlement instructions which are partially settled. 6

7

Query Service 8

T2S Service Name Query Services



Trigger Receipt of a query request from the CSD for securities positions or

settlement instructions

The T2S Settlement-Related Queries Service component of the Query Service facilitates the Notify CA 9

process by providing information of the securities positions (current and history) and pending settlement 10

instructions in the underlying ISIN. 11

Settlement services 12

T2S Service Name Business Validation Service

Linked Instructions Service

Settlement Sequencing Service

Settlement Posting Service

T2S Service Reference ID T2S.SD.SETT

T2S Service Class Settlement Services

Trigger Receipt of a pre-matched settlement instruction from the CSD10

10 Depending on the business model of each market, T2S parties other than the CSD may instruct the cash distributions

in T2S.


Cash Distributions


This T2S business service facilitates the settlement of cash distribution instructions sent to T2S from the 1

CSD. T2S processes these settlement instructions by using one or more component services (listed below) in 2

the Life Cycle Management Services. T2S sends the results of the settlement services (status advice and 3

settlement confirmations) to the CSD via the T2S Status Management Service (T2S.SD.INF.010). 4

5

Business Validation Service (T2S.SD.SETT.010) 6

This T2S service validates the settlement instructions relating to the securities distribution and ensures 7

the fulfilment of defined rules pertaining to the content of the fields on the settlement instructions. In 8

addition to the validation, this service creates two instructions from the already matched settlement 9

instruction (i.e. one for the deliver leg and one for receive leg of the transaction) sent by the CSD to T2S. 10

The T2S generated instructions are created using the details in the settlement instruction sent by the 11

CSD. 12

13

Linked Instructions Service (T2S.SD.SETT.150) 14

This T2S service creates T2S associations/links amongst the settlement instructions as grouped by the 15

CSD using a common reference. 16

17

Settlement Sequencing Service (T2S.SD.SETT.040) 18

This T2S service extracts all eligible settlement instructions related to CA on stock and proposes for 19

settlement in NTS sequence one (cycle 1). Any settlement instructions which are either received after 20

NTS sequence 1 or could not be processed in sequence 1 are proposed for settlement in the subsequent 21

sequences. 22

23

Settlement Posting Service (T2S.SD.SETT.050) 24

This T2S service performs the provisioning and booking of the settlement instructions. 25

Liquidity management services 26

Corporate action cash service 27

T2S Service Name Corporate action cash services

T2S Service Reference ID T2S.SD.LIM.040

T2S Service Class Liquidity Management Services

Trigger Cash Credit due to corporate action into the dedicated cash account of T2S

actors


Cash Distributions


1

The „Corporate action cash service‟ component, of the „Liquidity management‟ service facilitates T2S actors 2

to manage the CA generated liquidity they receive in their T2S DCAs. The T2S actors can decide if this 3

liquidity should: 4

stay in the T2S DCA , or 5

be moved to an RTGS account outside T2S 6

The service facilitates the creation of a standing instruction to specify this option, and executes the 7

instruction by creating an immediate liquidity transfer order. 8

9


Securities Distributions


1

2.2 Securities Distributions 2

In a securities distribution, the proceeds of the CA consist of securities. Stock dividends and bonus issues are 3

typical examples of such events. 4

This section covers the standard steps in a securities distribution within the context of a CSD. It covers both 5

the domestic and the cross-CSD environment. 6

2.2.1 Process Diagrams 7

Figure 2.2-1 Business Process Model of a CA Securities Distribution 8

CAPTURE

CA

[T2S.BP.CORP.SECD.010]

CALCULATE,

INSTRUCT AND

SETTLE

CA PROCEEDS[T2S.BP.CORP.SECD.030]

Current

Date =

Record

Date

CSD

ENTITLED

HOLDERS AND

POSITION

DETAILS

NOTIFY

CA


Until

Record Date

CA DETAILS

Receipt of CA Details

9

2.2.2 Process description 10

Capture CA 11

Reference ID T2S.BP.CORP.SECD.010

This process captures the securities distribution details received by the CSD (CA announcement). 12

Notify CA 13


This process „Notify CA‟ identifies the eligible recipients based on the CA details and the T2S information. 14

This process runs until the record date of the CA. 15

For the process description of „Notify CA‟ see section 2.1.2 16






Business Actors: CSDs, T2S 2

Business Object: 3

- CA details 4




- Send Settlement Instruction (see T2S UDFS, Chapter 2) 8

Trigger: 9


Precondition: 11

- Current date is record date of the CA. 12

- Necessary securities proceeds are available to the CSD 13

CSD11

calculates CA entitlements based on securities positions at the close of business of the CA record date 14

and sends settlement instructions12

to T2S. The CSDs will handle the CA entitlements on the pending 15

settlement instructions as market claims. See section 4.1 on market claims processing in the context of T2S. 16



19

Calculate CA Entitlements 20


The CSD calculates entitlements based on the securities positions held at the close of business of the 21

record date and based on the CA details. 22

23

Instruct and Settle in T2S 24


11 In certain registered markets, the paying agent does the calculation of entitlements

12 In case the outturn ISIN is not eligible in T2S, the distribution of proceeds will be handled outside T2S(applicable for

all types of CAs).




At the latest by the start of business on the payment date (prior to NTS settlement sequence 1) the CSD 1

creates and sends to T2S the settlement instructions for crediting the securities to the entitled position 2

holders (See section on T2S Settlement Services). 3

The indicative instruction type (from CSD‟s perspective) is 4


Securities DFP Outturn ISIN Securities proceeds

of the participant

-

5

During this process, the CSD receives status advices and settlement confirmations from T2S. 6

Figure 2.2-2 Decomposition of Calculate, Instruct and Settle CA Proceeds process 7


T2S

CSD

BUSINESS

VALIDATION



CALCULATE CA

ENTITLEMENTS[T2S.AC.CORP.040]


[T2S.AC.SETT.040]

SETTLEMENT

POSTING


LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE

SETTLEMENT

CONFIRMATIONS

CSD


CONNECTED

PARTIES)

STATUS

MANAGEMENT


Settlement InstructionsStatus Advices and



CALCULATE,

INSTRUCT AND

SETTLE

CA PROCEEDS[T2S.BP.CORP.SECD.030]

Current

Date =

Record

Date

NOTIFY

CA


Until

Record Date

8

In a link arrangement, both the issuer CSD and the investor CSD perform this process in order to 9

generate entitlements for their participants: 10




The issuer CSD sends to T2S settlement instructions for issuance and distribution of additional 1

underlying securities. Depending on the issuer CSD‟s account structures, securities are typically 2

created by the usage of an Issuance and a Distribution (or “off-set”) account. The Distribution 3

account is debited and participants‟ accounts are credited (steps 1 and 2 in Box 2.2-1Box 2.2-1) 4

The investor CSD being a participant of the issuer CSD receives the proceeds of the securities 5

distribution in its omnibus account in the issuer CSD. In its turn, the investor CSD should ensure 6

that these proceeds are distributed within its own books to the securities accounts of its own 7

participants (step 3 in Box 2.2-1Box 2.2-1) 8

9

The CSD has the possibility to send all settlement instructions related to a specific securities distribution 10

event to settle on an “All-or-none” basis. 11

The CSD also has the option to send the securities issuance and all the securities distribution settlement 12

instructions related to a specific CA, to settle on an “All or none” basis. 13

Box 2.2-1 Securities distribution in the context of T2S 14

T2S

Investor CSD BInvestor CSD B

Mirror a/c B

Participant B

25

3

Issuer CSD AIssuer CSD A

100 100

Distribution/

“Off-set”Issuance

1

Part. A Inv CSD B

50 50

2 Participant C

25 25

50

50

25

T2S


Mirror a/c B

Participant B

25

3


100 100

Distribution/


1

Part. A Inv CSD B

50 50

2 Participant C

25 25

50

50

25

15

(1) Step 1: The issuer CSD A initiates the issuance process of a EUR 100 securities distribution. The 16

procedure resembles a “primary market” operation. Securities are created by the usage of an 17

Issuance and a Distribution (or “off-set”) account. 18

(2) Step 2: The issuer CSD A distributes the securities entitlements to its own participants. The 19

distribution account is debited and participants‟ accounts are credited accordingly. Investor CSD B 20

does not differ from a standard CSD A participant. Investor CSD B receives in its omnibus 21

account in the CSD A, the proceeds of the securities distribution (EUR 50). 22




(3) Step 3: Investor CSD B distributes the securities entitlements to the two relevant participants (EUR 1

25 each). Mirror account is debited and investor CSD B participants‟ accounts are credited 2

accordingly. 3

In T2S, like in cross-CSD CA processing today, movements 2 and 3 are not dependant upon the checking of 4

a central mechanism. Investor CSD B like any other participant of issuer CSD A, may or may not wait for 5

the final settlement of movement 2 before initiate movement 3 in its own books. Movement 2 is not a 6

prerequisite of movement 3. 7

8


Information Services 10


Refer section 2.1.3 12



Query Service 15


17

Settlement Services 18

T2S Service Name Life Cycle Management Services



Trigger Receipt of a pre-matched settlement instruction from the CSD

This T2S business service facilitates the settlement of securities distribution instructions sent to T2S from the 19

CSD. T2S processes these settlement instructions by using one or more component services (listed below) in 20

the Life Cycle Management Services. T2S sends the results of the settlement services (status advice and 21

settlement confirmations) to the CSD via the T2S Status Management Service (Information Management 22

Service Class, T2S.SD.INF). 23

24

Life Cycle Management Services - Components 25






2



5




This T2S service performs the provisioning and booking of the settlement instructions. For securities 9

issuance process, it allows the securities positions in the Issuance securities account to become negative. 10

It considers the technical netting effect during provision check and proposes all relevant settlement 11

instructions for settlement on an “All or None” basis. 12

13


Distributions with options


1

2.3 Distributions with options 2

„Distributions with options‟ are distribution events which provide the investor with a choice of proceeds. An 3

example of such an event is an optional dividend (e.g. with options for receiving cash and/or securities). This 4

section covers the standard steps within the context of a CSD settling distributions with options in T2S. It 5

covers both the domestic and the cross-CSD scenario. 6

According to the CAJWG standards, the CSD should treat distributions with options as two separate CA 7

events: 8

the distribution of the interim ISIN; 9

the mandatory reorganisation with option event (i.e. the option) on the interim ISIN. 10

For the business process description of the first event (the securities distribution) see section 2.2. 11

For the business process description of the second event (the mandatory reorganisations with options) see 12

section 3.1. 13

For the T2S service description, see section 2.1.3 14

15


Mandatory Reorganisations with options


3 Reorganisations 1

A reorganisation is a CA event whereby the underlying security is replaced with proceeds. 2

3.1 Mandatory Reorganisations with options 3

A mandatory reorganisation with options event is a mandatory reorganisation, where the investor has a 4

choice of proceeds. 5

A „conversion‟ is an example of a mandatory reorganisation with options event (whereby the investor has a 6

choice of receiving e.g. cash and/or securities as proceeds). 7

This section covers the standard steps within the context of a CSD settling a mandatory reorganisation with 8

options in T2S. It covers both the domestic and the cross CSD scenarios. 9


Figure 3.1-1 Business Process ‘Mandatory Reorganisations with options’ (Process Layer) 11

12

CAPTURE CA

[T2S.BP.CORP.RGOP.010]

CSD

RECEIVE CA

ELECTIONS[T2S.BP.CORP.RGOP.030]

CA

Details

Receipt of CA

Details

Receipt of Election

Instructions

Until CA

market deadline

NOTIFY CA


EOD of Payment date -1

CALCULATE,

INSTRUCT AND

SETTLE CA

PROCEEDS[T2S.BP.CORP.RGOP.040]

BLOCK ISIN


TRANSFORM

SETTLEMENT

INSTRUCTIONS[T2S.BP.CORP.RGOP.060]

CREATE

OUTTURN

SECURITIES

REFERENCE DATA[T2S.BP.CORP.RGOP.070]

13





Capture CA 2

Reference ID T2S.BP.CORP.RGOP.010

This process (see Figure 3.1-1Figure 3.1-1), captures the „mandatory reorganisation with options‟ details 3

received by the CSD (CA announcement). 4

Notify CA 5


Business Actors: CSD, CSD Participants, T2S 6

Business Objects: 7

- CA details 8

- Securities positions 9

- T2S settlement instructions (pending) 10



- Send Query (refer Chapter 2 of T2S UDFS) and/or 13

- Receive Report (See Chapter 2 of T2S UDFS) 14

Trigger: 15

- CSD captures CA announcement 16

Preconditions 17

- Current date is on or before the CA market deadline date 18

This process (see Figure 3.1-1Figure 3.1-1) identifies the eligible recipients based on the CA details (ISIN, 19

market deadline date etc). This process runs until the market deadline of reorganisation event, for 20

identifying: 21

participants obtaining a new holding in the underlying security which is valid after the reorganisation 22

announcement, but before the market deadline; and 23

participants creating a new open position (pending instructions) in the underlying security after the initial 24

announcement 25

26




Figure 3.1-2 Decomposition of the process ‘Notify CA’ into activities (Activity Layer) 1

2

NOTIFY CA


RECIPIENTS

[ T2S.AC.CORP.020 ]

CSD

OBTAIN SECURITIES POSITIONS AND PENDING

INSTRUCTIONS’ DETAILS

[T2S.AC.INF.010 ]

CSD may use either T2S query

responses or data extracted from T2S

reports (or both forms of data) to

identify and inform entitled position

holders

RECEIVE CA

ELECTIONS[T2S.BP.CORP.RGOP.030]

Until CA

market deadline

NOTIFY CA


3

The process „Notify CA‟ consists of the following two activities (see Figure 3.1-2Figure 3.1-2): 4

1. obtain securities positions and pending settlement instructions’ details; 5

2. identify and inform eligible recipients 6

7

Obtain securities positions and pending settlement instructions’ details 8


9

The CSD has the option to: 10

either receive these details through predefined reports generated by T2S at close of business of 11

settlement day (End of Day reporting) [ see Task 3, Task 4 below] or 12

query T2S specifying the underlying ISIN13

as a filter criterion [See Task 1, Task 2 below]14

13

This activity consists of the following tasks (see Figure 3.1-3Figure 3.1-3): 14

the CSD queries T2S for securities positions related to the underlying ISINs (Task 1) 15

the CSD queries T2S for pending settlement instructions details related to the underlying ISINs 16

(Task 2) 17

based on its report subscription set up in T2S, the CSD can receive periodically statement of 18

holdings, delta statement of holdings, statement of pending instructions and delta statement of 19

pending instructions reports (Task 3) 20

the CSD filters the reports in order to extract details relevant to the underlying ISINs (Task 4) 21

13 Refers to the underlying security which is subject to a CA

14 See section on T2S Services Description for details about T2S Report Generation Services and T2S Query Services




Figure 3.1-3 Decomposition of the activity ‘Obtain Securities Positions and Pending Instructions’ Details’ into tasks 1

(Task Layer) 2

NOTIFY CA


RECIPIENTS

[ T2S.AC.CORP.020 ]

OBTAIN SECURITIES POSITIONS AND PENDING

INSTRUCTIONS’ DETAILS

[T2S.AC.INF.010 ]


NOTIFY CA

T2S

CSDOBTAIN SECURITIES POSITIONS AND PENDING INSTRUCTIONS’ DETAILS

REPORT

GENERATION

SERVICES

[T2S.SD.INF.020]

FILTER REPORTS FOR

UNDERLYING ISIN

DETAILS[ 4 ]

RECEIVE REPORTS -


INSTRUCTIONS[ 3 ]

QUERY SECURITIES

POSITIONS FOR


QUERY PENDING

INSTRUCTIONS FOR


Query Request Query Request

Query Response -


T2S Reports - Securities Positions and


Specific Time

SECURITIES

BALANCE

QUERY

SETTLEMENT

INSTRUCTION

QUERY

Query Response -

Securities Positions

3

4

Identify and inform eligible recipients 5


6

The CSD informs eligible recipients (received/queried in the previous activity T2S.AC.INF.010) about 7

the CA details (see Figure 3.1-2Figure 3.1-2). 8

9

In the cross CSD context, both issuer CSD and investor CSD execute this process to identify their 10

entitled CSD participants. The investor CSD identifies and informs the entitled position holders after it 11

receives the CA details from issuer CSD (or any entity depending on their business model). 12

13




1

Receive CA elections 2


Business Actors: CSD, CSD Participant, T2S 3

Business Objects: 4

- CA details 5

- CA election 6

- Settlement restrictions (i.e. Intra-position movements) 7

T2S Service Class Name: 8

- Settlement services (T2S.SD.SETT) 9

T2S Use Case Name: Send Settlement Restriction on Securities Position (see Chapter 2 of T2S UDFS) 10

Trigger: 11

- CSD receives of CA election 12

Precondition: 13

- CA details are available to the CSD 14

This process (at CSD) captures the participant‟s CA election based on which the CSD attempts to separate 15

the elected securities positions accounting-wise (e.g. by blocking the securities positions, or by moving the 16

securities positions from the participant account to the PA‟s15

issuer/issuer‟s agent‟s account, or moving the 17

securities positions to an escrow account set up by the issuer agent for the event). The CSD may „facilitate‟ 18

CA elections on pending instructions, if it offers an automated buyer protection service (Documented in the 19

process „Transaction management - Buyer protection‟). 20

The process „Receive CA elections‟ consists of the following two activities (see Figure 3.1-4Figure 3.1-4): 21

1. Receive CA election 22

2. Block securities positions in T2S 23

24

Receive CA election 25


15 Paying Agent (PA) is appointed by the issuer of the ISIN, for distribution of CA proceeds to the eligible holders, and

for the management of elections made.




The CSD receives the CA elections from the CSD participants based on which it creates settlement 1

instructions in T2S. 2

Block securities in T2S 3


The CSD creates and sends to T2S intra-position movements16

for moving the elected securities 4

positions from the „available‟ securities position type to the „blocked for CA17

‟ securities position type, 5

in the participant‟s account. During this process, the CSD receives status advices and settlement 6

confirmations from T2S (see T2S Use Case “Send Settlement Restriction on Securities Position” in 7

Chapter 2 of T2S UDFS). 8

9

AlternativelyDepending on the way a specific CA is processed, the CSD may send settlement 10

instructions to T2S for moving elected securities positions from CSD participant‟s securities account to 11

PA‟s issuer/issuer‟s agent‟s securities account. 12

In a cross-CSD environment, the investor CSD communicates the CA elections to the issuer CSD/ PA 13

issuer/issuer‟s agent after successful blocking of the elected securities positions. 14

16 AG has approved for raising a change request (CR), to disallow partial blocking of securities positions for corporate

action purpose.

17 „Blocked for CA‟ is a securities position type created by the respective CSD to manage certain reorganisations. CSD

will have to create all their securities position types using the T2S settlement restrictions model.




Figure 3.1-4 Decomposition of the process ‘Receive CA Election’ into activities (Activity Layer) 1

CSDRECEIVE CA ELECTIONS

RECEIVE CA ELECTION[T2S.AC.CORP.100]

BLOCK SECURITIES IN T2S[T2S.AC.SETT.100]

T2S

SETTLEMENT SERVICES

SETTLEMENT

POSTING


EARMARKING,

BLOCKING AND

RESERVATION


STATUS

MANAGEMENT


BUSINESS

VALIDATION


Settlement RestrictionsStatus Advices and


RECEIVE

CA ELECTIONS[T2S.BP.CORP.VOLU.030]

2

3

Create Outturn Securities Reference Data 4


This process captures and creates new outturn securities if the mandatory reorganisation involves distribution 5

of securities. Refer section 3.2.2 6




Business Object: 9

- CA elections 10

- Settlement instructions 11


T2S Use Case Name: Send Settlement Instruction (refer See Chapter 2 of T2S UDFS) 13

Trigger: 14




- Payment date is reached 1

Precondition: 2

- Necessary proceeds are available to the CSD 3

CSD invokes this process on or after payment date. CSD initiates the distribution of proceeds (cash amount 4

and/or securities quantity) by instructing T2S for settlement in function of the instructions received from the 5

PAissuer/issuer‟s agent. 6

7

The process „Distribute CA proceeds‟ consists of the following activities (see Figure 3.1-5Figure 3.1-4): 8



11

Calculate CA Entitlements (Activity 1) 12


The paying agentissuer/ issuer‟s agent calculates the entitlements based on the securities positions that 13

have been segregated accounting-wise and the related instructed options of the electing participants. 14

CSD would calculate the entitlements on positions where default option is applied. 15

16



CSD creates and sends to T2S the settlement instructions based on the instructions received from the 18

paying agentissuer/issuer‟s agent to distribute the CA proceeds. 19

- For cash proceeds, CSD creates „versus payment18

‟ instructions, for moving the underlying 20

securities positions19

from the CSD participant to CSD/PAissuer/issuer‟s agent, and for 21

moving cash amount from CSD‟s/PA‟s issuer‟s/issuer‟s agent‟s DCA to participant‟s DCA 22

- For securities proceeds, CSD creates two „Free of payment‟ transactions (four instructions). 23

One for moving underlying securities positions from participant‟s account to CSD‟s/PA‟s 24

issuer‟s/issuer‟s agent‟s account, another for moving outturn securities positions from 25

CSD‟s/ issuer‟s/issuer‟s agent‟sPA‟s account to participant‟s account. CSD may link the 26

four FOP instructions as „all or none‟ 27

18 If payment date is not market deadline date + 1 business day, CSD instructs debit of underlying securities, credit of

cash and/or outturn securities on different dates, to T2S.

19 In case securities positions in the underlying ISIN are already debited earlier, CSD instructs T2S for credit of outturn

securities or cash only




In the settlement instruction sent to T2S for debiting the underlying ISIN from participant‟s account, 1

CSD must specify the reference of the blocked securities positions (as obtained via status advice in the 2

process „receive CA elections‟). 3

The indicative instruction types (from CSD‟s/ issuer‟s/ issuer‟s agent‟sPA‟s perspective) are 4


Cash RVP Underlying ISIN Securities positions

of the participant

Cash proceeds of

the participant

Securities

RFP Underlying ISIN Securities positions

of the participant

-

DFP Outturn ISIN Securities proceeds

for the participant

-

Cash and

securities

RVP Underlying ISIN Securities positions

of the participant

Cash proceeds of

the participant


for the participant

-

None DFP Underlying ISIN Securities positions

of the participant

-

5

The CSD can optionally send all settlement instructions related to a reorganisation CA to settle on an 6

“All or none” basis. 7

Alternatively, if the CSD has segregated the participant‟s elected positions by moving them to a different 8

account (issuer‟s/issuer‟s agent‟sPA‟s or Escrow), the CSD creates instructions to deliver cash and/or 9

securities to participant. 10



Cash RVP Underlying ISIN Zero Cash proceeds of

the participant






for the participant

-

Cash and

securities

RVP Underlying ISIN zero Cash proceeds of

the participant


for the participant

-

1

During this process, the CSD receives status advices and settlement confirmations from T2S. Upon 2

settlement of the settlement instructions, CSD sends confirmation of CA elections to its participants. 3

In case of cash proceeds, if the payment bank has set up a standing instruction to move corporate action 4

cash proceeds to RTGS account, T2S will create an immediate liquidity transfer, and payment bank will 5

receive liquidity transfer status advice. 6

In case of a cross-CSD scenario, investor CSD invokes this process after the receipt of CA proceeds 7

from issuer CSD20

. 8

9

20 In case of chain of intermediaries, investor CSD receives confirmations from technical issuer CSD.




Figure 3.1-5 Decomposition of the process ‘Calculate, Instruct and Settle CA proceeds’ (Activity Layer) 1

2

CSD

CALCULATE, INSTRUCT AND SETTLE CA PROCEEDST2S.BP.CORP.RGOP.040


T2S.AC.SETT.040

T2S


SETTLEMENT

POSTING


LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE

SETTLEMENT

CONFIRMATIONS

CSD


CONNECTED

PARTIES)

STATUS

MANAGEMENT



Status Advices and


Settlement

Confirmations

CORPORATE

ACTION CASH


RECEIVE LIQUIDITY

TRANSFER

INFORMATION

PAYMENT

BANKS(T2S DIRECTLY

CONNECTED

PARTIES)

Liquidity transfer

information

BUSINESS

VALIDATION


CALCULATE,

INSTRUCT AND

SETTLE CA

PROCEEDS[T2S.BP.CORP.RGOP.040]

CALCULATE CA

ENTITLEMENTS

T2S.AC.CORP.040

3

Block ISIN 4



Business Objects: 6

- ISIN 7

T2S Service Class Name: Static data management services (T2S.SD.INF) 8

T2S Use Case Name: Maintain SD (Refer Chapter 2 of T2S UDFS) 9

Trigger: 10




- Market deadline date is reached 1

This process (see Figure 3.1-6Figure 3.1-5) involves CSD sending request to T2S for blocking21

the 2

underlying ISIN, and CSD receiving the response from T2S. This process is optional, and may not be used in 3

case the CSD initiates debit of the underlying ISIN from participants accounts at or before the market 4

deadline, using settlement instructions. 5

Figure 3.1-6 Decomposition of the process ‘Block ISIN’ (Activity Layer) 6

CSD

BLOCK ISIN

INSTRUCT T2S TO BLOCK

SECURITYT2S.AC.STD.010

T2S.BP.CORP.RGOP.050

RECEIVE CONFIRMATION FROM

T2S

T2S.AC.STD.020

T2S


SECURITIES REFERENCE DATA

SERVICE[T2S.SD.STD.020]

Securities maintenance

request

Securities maintenance

status advice

BLOCK ISIN[T2S.BP.CORP.RGOP.050]

7

8

21 The assumption is that the outturn security is different from the underlying security.




The process „Block ISIN‟ consists of the following two activities (see Figure 3.1-6Figure 3.1-5): 1

1. Instruct T2S to block ISIN 2

2. Receive confirmation from T2S 3

4

Instruct T2S to block ISIN 5

Reference ID T2S.AC.STD.010

6

The CSD invokes this process prior to the payment date of the reorganisation event. More specifically 7

this process takes place prior to the start of sequence 1 in the T2S night-time settlement of payment date. 8

The CSD sends to T2S a securities maintenance request to block the underlying ISIN22

subject to the 9

reorganisation. 10

The request to block will affect only the relevant ISIN balances and pending instructions of the 11

instructing CSD. Other CSDs with balances and pending instructions on the relevant ISIN will have to 12

instruct T2S separately, for blocking the ISIN. As an example, a request to block the relevant ISIN sent 13

to T2S from the issuer CSD will not result in a global freeze of all balances and pending instructions 14

across all CSDs, for the ISIN under reorganisation. 15

Receive confirmation from T2S 16

Reference ID T2S.AC.STD.020

17

The CSD receives confirmation message from T2S, for blocking the ISIN. (see Figure 3.1-6Figure 3.1-5). 18

Transform settlement instructions 19


This process involves the CSD initiating the cancellation of the pending settlement instructions in T2S and 20

sending the transformed settlement instructions on the outturn security and/or cash to T2S. (See business 21

process „Transformations‟) 22




22 Prior to instructing T2S, CSD must create a restriction type for blocking the ISIN for settlement. UDFS documents

the process of creating this restriction type.








Static data management services 5

Securities reference data service 6

T2S Service Name Securities reference data service

T2S Service Reference ID T2S.SD.STD.020

T2S Service Class Static data management services

Trigger Instruction for blocking ISIN

The „Securities reference data service‟ component, of the „Static data management‟ service facilitates 7

blocking or unblocking of the ISIN. 8

9


Mandatory Reorganisations


1

3.2 Mandatory Reorganisations 2

Mandatory reorganisation is a reorganisation that affects in all cases the underlying security (e.g. stock split, 3

redemption). This process replaces the underlying securities fully or partly with one or more resources (cash 4

only, securities only, both cash and securities). This type of corporate action does not require any action on 5

the part of holders of the underlying securities. 6

This section covers the standard steps in a reorganisation within the context of a CSD settling mandatory 7

reorganisations in T2S. It covers both the domestic and the cross CSD environment. A cross CSD 8

reorganisation is in fact two domestic reorganisations. One refers to the issuer CSD reorganising the 9

securities and the other to the investor CSD reorganising the securities for its own participants (see Box 10

3.2-1Box 3.2-1). 11


Figure 3.2-1 Process diagram of Mandatory Reorganisation 13

14

CAPTURE

CA[T2S.BP.CORP.MAND.010]

Entitled

position

holders

have to

be notified

CALCULATE,

INSTRUCT AND SETTLE

CA PROCEEDS[T2S.BP.CORP.MAND.040]CSD

ENTITLED

HOLDERS AND

POSITION

DETAILS

NOTIFY


Until

Record Date

CA DETAILS

CREATE OUTTURN

SECURITIES

REFERENCE DATA[T2S.BP.CORP.MAND.030]

Current Date

=

Record Date

[ CA

reorganisation

event requires

creation of

new outturn

securities]

15

16





Capture CA 2

Reference ID T2S.BP.CORP.MAND.010

This process (see Figure 3.2-1Figure 3.2-1) captures the mandatory reorganisation received by the CSD (CA 3

announcement). 4

Notify CA 5



This process runs until the record date of the CA. 7


Create Outturn Securities Reference Data 9


Business Actors: CSD, T2S 10

Business Objects: 11

- Securities 12

T2S Service Class Name: Static Data Management Services (T2S.SD.SDMG) 13


- Maintain SD (See Chapter 2 of T2S UDFS) 15

Trigger: 16

- Mandatory reorganisation CA information received, with a new outturn security 17

Preconditions 18

- CA details are available to CSD 19

- Availability of the ISIN code of the outturn securities 20

21

This process captures and creates new outturn securities if the mandatory reorganisation involves distribution 22

of securities23

. The issuer/issuer‟s agent provides the details of the outturn security, including the ISIN code, 23

23 According to CAJWG standard 16 of mandatory reorganisation, a new ISIN should be allocated to each outturn

securities




to the issuer CSD. The issuer CSD24

uses the T2S static data management services for setting up the new 1

security in T2S (see T2S business process “Maintain Securities” for details). The issuer CSD must complete 2

the process of creating the outturn securities (set up of outturn securities ISIN in T2S prior to any distribution 3

to account holders) before the close of business on the business day preceding the payment date of the CA. 4




Business Objects: 7

- CA details 8

- T2S Settlement Instructions 9

- T2S Status Advice and Settlement Confirmations 10



- Send Settlement Instruction (See Chapter 2 of T2S UDFS) 13

Trigger: 14


- Necessary CA proceeds are available to the CSD 16

Preconditions 17

- Current date is the payment date of the CA 18

This process generates CA reorganisations based on securities positions in the underlying securities at the 19

close of business of the CA record date and sends settlement instructions to T2S. This process involves the 20

removal of underlying securities and credit of outturn securities and/ or cash, depending upon the CA 21

reorganisation event. 22

23

CSD will handle the re-organisations on the pending settlement transactions as „Transformations‟. 24

Processing of transformations is documented in the business process „Transformations‟. 25

24 In case the issuer CSD is not in T2S, the securities reference data is maintained by the CSD set-up as „Securities

maintenance CSD‟




Figure 3.2-2 Decomposition of the process Calculate, Instruct and settle CA proceeds into activities (Activity Layer) 1

NOTIFY CA


RECIPIENTS[T2S.AC.CORP.020]

CSD


INSTRUCTION DETAILS[T2S.AC.INF.010]

Either T2S query responses or data

extracted from T2S reports (or both)

may be used to identify and inform

entitled position holders


further decomposed into tasks

CALCULATE,

INSTRUCT AND SETTLE

CA PROCEEDS[T2S.BP.CORP.MAND.040]

NOTIFY


Until

Record Date

Current Date

=

Record Date

2

3

The process „Calculate and Instruct CA Reorganisation‟ consists of the following three activities (see Figure 4

3.2-2Figure 3.2-2): 5

1. Calculate CA entitlements 6

2. Instruct and settle in T2S 7

8

Calculate CA entitlements 9


The CSD25

calculates the entitlements based on the securities positions held at the close of business of 10

the record date and based on CA details. 11

12



By the start of business on the payment date (before the T2S night time settlement sequence 1) CSD 14

creates and sends to T2S the settlement instructions for removal26

of underlying securities and the 15

crediting of outturn securities and /or cash to the entitled position holders (See to section on T2S 16

Settlement Services). 17

The CSD sends to T2S, „already matched‟ instructions. The indicative instruction types (from CSD‟s/ 18

issuer‟s/ issuer‟s agent‟sPA‟s perspective) for each type of CA proceeds is as below. 19

25 In certain registered markets, the paying agent does the calculation of entitlements

26 If payment date is not record date + 1 business day, CSD instructs debit of underlying securities, credit of outturn

securities on different dates, to T2S





Cash only RVP Underlying ISIN Securities positions

of the participant

Cash proceeds of

the participant

Securities

only


of the participant

-


for the participant

-

Cash and

securities

RVP Underlying

ISIN,

Securities positions

of the participant

Cash proceeds of

the participant


for the participant

-

1

The CSD can, optionally, send all Reorganisation CA settlement instructions to settle on an “All or 2

none” basis. 3

During this process, the CSD receives status advices and settlement confirmations from T2S (see Figure 4

3.2-3Figure 3.2-3) 5

6




Figure 3.2-3 Decomposition of the activity Instruct and Settle in T2S into tasks (Task Layer) 1


T2S

CSD


CALCULATE CA

ENTITLEMENTS

[T2S.AC.CORP.040]


[T2S.AC.SETT.040]

SETTLEMENT

POSTING


LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE

SETTLEMENT

CONFIRMATIONS

CSD


CONNECTED

PARTIES)

STATUS

MANAGEMENT



Status Advices and


Settlement

Confirmations

CORPORATE

ACTION CASH


BUSINESS

VALIDATION


RECEIVE LIQUIDITY

TRANSFER

INFORMATION

NCB /

PAYMENT

BANKS(T2S DIRECTLY

CONNECTED

PARTIES)

Liquidity transfer

information

CALCULATE,

INSTRUCT AND SETTLE

CA PROCEEDS[T2S.BP.CORP.MAND.040]

NOTIFY


Until

Record Date

Current Date

=

Record Date

2

3

CA reorganisation in a Cross CSD environment 4

In a cross CSD environment wherein the CSDs are linked to each other, both the issuer CSD and the investor 5

CSD perform this process in order to generate reorganisations for their respective CSD participants. 6

7

The issuer CSD sends to T2S settlement instructions either for the removal of the underlying securities, 8

the issuance and distribution of outturn securities and/or credit of cash. Based on the market specific 9

operational procedures, issuer CSD may define an account structure consisting of both an Issuance and a 10

Distribution (or “off-set”) account for creation and removal of securities. 11




o For issuance, issuer CSD instructs debit of Issuance account and credit of Distribution account. For 1

distribution of CA proceeds, issuer CSD instructs debit of Distribution account and credit of 2

Participants‟ accounts (see Box 3.2-1Box 3.2-1) 3

o For removal of underlying securities, issuer CSD instructs the debit of Participant‟s account and 4

credit of Distribution account. Subsequently, issuer CSD instructs debit of Distribution account 5

and credit of Issuance account. This results in the decrease of issued balance of underlying 6

securities. The securities movements for removal of underlying securities occurs in a direction 7

opposite to issuance of securities 8

o For cash credit, issuer CSD instructs debit of cash from the T2S dedicated cash account of the 9

payment bank managing the payments on behalf of the issuer/issuer‟s agent. The issuer CSD 10

instructs the credit of cash to either the default T2S dedicated cash account associated with the 11

relevant securities account or to the T2S dedicated cash account provided by the CSD participant 12

(see Box 3.2-2Box 3.2-2) 13

14

The investor CSD being a participant of the issuer CSD delivers underlying securities and receives the 15

outturn securities proceeds in its omnibus account in the issuer CSD. In its turn, the investor CSD should 16

ensure that these removals and credit of securities are reflected within its own books on the securities 17

accounts of its own participants (see Box 3.2-1Box 3.2-1) and the credit of cash is reflected on the T2S 18

dedicated cash accounts provided by its Participants (see Box 3.2-2Box 3.2-2). 19

Box 3.2-1 Distribution of securities proceeds in the context of T2S 20

T2S


Mirror a/c B

Participant B

25

3


100 100

Distribution/


1

Part. A Inv CSD B

50 50

2 Participant C

25 25

50

50

25

T2S


Mirror a/c B

Participant B

25

3


100 100

Distribution/


1

Part. A Inv CSD B

50 50

2 Participant C

25 25

50

50

25

21

Step 1: The issuer CSD A initiates the issuance process of a 100 securities distribution. The procedure 22

resembles a “primary market” operation. Issuer CSD creates securities by the usage of an Issuance and a 23

Distribution (or “off-set”) account. 24




Step 2: The issuer CSD A distributes the outturn securities to its own participants. Issuer CSD A 1

instructs the debit of distribution account and credit of participants‟ accounts. Investor CSD B does not 2

differ from a standard CSD A participant. Investor CSD B receives in its omnibus account in the CSD A, 3

the proceeds of the securities distribution (50 securities). 4

Step 3: Investor CSD B distributes the securities entitlements to the two relevant participants (25 5

securities each). Investor CSD B instructs debit of Mirror account and credit of investor CSD B 6

participants‟ accounts. 7

8

Box 3.2-2 Credit of cash in the context of T2S 9

T2S

NCB B (Investor CSD B)NCB B (Investor CSD B)

Participant c

2

NCB A (Issuer CSDA)NCB A (Issuer CSDA)

30

CSD

B/SB/DCAIssuer Agent A

DCA

1

Part. A/DCA

30

Participant b

/DCA

5

Participant d

10 15

20

20

CSD B/SB/DCA

5

10

15

T2S

NCB B (Investor CSD B)NCB B (Investor CSD B)

Participant c

2

NCB A (Issuer CSDA)NCB A (Issuer CSDA)

30

CSD

B/SB/DCAIssuer Agent A

DCA

1

Part. A/DCA

30

Participant b

/DCA

5

Participant d

10 15

20

20

CSD B/SB/DCA

5

10

15

10

(3) Step 1: Issuer Agent A is responsible for distributing the cash entitlements in the environment of the 11

issuer CSD A. The payments are made between the dedicated cash accounts (DCA) in the issuer CSD A. 12

Investor CSD B may be using a settlement bank (SB) for managing its liquidity in the environment of 13

issuer CSD A (SB receives EUR30 for investor CSD B). 14

(4) Step 2: The investor CSD B has received EUR 30 in its DCA operated by its SB (presumably, but not 15

necessarily, the same SB used in step 1). Cash distributions in the form of cash payments are made 16

towards the participants (b, c and d) of investor CSD B (movement 2) 17

18




1











Trigger Receipt of a pre-matched settlement instruction from CSD

This T2S business service facilitates the settlement of securities reorganisation instructions sent to T2S from 6

the CSD. T2S processes these settlement instructions by using one or more component services (listed 7

below) in the Life Cycle Management Services. T2S sends the results of the settlement services (status 8

advice and settlement confirmations) to the CSD via the T2S Status Management Service (T2S.SD.INF.010). 9

10



13



16

17



20

21





This T2S service performs the provisioning and booking of the settlement instructions. For securities 1

issuance process, it allows the Issuance securities account to become negative. It considers the technical 2

netting effect during provision check and proposes all relevant settlement instructions for settlement on 3

an “All or None” basis. 4

5


Voluntary Reorganisations


1

3.3 Voluntary Reorganisations 2

A voluntary reorganisation is a reorganisation event in which participation is optional for the holder of the 3

underlying security. 4

A „tender offer‟ (an offer made to shareholders, offering them to sell (tender) or exchange their equities) is 5

an example of a voluntary reorganisation event. This section covers the standard steps within the context of a 6

CSD settling the outcome of a voluntary reorganisation in T2S. It covers both the domestic and the cross 7

CSD environment. 8


Figure 3.3-1 Business Process “Voluntary Reorganisation” (Process Layer) 10

CAPTURE CA

[T2S.BP.CORP.VOLU.010]CSD

CA

Details

Receipt of CA

DetailsReceipt of Election

Instructions

Until

Market Deadline Date

NOTIFY CA

[T2S.BP.CORP.VOLU.020]

DISTRIBUTE CA

PROCEEDS[T2S.BP.CORP.VOLU.040]

RECEIVE

CA ELECTIONS[T2S.BP.CORP.VOLU.030]

CREATE

OUTTURN

SECURITIES

REFERENCE DATA

[T2S.BP.CORP.VOLU.050]

11


Capture CA 13

Reference ID T2S.BP.CORP.VOLU.010

This process (see Figure 3.3-1Figure 3.3-1) which takes place outside T2S, captures the voluntary 14

reorganisation event details as received by the CSD. 15

Notify CA 16






This process runs until the market deadline of the CA. 2


Receive CA elections 4


See section 3.1.2 for description of Receive CA elections process 5

Create outturn securities reference data 6


This process captures and creates new outturn securities if the voluntary reorganisation involves distribution 7

of securities. Refer section 3.2.2 8

Distribute CA proceeds 9



Business Object: 11

- CA elections 12

- Settlement instructions 13


T2S Use Case Name: Send Settlement Instruction (see Chapter 2 of T2S UDFS) 15

Trigger: 16

- Receipt of CA election proceeds from the issuer/ or issuer‟s agent 17

18

This process initiates the settlement instructions to T2S to distribute CA proceeds (cash amount and/or 19

securities quantity) for each CA election that resulted in a successful block or debit. The underlying security 20

(and possibly cash) is booked out and depending upon the applicable CA election option, outturn securities 21

and/or cash payments are made. 22

23

The process „Distribute CA proceeds‟ consists of the following activity (see Figure 3.3-2Figure 3.3-3): 24

25



27




At the start of business on the payment date (prior to NTS settlement sequence 1), CSD creates and 1

sends to T2S the settlement instructions based on the instructions received from the paying 2

agentissuer/issuer‟s agent to distribute the CA proceeds. 3

- For cash proceeds, the CSD creates „versus payment‟ instructions, for moving the blocked27

4

securities positions from the CSD participant‟s securities account to CSD‟s/ issuer‟s/ issuer‟s 5

agent‟sPA‟s securities account, and for moving cash amount from CSD‟s/ issuer‟s/ issuer‟s 6

agent‟sPA‟s T2S DCA to participant‟s T2S DCA. 7

- For securities proceeds, the CSD creates „Free of payment‟ instructions for moving 8

underlying securities positions from participant‟s securities account to CSD‟s/ issuer‟s/ 9

issuer‟s agent‟sPA‟s securities account and moving outturn securities positions from CSD‟s/ 10

issuer‟s/ issuer‟s agent‟sPA‟s securities account to participant‟s securities account. The CSD 11

may link the settlement instructions for booking-in of outturn securities and the booking-out 12

of underlying securities to settle on an „All-or-none‟ basis. 13

- Certain CA also require a debit of cash (e.g. rights subscriptions) 14

15



Cash RVP Underlying ISIN Securities positions

of the participant

Cash proceeds

Securities


of the participant

-


for the participant

-

Securities

with cash

debit


of the participant

-

DVP Outturn ISIN Securities proceeds

for the participant

Amount as per the

elected positions

27 In case securities positions in the underlying ISIN are already debited earlier, CSD instructs T2S for credit of outturn

securities or cash only





Cash and

securities

RVP Underlying ISIN Securities positions

of the participant

Cash proceeds of

the participant


for the participant

-

1

The T2S reference of the blocked securities positions in the CSD participant‟s securities account is 2

included in the settlement instruction for booking-out of the underlying securities. During this process, 3

the CSD receives status advices and settlement confirmations from T2S. Upon settlement of the 4

settlement instructions, CSD sends CA election confirmation to its participants. 5

6

Alternatively, if the CSD has segregated the participant‟s elected positions by moving them to a different 7

account (issuer‟s/ issuer‟s agent‟sPA‟s or Escrow), the CSD creates instructions to deliver cash and/or 8

securities to participant. 9

10



Cash RVP Underlying ISIN Zero Cash proceeds of

the participant


for the participant

-

Securities with

cash debit

DVP Outturn ISIN Securities proceeds

for the participant

Amount as per the

elected positions

Cash and

securities

RVP Underlying ISIN zero Cash proceeds of

the participant


for the participant

-

12




In case of cash proceeds, if the participant or the participant‟s payment bank has set up a standing 1

instruction to move corporate action cash proceeds to RTGS account, T2S will create an immediate 2

liquidity transfer, and payment bank will receive liquidity transfer status advice messages. 3

4

In case of a cross-CSD scenario, the investor CSD invokes this process after the receipt of the CA 5

proceeds from the issuer CSD. 6

7

Figure 3.3-23 Decomposition of the process ‘Distribute CA Proceeds’ 8

CSD

DISTRIBUTE CA PROCEEDS


T2S.AC.SETT.040

T2S.BP.CORP.VOLU.040

T2S


SETTLEMENT

POSTING


LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE

SETTLEMENT

CONFIRMATIONS

CSD


CONNECTED

PARTIES)

STATUS

MANAGEMENT



Status Advices and


Settlement

Confirmations

CORPORATE

ACTION CASH


RECEIVE LIQUIDITY

TRANSFER

INFORMATION

NCB

/ PAYMENT

BANKS(T2S DIRECTLY

CONNECTED

PARTIES)

Liquidity transfer

information

BUSINESS

VALIDATION


DISTRIBUTE CA

PROCEEDS[T2S.BP.CORP.VOLU.0 40]

9




1

2




1





T2S Service Name Settlement Services



Trigger Receipt of settlement restriction ,

Receipt of a pre-matched settlement instruction from CSD

6

This T2S business service facilitates the settlement of 7

settlement restrictions (i.e., intra-position movements) for blocking of securities positions and 8

settlement instructions for 9

o debit of underlying securities and 10

o credit of outturn securities and/or 11

o credit of cash 12

T2S processes these settlement instructions and settlement restrictions by using one or more component 13

services (listed below) in the Settlement Services. T2S sends the results of the settlement services (status 14

advices and settlement confirmations) to the CSD via the T2S Status Management Service 15

(T2S.SD.INF.010). 16

17

Settlement Services - Components 18





Earmarking, Blocking and Reservation Service (T2S.SD.SETT.120) 23












Market Claims


4 Transaction Management 1

4.1 Market Claims 2

Market claims is the process of reallocating the proceeds of a distribution to the contractually entitled party. 3

According to the CAJWG standards, a market claim should be created as a separate (from the original) 4

transaction in order to ensure that the proceeds of a distribution with or without options reaches the entitled 5

party without changing the underlying transaction. 6

In line with the above mentioned market standards, the following types of CA events trigger the market 7

claims: 8

• Cash distributions; and 9

• Securities distributions 10


Figure 4.1-1 Process Diagram of CA Market Claims (Process Layer)28

12

CAPTURE

CA[T2S.BP.CORP.MKTC.010]

Current Date =

Record Date /

(End-of-day in T2S)

IDENTIFY, CALCULATE

AND INSTRUCT

CA MARKET CLAIMS[T2S.BP.CORP.MKTC.030]

IOC

INSTRUCTION

DETAILSCA DETAILS

Current Date <=

20 T2S Business Days

from the

Record Date

Until

20 T2S Business

Days from

the Record Date

RECEIVE

INSTRUCTION

DETAILS[T2S.BP.CORP.MKTC.020]

13

28 IOC is Instruction Owning CSD


Market Claims



Capture CA29

2

Reference ID T2S.BP.CORP.MKTC.010

This process (see Figure 4.1-1Figure 4.1-1) captures the distributions CA details received by the CSD (CA 3

announcement). 4

Retrieve Instruction Details 5


Business Actors: IOC, T2S 6

Business Objects: 7

- CA Details 8


T2S Service Class Name: Information services (T2S.SD.INF) 10

T2S Use Case Name: Send Query (See Chapter 2 of T2S UDFS) 11

Trigger: This process is executed by the end of Record Date of the CA event and daily up to 20 T2S 12

business days from the Record Date 13

Precondition: CA details are available to IOC 14

15

This process (see Figure 4.1-1Figure 4.1-1) retrieves the settlement instruction details from T2S based on the 16

CA details (i.e. one or more CAs having the record date as the current date). The IOC30

uses the settlement 17

29 The Capture CA process is the same process as described in the business process description for Securities

Distribution (see T2S.CORP.SECD.010) or Cash Distribution (see T2S.CORP.CSHD.010). This process has been

included in this section to ensure completeness of the end-to-end description of the business process for CA market

claims.

30 Instruction Owning CSD is the CSD that provides the securities accounts on which the participant has sent an

underlying instruction. IOC model is preferable for transaction management because in case of a cross CSD scenario,

the intermediary CSD(s) between the two IOCs cannot initiate market claims on cancel the T2S generated realignment

instructions in the intermediary CSD‟s books. In this model, in case the IOCs bilaterally cancel their respective

settlement instructions, T2S will cancel both the settlement instructions and all the T2S generated realignment

instructions. Only the IOCs can initiate market claims.


Market Claims


instruction details (e.g. trade date, intended and actual settlement date, ex and cum indicators, status) to 1

identify the settlement instructions that require a market claims process. 2

The IOC runs this process at the end of record date of the CA event. The IOC runs this process at least daily. 3

During the market claims detection period the IOC identifies any new matched settlement instruction input 4

after the record date (e.g., a settlement instruction with trade date before the ex-date and the intended 5

settlement date on or before the record date). 6

The IOC has the option to either receive these details through 7

- predefined reports generated by T2S at close of business of a settlement date (End of Day 8

reporting), 9

- or query T2S specifying „underlying ISIN‟ and/or trade date, settlement date, instruction status 10

as a filter criteria (see T2S Services Description below for details about T2S Report Generation 11

Services and T2S Query Services). 12

This process consists of a single activity Obtain Settlement Instruction Details (see Figure 4.1-2Figure 4.1-2). 13

Figure 4.1-2 Decomposition of the process Receive Instruction Details into activities (Activity Layer) 14

RECEIVE INSTRUCTION DETAILS

IOC

OBTAIN SETTLEMENT INSTRUCTION DETAILS[T2S.AC.INF.030]

CAPTURE

CA[T2S.BP.CORP.MKTC.010]

Current Date =

Record Date /

(End-of-day in T2S)

Until

20 T2S Business

Days from

the Record Date

RECEIVE

INSTRUCTION


15

Obtain Settlement Instruction Details 16


17

The activity Obtain Settlement Instruction Details consists of the following tasks (see Figure 4.1-3Figure 18

4.1-3) at the disposal of the IOC: 19

The IOC queries T2S for settlement instructions details related to each „underlying ISIN‟ 20

The IOC receives statement of pending instructions, delta statement of pending instructions and 21

statement of transactions (settled settlement instructions), delta statement of transactions report to be 22


Market Claims


generated at fixed time/ event based on its report subscription set up in T2S [e.g. after intraday DVP 1

cut-off, currently at 04.00 p.m.; and/or after FOP cut-off currently at 6:00 p.m.]. 2

The IOC filters the reports in order to extract details relevant to the „underlying ISIN‟ 3

Figure 4.1-3 Decomposition into tasks of the activity Obtain Settlement Instruction Details (Task Layer) 4



T2S

IOC OBTAIN SETTLEMENT INSTRUCTION DETAILS

REPORT

GENERATION

SERVICES

[T2S.SD.INF.020]

FILTER REPORTS FOR

SETTLEMENT

INSTRUCTIONS IN CA

UNDERLYING

SECURITIES

[3]

RECEIVE REPORTS -

SETTLEMENT

INSTRUCTIONS

[2]

QUERY SETTLEMENT

INSTRUCTIONS IN

UNDERLYING

SECURITIES

[1]

Query Request

Query Response -


T2S Reports - T2S Settlement Instructions

Specific time

SETTLEMENT

INSTRUCTION

QUERY


OBTAIN SETTLEMENT INSTRUCTION DETAILS[T2S.AC.INF.030]

5

Identify, Calculate and Instruct CA Market Claims 6


Business Actors: IOC, T2S 7

Business Objects: 8

- CA Details 9


- T2S status advice 11

T2S Service Class Name: Settlement services (T2S.SD.SETT) 12


Market Claims


T2S Use Case Name: Send Settlement instruction (See Chapter 2 of T2S UDFS) 1

Trigger: The process of identifying market claims runs after the IOC receives the final reporting of 2

settlement instructions in T2S at the close of business on record date and everyday up to 20 T2S business 3

days from the record date 4

Precondition: Latest settlement instructions data from T2S is available at the close of business of the CA 5

record date 6

This process identifies, calculates and executes market claims based on the details of the settlement 7

instructions consolidated in the process Receive Instruction Details. The process results in the IOC sending 8

to T2S, settlement instructions for processing of market claims for securities and cash distributions. 9

Figure 4.1-4 Decomposition of the process Identify, Calculate, Instruct and Settle in T2S into activities (Activity Layer) 10

IDENTIFY, CALCULATE AND INSTRUCT CA MARKET CLAIMSIOC

IDENTIFY

MARKET CLAIMS[T2S.AC.CORP.070]

INSTRUCT AND SETTLE

IN T2S[T2S.AC.SETT.040]

CALCULATE


IDENTIFY, CALCULATE

AND INSTRUCT

CA MARKET CLAIMS[T2S.BP.CORP.MKTC.030]

Current Date <=

20 T2S Business Days

from the

Record Date

Until

20 T2S Business

Days from

the Record Date

RECEIVE

INSTRUCTION


11

12

The process „Identify, Calculate and instruct CA market Claims‟ consists of the following three activities 13

(see Figure 4.1-4Figure 4.1-4): 14

1. Identify Market Claims 15

2. Calculate Market Claims 16


18

Identify Market Claims 19


The IOC will identify31

the underlying transaction eligible for market claims: 20

31 As per the CASG standards, the maximum period for claim detection will be 20 T2S business days from the record


Market Claims


after the close of business on the record date of the CA event and 1

during the rest of the market claims detection period for the matched settlement instructions sent 2

to T2S after the record date. 3

The IOC will identify market claims based on a set of parameters corresponding to the attributes in a 4

settlement instruction (see below). 5

6

The identification of standard market claims is based on the following rules: 7

Opt-out indicators32

in the settlement instruction 8

The IOC will exclude a settlement instruction from identification of market claims if the opt-out 9

indicator is set to “Yes” 10

11

Status of the settlement instruction 12

The IOC will only include settlement instructions in matched status set to “Yes” and settlement status set 13

to “Unsettled” or “Settled” for market claims detection process. 14

15

Initiator of the settlement instruction 16

T2S generated settlement instruction for realignments should not be subjected to the market claims 17

detection process. However, T2S generated settlement instructions for reversal of client collateralisation 18

will be subject to a market claims detection process. 19

20

Trade Date and Intended Settlement Date of the settlement instruction 21

Market Claims should be created, as a separate Transaction without changing the Underlying 22

Transaction, by the (I)CSD or the CCP for all irrevocable settlement transactions (as defined in each 23

market) as follows: 24

a) For securities in units (e.g. shares); 25

From the seller to the buyer, when trade date is before Ex Date and there is a Pending Transaction at 26

close of business of Record Date; or 27

From the buyer to the seller, when trade date is on or after Ex Date and Actual Settlement Date is on or 28

before Record Date. 29

30

b) For securities in nominal (e.g. bonds): 31

date.

32 T2S will consider the opt-out indicator as additional matching criteria if specified in a settlement instruction by the

T2S instructing party.


Market Claims


From the seller to the buyer, if the Intended Settlement Date is on or before the Record Date but 1

there is a Pending Transaction at close of business on Record Date. 2

3

The identification of market claims in case of special ex- and special cum- trading (for securities in 4

units) is based the following rules: 5

Special ex- indicator 6

o The trade date is before the ex-date, the actual settlement date is before the record date and the 7

ex indicator is set to yes, then the market claim is raised in favour of the seller 8

o The trade date is before the ex-date and transaction is still pending and the ex indicator is set to 9

yes, then no market claims will be raised 10

Special cum- indicator 11

o The trade date is after the ex-date, actual settlement date is after the record date and the cum 12

indicator is set to yes, then the market claim is raised in favour of the buyer 13

o The trade date is after the ex-date, and transaction is still pending and the cum indicator is set to 14

yes, then market claim is raised in favour of the buyer 15

16

Calculate Market Claims 17


After the identification of settlement instructions that require market claims generation, the IOC will 18

calculate the market claim quantity (i.e. securities positions) and the claim cash amount based on the CA 19

event details and the securities settlement quantity in the underlying transaction. This activity also 20

handles fractional market claims based on the information in the CA details. 21

22



24

At the start of business on the payment date (NTS settlement sequence 4) the IOC33

/ CCP creates and 25

sends to T2S the settlement instructions related to market claims. The IOC generates either free of 26

payments (FOP) for transfer of securities and/or payment free of delivery (PFOD) for transfer of cash 27

depending upon the outturn of the distribution CA event (i.e. distribution of securities only, distribution 28

of cash only and distribution of both securities and cash). 29

The indicative instruction types (from the perspective of the party receiving benefit in the claim) are 30

33 IOCs also send settlement instructions for market claims on behalf of their CSD participants who have direct

technical connectivity to T2S


Market Claims



Cash DVP Underlying ISIN Zero Cash proceeds of

the participant

Securities RFP Outturn ISIN Securities proceeds

of the participant

-

Cash and

securities

DVP Underlying ISIN Zero Cash proceeds of

the participant

RFP Outturn ISIN Securities proceeds

for the participant

-

1

During this process, the IOC receives the status advices and settlement confirmations from T2S. 2


Market Claims


Figure 4.1-5 Decomposition into tasks of the activity Instruct and Settle in T2S (Task Layer) 1

IDENTIFY, CALCULATE AND INSTRUCT CA MARKET CLAIMS

IDENTIFY


INSTRUCT AND SETTLE

IN T2S[T2S.AC.SETT.040]

CALCULATE


IDENTIFY, CALCULATE AND INSTRUCT CA MARKET CLAIMS


IOCCREATE

MARKET CLAIMS

[1]

SEND INSTRUCTION AND RECEIVE

STATUS ADVICES FROM T2S

[2]

T2S

SETTLEMENT SERVICES

SETTLEMENT

POSTING


LINKED

INSTRUCTIONS


SETTLEMENT

SEQUENCING


RECEIVE LIQUIDITY

TRANSFERNCB

STATUS

MANAGEMENT



Status Advices and


CORPORATE

ACTION CASH


BUSINESS

VALIDATION


Outbound Liquidity Transfer

2

3

This activity consists of the following tasks (see Figure 4.1-5Figure 4.1-5): 4

a. Create market claims 5

The IOC will create the market claims related settlement instructions with the following details: 6

Special ISO Transaction Type Code – This code („CLAI‟) is required to identify market claims 7

related settlement instruction 8

Reference of Underlying Settlement Instruction – The IOC should specify the reference of the 9

underlying settlement instruction 10

Link indicator - According to the T2S CA on flows standards the IOC should not link the market 11

claim to the underlying settlement instruction. However, in case the IOC wants to ensure that the 12

market claim settles after the underlying settlement instruction, the IOC may instruct the market 13

claim related settlement instruction with a hold status set to “Yes” and release the this status upon 14

receiving the settlement confirmation of the underlying settlement instruction 15


Market Claims


CA Event Reference 1

Trade Date of the market claim will be the trade date of the underlying settlement instruction 2

Intended Settlement Date of the market claim will be either the payment date of the corporate action 3

or the current business date (if the market claim is generated after the payment date) 4

Partial Settlement indicator is set to “No” for market claims in cash and for market claims in 5

securities to be set to the same value as of the underlying settlement instruction. 6

7

Cross CSD settlements and Market Claims 8

In the cross CSD scenario, the issuer CSD will exclude the T2S generated realignment instructions in the 9

market claims identification process. The IOCs owning the underlying settlement instructions related to the 10

T2S generated realignment instructions will raise the relevant market claims for their participants. 11

Following the matching of the two market claims instructions sent to T2S by the IOCs, T2S will create the 12

relevant realignment instructions. (Between the IOC‟s accounts, technical issuer‟s accounts and; between 13

technical issuer‟s accounts, when more than one technical issuer is involved) 14

15

Maintenance of Market Claims 16

In case the instructing parties of the underlying settlement instructions cancel their respective settlement 17

instructions bilaterally, the IOCs34

may also cancel the corresponding market claims. As per standard 18

T2S cancellation procedures, matched market claims instructions are subject to bilateral cancellation 19

whereas unmatched market claims are subject to unilateral cancellation. 20

IOCs can modify the process condition indicators35

on the market claims (if required) as per the standard 21

T2S procedures 22

23

b. Send Instruction and receive status advices and settlement confirmations from T2S36

24

This task results in IOCs sending settlement instructions to T2S. Depending on the CA event (i.e. type of 25

distribution) an IOC may send either 26

Settlement instructions for credit of securities only; 27

and / or 28

34 If the CSD specifies the settlement instruction (the market claim) as modifiable by its participant, participant may

cancel the settlement instruction (the market claim),

35 Refers to indicators affecting the processing of the instruction. e.g. partial settlement, priority indicator.

36 Please note that the task Send Instruction and Receive status advices and settlement confirmations from T2S is a

common task across different activities in various CA processes that have been described in this document.


Market Claims


Settlement instructions for credit of cash 1

This task also involves IOCs receiving acknowledgements, status advices and settlement confirmations of 2

the settlement instructions sent to T2S for securities reorganisations. 3

4




T2S Service Name Status management Services



Trigger Any change of the status of the T2S instructions

Status management service communicates the status of the instructions to the authorised T2S actors. The 8

T2S actors must have subscribed in advance to the status management service in order to receive the advice 9

messages. 10

11


T2S Service Name Report Generation Services



Trigger Automatic initiation at a specific time based on the report subscription set

up in T2S

This T2S business service facilitates the Retrieve instruction details process by generating and sending to 13

CSD statement of pending instructions and delta statement of pending instructions reports after the close of 14

daytime settlement (or at any other time as specified by the CSD in its report subscription). 15

Statement of Pending Instructions - This report includes details of all pending instructions related to the 16

respective CSD‟s securities accounts, that T2S has accepted. 17

Delta Statement of Pending Instructions - The report lists instructions created/amended since the creation 18

of the previous Statement of pending instructions. This report covers: 19


Market Claims


new pending settlement instructions; 1

pending settlement instructions which were modified; 2

settlement instructions which were formerly pending but are now cancelled; 3

settlement instructions which are partially settled. 4

Query Service 5

T2S Service Name Query Services



Trigger Receipt of a query request from the CSD for securities positions or

settlement instructions

The T2S Settlement-Related Queries Service component of the Query Service facilitates the Retrieve 6

instruction details process by providing information of the pending settlement instructions in the underlying 7

ISIN. 8









This T2S business service facilitates the settlement of market claim related settlement instructions sent to 10

T2S from the CSD. T2S processes these settlement instructions by using one or more component services 11

(listed below) in the Life Cycle Management Services. T2S sends the results of the settlement services (status 12

advice and settlement confirmations) to the CSD via the T2S Status Management Service (T2S.SD.INF.010). 13

14



Market Claims


This T2S service validates the settlement instructions relating to the securities distribution and ensures 1

the fulfilment of defined rules pertaining to the content of the fields on the settlement instructions. In 2

addition to the validation, this service creates two instructions from the already matched settlement 3

instruction (i.e. one for the deliver leg and one for receive leg of the transaction) sent by the CSD to T2S. 4

The T2S generated instructions are created using the details in the settlement instruction sent by the 5

CSD. 6

7


This T2S service creates T2S associations/links amongst the settlement instructions as grouped by the 9

CSD using a common reference. 10

11


This T2S service extracts all eligible settlement instructions related to CA on flow and proposes for 13

settlement in NTS sequence 4 (cycle 1). Settlement instruction related to CA on flow, which are either 14

received after NTS sequence 4 or could not be processed in sequence 4 are proposed for settlement in the 15

subsequent sequences. 16

17


This T2S service performs the provisioning and booking of the settlement instructions. 19

20


Market Claims


1


Corporate action cash service 3

T2S Service Name Corporate action cash services

T2S Service Reference ID T2S.SD.LIM.040

T2S Service Class Liquidity Management Services

Trigger Cash Credit due to corporate action into the dedicated cash account of T2S

actors

The „Corporate action cash service‟ component, of the „Liquidity management‟ service facilitates T2S actors 4

to manage the CA generated liquidity they receive in their T2S DCAs. The T2S actors can decide if this 5

liquidity should: 6

stay in the T2S DCA , or 7

be moved to an RTGS account outside T2S 8

The service facilitates the creation of a standing instruction to specify this option, and executes the 9

instruction by creating an immediate liquidity transfer order. 10

11


Transformations


1

4.2 Transformations 2

Transformation is a process by which the pending transactions (on or after record date/ market deadline) are 3

cancelled and replaced by new transactions in accordance with the terms of the reorganisation. 4

In line with the CAJWG market standards, the following types of CA events trigger the transformation of a 5

pending transaction: 6

• Mandatory reorganisations; 7

• Mandatory reorganisations with options (with or without a valid buyer election) as a single event or as the 8

second part of the distribution event with options; 9

• Voluntary reorganisations where a valid buyer protection has been agreed (if the service is offered by 10

CSD). 11


Figure 4.2-1 Process Diagram for CA Transformations (Process Layer) 13

CAPTURE

CA[T2S.BP.CORP.TRAN.010]

Current Date =

Record Date /

Market Deadline

(End-of-day in T2S)

CALCULATE AND

INSTRUCT

CA TRANSFORMATION[T2S.BP.CORP.TRAN.030]

CSD

PENDING

INSTRUCTION

DETAILS

RECEIVE

INSTRUCTION

DETAILS[T2S.BP.CORP.TRAN..020]

CA DETAILS

Current Date =

Payment Date

14


Capture CA37

16

Reference ID T2S.BP.CORP.TRAN.010

This process (see Figure 4.2-1Figure 4.2-1) captures the reorganisation CA details received by the CSD (CA 17

announcement).sent by the issuer and/or market data vendor(s) to the CSD (CA announcement). 18

37 The Capture CA process is the same process as described in the business process description for Mandatory

Reorganisation (without options). This process has been included in this section to ensure completeness of the end-to-

end description of the business process for CA transformations.


Transformations


Retrieve Instruction Details 1


Business Actors: Instruction Owning CSD (IOC38

) / Central Counter Party (CCP), T2S 2

Business Object: 3

- CA details 4



T2S Use Case Name: Send Query (see Chapter 2 of T2S UDFS) 7

Trigger: This process is executed by the IOCs /CCPs by the end of Record Date or by the end of market 8

deadline of the CA 9

Precondition: CA details are available to IOCs / CCPs 10

11

This process (see Figure 4.2-1Figure 4.2-1) retrieves the pending instruction details from T2S based on the 12

CA details. This process runs between „the end of record date or the market deadline39

of the CA 13

reorganisation event‟ and the start of day of the next business day. Refer section 4.1.2, for activity details. 14

Calculate and Instruct CA Transformation 15


Business Actors: IOC / CCP, CSD Participant, T2S 16

Business Object: 17

- CA details 18


- T2S Cancellation Instructions 20


38 Instruction Owning CSD is the CSD that provides the securities accounts on which the participant has sent an

underlying instruction. IOC model is preferable for transaction management because in case of a cross CSD scenario,

the intermediary CSD(s) between the two IOCs cannot initiate transformations on T2S generated realignment

instructions. Only the IOCs can initiate transformations.

39 As per CAJWG definition


Transformations



- Send Cancellation Instruction (see Chapter 2 of T2S UDFS) 2

- Send Settlement Instruction (see Chapter 2 of T2S UDFS) 3

Trigger: The process runs after the IOCs / CCPs receive the final reporting of pending instructions in 4

T2S at the close of business on record date or market deadline date 5

Precondition: Latest settlement instructions data from T2S is available at the close of business of the CA 6

record date or the CA market deadline date and the instruction is eligible for transformation. 7

8

This process generates CA transformations based on the pending settlement instructions in the underlying 9

securities at the close of business of the CA record/market deadline date. The process results in IOCs sending 10

to T2S: 11

maintenance instructions (cancellations for settlement instructions) in the underlying securities 12

and the new settlement instructions for the outturn securities and/or cash. 13

Figure 4.2-2 Decomposition of the process Calculate and Instruct CA transformations into activities (Activity Layer) 14

CALCULATE AND INSTRUCT CA TRANSFORMATIONT2S.BP.CORP.TRAN.030

CSD

CANCEL INSTRUCTIONS ON

UNDERLYING ISIN[T2S.AC.SETT.060]

REINSTRUCT

AND

SETTLE IN T2S[T2S.AC.SETT.070]

CALCULATE AND

INSTRUCT

CA TRANSFORMATION[T2S.BP.CORP.TRAN.030]

RECEIVE

INSTRUCTION

DETAILS[T2S.BP.CORP.TRAN..020]

Current Date =

Payment Date

CALCULATE THE

SETTLEMENT QUANTITY,

CASH OF THE NEW

SETTLEMENT

INSTRUCTIONS[T2S.AC.CORP.090]

T2S

BUSINESS

VALIDATION



SETTLEMENT

POSTING


INSTRUCTIONS

CANCELLATION


SETTLEMENT

SEQUENCING


STATUS

MANAGEMENT



and/or

Settlement Restrictions

Status Advices and

Settlement ConfirmationsCancellation instructions

Status Advices and


15

16

17


Transformations


The process consists of the following activities (see Figure 4.2-2Figure 4.2-2): 1

1. Cancel instructions on the underlying ISIN 2

2. Calculate the settlement quantity, cash of the new settlement instructions 3

3. Reinstruct and Settle in T2S 4

5

Cancel instructions on the underlying ISIN 6


After the close of business on the record date or market deadline date (and before the T2S night time 7

settlement sequence 1), IOCs/ CCPs sends cancellation instructions for the pending instructions in the 8

underlying ISIN to T2S. 9

The table below lists the possible IOC / CCP actions in T2S: . 10

Table 4.2-1 IOC / CCP Actions in T2S 11

Originator of

settlement instruction

T2S status of


Action in T2S

T2S Actor Unsettled and

Unmatched40

IOCs / CCPs can cancel the settlement instruction

unilaterally41

40 Unmatched instructions have not been specified in the scope of CASG standards for transformations. IOC can choose

to (i) cancel the instruction unilaterally, Or (ii) wait for the counter party to send settlement instruction in the underlying

security, once matched cancel bi-laterally and transform the instruction (provided it is still within the transformation

detection period).

41 If the settlement instruction has references to blocked or reserved securities status, IOC / CCP perform CA on stock

on the underlying securities and should attach the reference of the blocked / reserved outturn securities to the

transformed settlement instruction.


Transformations


Originator of


T2S status of


Action in T2S

T2S Actor Unsettled and Matched Scenario 1 - Both settlement instructions have the

same IOC (Intra-CSD scenario)

IOC can cancel the matched settlement instruction

using an already matched cancellation instruction.

Scenario 2 - The matched pair of settlement

instructions have different IOC (Inter-CSD scenario)

Both IOCs can cancel their respective settlement

instructions in matched status. T2S executes the

cancellation instructions for the pending settlement

instructions only upon receipt of both cancellation

instructions from IOCs

T2S Actor Partially Settled Following partial settlement, IOC / CCP instructs T2S

for the cancellation of the pending quantity of the

settlement quantity (which is not yet settled).

T2S Actor CoSD Hold Settlement Instruction on CoSD Hold can be cancelled

only by the Administering Party42

T2S Actor Party Hold /

CSD Hold/

CSD Validation Hold

IOC instructs T2S for the cancellation of the pending

settlement instructions (on hold)

T2S

(settlement instructions

for realignment in cross-

CSD settlement

scenarios)

Same status as the

corresponding

underlying settlement

instruction sent by T2S

Actor

IOCs / CCPs cannot cancel the T2S generated

settlement instructions intended for realignment in

cross CSD environment.

T2S cancels the realignment instructions when the

IOCs / CCPs instruct cancellation of the corresponding

business instructions.

42 Administrating parties are identified by the CSDs, and are responsible for releasing the instructions that are identified

as CoSD (that needs fulfilling an external condition).


Transformations


Originator of


T2S status of


Action in T2S

T2S

(settlement instructions

generated for client

collateralisation

reimbursements)

Party Hold IOC has to identify pending collateral reimbursement

instructions in T2S and instruct cancellation to T2S.

1

2

Calculate the settlement quantity, cash of the new settlement instruction 3


The IOCs / CCPs perform the calculations depending upon the type of the following transformation 4

events: 5

Transformation into new securities with single or multiple outturn 6

Based on the CA details (i.e. conversion ratios between the outturn securities and underlying 7

securities) and the settlement quantity (underlying securities) of the pending settlement 8

instruction, the IOCs/CCPs calculate the settlement quantity of the outturn. 9

Transformation into cash 10

Based on the CA details (rates provided by the issuer/issuer‟s agent) and the settlement quantity 11

(underlying securities) of the pending settlement instruction, IOCs / CCPs calculate the cash 12

outturn 13

Treatment of fractions 14

o If the settlement quantity (outturn securities) of the transformed settlement instruction 15

results in fraction and the issuer/issuer‟s agent does not compensate fractions in cash, 16

then the IOCs / CCPs round down the settlement quantity (outturn securities) to the 17

nearest whole number. 18

o If the issuer/issuer‟s agent compensates fractions in cash, then the IOCs / CCPs create an 19

additional PFOD settlement instruction with the same characteristics as the underlying 20

settlement instruction and sets the settlement quantity of the outturn securities to zero. 21

The cash amount calculated equals the number of residual fractions multiplied by the 22

“compensation price” as announced by the issuer/issuer‟s agent. 23

24

Reinstruct and Settle in T2S 25



Transformations


After the close of business on the record date (before the T2S night time settlement sequence 4)43

IOCs / 1

CCPs create and send the settlement instructions in outturn ISIN and/or cash to T2S 2

During this activity, the IOCs / CCPs receive status advices and settlement confirmations from T2S (see 3

Figure 4.2-2Figure 4.2-2) 4

Transformation into new securities with single or multiple outturn 5

For single outturns, IOCs/CCPs create settlement instructions (outturn securities) with the same 6

characteristics (e.g. trade date, cash consideration) as those of the original settlement instructions (underlying 7

securities). Only the following fields in respect with the terms of the reorganisation can change: 8

the quantity of securities; 9

the ISIN; 10

the settlement date (SD) 11

12

For multiple outturns (i.e. multiple new ISINs being generated by the transformation process), the IOCs and 13

CCPs create multiple settlement instructions. The new settlement instructions do not settle as linked 14

settlement in T2S. The transformed instructions should retain the same characteristics (e.g. trade date) as the 15

original settlement instruction (underlying securities). Only the following fields in respect with the terms of 16

the reorganisation can change: 17

the quantity of securities; 18

the cash consideration should be allocated to the transformed transactions according to the securities 19

ratios provided by the issuer/issuer‟s agent 20

The ISIN 21

The settlement date (SD) 22

23

Transformation into cash 24

According to the T2S CA standards on flows, IOCs/ CCPs should create the cash transfer(s) settlement 25

instructions with the same characteristics as those of the original settlement instruction of the underlying 26

securities. If the settlement instruction (underlying securities) was against payment, two new instructions 27

(Payment Free of Delivery - PFODs), in opposite directions, will be created. 28

o Settlement instruction for the settlement amount 29

o Settlement instruction for the cash outturn 30

IOCs / CCPs should not link the two settlement instructions. IOCs/ CCPs create only one transfer for the 31

cash outturn, if the original settlement instruction (underlying securities) was free of payment. 32

43 See Schedule of the T2S settlement day


Transformations


1

Treatment of fractions 2

If the settlement quantity (outturn securities) of the reinstructed settlement instruction results in fraction and 3

the issuer/issuer‟s agent does not compensate fractions in cash, then the IOCs/ CCPs create the settlement 4

instructions with the settlement quantity (outturn securities) rounded down to the nearest whole number. If 5

the issuer/issuer‟s agent compensates fractions in cash, then the IOCs/ CCPs create an additional settlement 6

instruction with the same characteristics as those of the original settlement instruction (underlying securities) 7

and set the settlement quantity of the outturn securities to zero. 8

9


Transformations


1




5


T2S Service Name Instruction Cancellation Service

Business Validation Service





Trigger Receipt of a pre-matchedcancellation instruction/ settlement instruction from

CSD

This T2S business service facilitates the cancellation of pending settlement instructions (underlying 7

securities) and settlement of CA transformation instructions (outturn securities and/or cash) sent to T2S from 8

the CSD. T2S processes the cancellation instructions using the Instruction Cancellation Services and the 9

transformed settlement instructions by using one or more component services (listed below) in the Life Cycle 10

Management Services. T2S sends the results of the settlement services (status advice and settlement 11

confirmations) to the CSD via the T2S Status Management Service (T2S.SD.INF.010). 12

13

Instruction Cancellation Service (T2S.SD.SETT.100) 14

This T2S service cancels the pending settlement instructions unilaterally prior to matching or bilateral 15

cancellations after matching. T2S checks in case of bilateral cancellation of pending settlement 16

instructions if the cancellation instruction from the counterpart exists and matches the two cancellation 17

instructions. If the counterpart cancellation instruction does not exist, then the cancellation instruction 18

remains pending until it matches with a valid counterpart cancellation instruction. T2S also accepts 19

cancellation instructions entered as already matched. 20

21



Transformations



2



5



8


Buyer Protection


1

4.3 Buyer Protection 2

Buyer protection is a process whereby a buyer44

who has yet to receive the underlying securities of an 3

elective CA45

, instructs the seller in order to receive the outturn of his choice. The business process 4

description in this section covers the interaction of the CSD‟s offering BP service46

, with T2S. 5


Figure 4.3-1 Business Process ‘Buyer Protection’ (Process Layer) 7

8

NOTIFY CA

[T2S.BP.CORP.BPRT.020]

CAPTURE CA


CSD

CA

Details

Receipt of CA

Details from IssuerBP deadline

Until

market deadline

BP Instructions

from Participants

RECEIVE BP

INSTRUCTION


CALCULATE AND

INSTRUCT CA

TRANSFORMATION[T2S.BP.CORP.BPRT.050]

HOLD UNDERLYING

SETTLEMENT

INSTRUCTIONS[T2S.BP.CORP.BPRT.040]

9


Capture CA 11

Reference ID T2S.BP.CORP.BPRT.010

This process (see Figure 4.3-1Figure 4.3-1) captures the CA events of type „Distributions with options‟ (as 2 12

events, distribution, and mandatory reorganisation with options), „Mandatory reorganisations with options‟, 13

and „Voluntary reorganisations‟. 14

44 BP can also apply to bilateral securities lending and collateral management related activities

45 Elective CA: Distribution with options, mandatory reorganisation with options or voluntary reorganisation

46 In case the CSD does not offer a BP service, the counterparts of the trade should interact bilaterally to handle the BP

process.


Buyer Protection


1

Notify CA 2



This process runs until the market deadline date of the CA. 4


6

Receive BP instruction 7


Business Actors: CSD, CSD participant, T2S 8

Business Object: 9

- CA details 10

- Buyer protection (BP) instruction 11



- Information Services (T2S.SD.INF) 14


- Status management service (T2S.SD.STD.010) 16


- Send Query (see T2S UDFS, Chapter 2) 18

Trigger: 19

- CSD receives BP instruction 20

CSD validates the underlying settlement instruction reference in the BP instructions. 21

This process is relevant only for the CSDs that offer the buyer protection facility to its participants. 22


Buyer Protection


Figure 4.3-2 Decomposition of the process ‘Receive BP instruction’ into activities (Activity Layer) 1

CSDRECEIVE BP INSTRUCTION

T2S.BP.CORP.BPRT.030

VALIDATE BP INSTRUCTION

T2S.AC.CORP.010

RECEIVE BP

INSTRUCTION


2

The process „Validate BP instruction‟ consists of the following activity (see Figure 4.3-2Figure 4.3-2): 3

4

Validate BP instruction (Activity 1) 5


The CSD performs a validity check for the BP instruction, which the buyer sends to the seller (e.g. CA 6

reference, option number, and underlying settlement instruction). 7

This activity consists of the following two tasks (see Figure 4.3-3Figure 4.3-3): 8

The CSD queries T2S for relevant settlement instructions on the underlying ISIN (Task 1) 9

The CSD checks the status of the underlying settlement instruction that is identified in Task 1 10

(Task 2) 11


Buyer Protection


Figure 4.3-3 Decomposition of the activity ‘Validate BP instruction’ into tasks (Task Layer) 1

RECEIVE BP INSTRUCTIONT2S.BP.CORP.BPRT.030

VALIDATE BP INSTRUCTION

T2S.AC.CORP.010

CSD

RECEIVE BP INSTRUCTIONT2S.BP.CORP.BPRT.030

VALIDATE BP INSTRUCTIONT2S.AC.CORP.010

T2S

OBTAIN PENDING

INSTRUCTIONS ON

THE UNDERLYING

ISIN

[1]

VALIDATE

UNDERLYING

INSTRUCTION

REFERENCE

[2]


Query Request

SETTLEMENT

INSTRUCTION

QUERY

Query Response -

T2S Settlement instructions

2

3

Hold underlying settlement instructions 4



Business Objects: 6

- Settlement instruction 7



- Status management service (T2S.SD.STD.010) 10



Buyer Protection


- Send Hold/Release Instruction (see T2S UDFS, Chapter 2) 1

Trigger: 2

- BP deadline47

is reached 3

Precondition: 4

- Existence of valid BP instruction linked 5

The CSD sends the maintenance instructions48

to T2S to hold the underlying pending settlement instructions, 6

which are related to the BP instruction. 7

The process „Hold underlying instructions‟ consists of the following activity (see Figure 4.3-4Figure 4.3-4): 8

9

Hold settlement instruction 10


The CSD identifies the pending settlement instruction related to the BP. The CSD sends a maintenance 11

instruction to T2S, to put the underlying settlement instruction on hold. The CSD receives from T2S the 12

status advice messages for the underlying settlement instruction. 13

14

47 According to the CASG standards, BP deadline is market deadline – 1 day.

48 In case the BP is not offered by the CSD, the buyer and seller need to agree to cancel and/or replace underlying

settlement instructionthe buyer may send to the CSD/T2S the cancellation of the underlying settlement instruction, as

well as the transformed settlement instruction on the outturn ISIN and instruct T2S, when relevant


Buyer Protection


Figure 4.3-4 Decomposition of the process ‘Hold underlying settlement instructions’ into Activities (Activity Layer) 1

CSD

HOLD UNDERLYING SETTLEMENT INSTRUCTIONST2S.BP.CORP.BPRT.040

HOLD SETTLEMENT INSTRUCTION

T2S.AC.SETT.050

T2S

SETTLEMENT SERVICES: LIFE

CYCLE MANAGEMENT SERVICES

HOLD/

RELEASE


RECEIVE STATUS

ADVICE

CSD


CONNECTED

PARTIES)

STATUS

MANAGEMENT


Maintenance Instructions

Status Advices

Status advices

BUSINESS

VALIDATION


HOLD UNDERLYING

SETTLEMENT

INSTRUCTIONS[T2S.BP.CORP.BPRT.040]

2

Calculate and instruct CA transformation 3


This process generates CA transformations49

based on the underlying pending settlement instructions in the 4

underlying ISIN. The process sends to T2S, maintenance instructions (cancellations for settlement 5

49 Cancellation of instructions on the underlying ISIN must be completed before by the close of business of the Record

date or market deadline date


Buyer Protection


instructions) in the underlying securities and the new settlement instructions for the outturn securities. 1

See section 4.2.2. 2



See section 2.1.3 5


T2S Service Name Settlement Services




7

This T2S business service facilitates the settlement of instructions (e.g. hold), sent to T2S from the CSDs. 8

T2S processes these settlement instructions by using one or more component services (listed below) in the 9

Settlement Services. T2S sends the results of the settlement services (status advice and settlement 10

confirmations) to the CSD via the T2S Status Management Service (T2S.SD.INF.010). 11

12

Settlement Services - Components 13


See section 2.1.3 15

16

Hold/ Release service (T2S.SD.SETT.010110) 17

This T2S service facilitates Hold / Release of settlement instructions in T2S by T2S parties. 18


Principles of Business Process Modelling


5 Annex A - Methodology and drafting principles 1

5.1 Principles of Business Process Modelling 2

T2S Business Process Model represents end-to-end (E2E) business processes of the CSDs and NCBs (or any 3

other process owning entity) and depicts all the steps of an E2E business process that transform a set of 4

inputs to a set of outputs. A process hierarchy50

depicts the steps involved in an E2E business process at three 5

different levels. 6

5.1.1 First Level Diagram – Process51 Layer 7

The first level diagram represents the Process Layer of the process hierarchy and defines the E2E business 8

process of a process owning entity. An E2E business process may consist of one or many processes. The first 9

level diagram depicts interactions between the inter-related processes of an E2E business process and does 10

not include interaction with T2S or any other external entity52

(see Figure 5.1-1Figure 5.1-1 for template of 11

process layer). 12

50 Process Hierarchy in T2S Business Process Modelling methodology defines the level of decomposition of an E2E

Business Process and aims at establishing a parent-child relationship between processes

51 Process is defined as an endeavour with a mutually exclusive objective

52 T2S Business Process Model does not describe or depict any interaction between the process owning entities and

entities other than T2S




Figure 5.1-1 Template of First Level Diagram 1

<<Name of the process>>

<<T2S reference identifier>>



<<Name of

Process

Owning

Entity>>



Depicts that this process can

be further decomposed

Depicts an E2E Business

Process of a process owning

entity

Depicts a PROCESS within an

E2E Business Process

2

There are two types of processes: Collaborative Process and Internal Process53

3

Collaborative Process is a process in an E2E business process that requires interaction with T2S 4

Internal Process is a process in an E2E business process that does not require interaction with T2S 5

5.1.2 Second Level Diagram – Activity Layer 6

The second level diagram represents the Activity Layer in the process hierarchy and defines the activities 7

that comprise a collaborative process only (internal processes of a CSD or NCB are not decomposed into 8

activities). It depicts the interactions within a set of well-defined and interrelated activities within a process. 9

For collaborative type of processes, if the activity requires interaction with T2S54

and can be broken down 10

into tasks, the Activity layer resembles the Process Layer, in that; it does not depict interaction with T2S55

or 11

53 The concept of collaborative and internal processes is also applicable at the level of activities and tasks

54 The process layer diagrams do not depict any interactions with T2S, whereas the activity layer and task layer

diagrams depict all relevant interactions with T2S




any other external entity (see Figure 5.1-2Figure 5.1-2 for template of activity layer with no T2S interaction). 1

For example, the process Notify CA consists of the activities: Obtain Securities Positions and Pending 2

Instruction Details, Identify and Inform Entitled Position Holders. The Activity Layer does not depict 3

interactions with T2S because the activity Obtain Securities Positions and Pending Instruction Details it 4

consists of tasks. In such cases, the third level diagram or the Task Layer depicts the interactions between the 5

tasks and T2S business services (see Figure 5.1-4Figure 5.1-4 below). Some activities may be common to 6

more than one process (e.g., the activity Send Instructions and Receive Status Advices/ Settlement 7

Confirmations) 8

Figure 5.1-2 Template of Second Level Diagram (no interactions with T2S) 9

<<Name of the process in the E2E Business Process>>

<<Name of the activity>>


<<Name of the

process

owning

entity>>



Depicts the process that can be

decomposed into activities


further decomposed into tasksDepicts an ACTIVITY within a

process





<<Name of

ProcessOwning

Entity>>



10

However, if no further decomposition of activity is possible and it requires interaction with T2S, the Activity 11

Layer depicts the T2S interaction (see Figure 5.1-3Figure 5.1-3 below for template of activity layer with T2S 12

interaction). e.g., the process, Calculate and Instruct CA Entitlements consists of the activities Calculate CA 13

and Instruct and Settle CA Entitlements. 14

A collaborative process may consist of collaborative and internal activities (e.g. the activity Identify and 15

Inform Entitled Position Holders in the process Notify CA). 16

55 T2S Business Process Model depicts two types of T2S interactions: Primary interaction occurs between T2S and the process

owning entities. Secondary interaction occurs between T2S and T2S stakeholders other than process owning entities (like CSD

participants or payment banks). These interactions occur because of primary interactions




Figure 5.1-3 Template of Second Level Diagram (includes interactions with T2S) 1

<<Name of the Process>>

T2S

<<Name of the

process

owning

entity>>

<<Name of T2S

Business Service>><<T2S reference identifier>>

<<Name of the

activity>>

<<T2S reference

identifier>>



<<Name of T2S


<<Name of T2S


<<Name of process

within the non-

process owning

entities>>

<<T2S

stakeholders

other than

process

owning

entity>>

<<Name of T2S


Depicts a logical grouping of T2S business

service (for e.g., Life cycle management

services in Settlement Service Class)





<<Name of

ProcessOwning

Entity>>



2

5.1.3 Third Level Diagram – Task Layer 3

The third level diagram represents the Task Layer (see Error! Reference source not found. in the section 4

on sample process description) in the process hierarchy and defines the specific tasks that each activity is 5

broken into. It depicts the interactions within a set of well-defined and interrelated tasks within an activity as 6

well as interactions with T2S business services. For example, the activity Obtain Securities Position and 7

Pending Instruction Details consists of the following tasks: Query Securities Position for CA ISIN, Query 8

Pending Instructions for CA ISIN and Receive Reports – Position and Pending Instructions (are examples of 9

collaborative tasks), Filter Reports for CA ISIN details (example of internal tasks). 10


Drafting Methodology


Figure 5.1-4 Template of Third Level Diagram (no interactions with T2S) 1

<<Name of T2S business service>><<T2S reference identifier>>

<<Name of the Process>>

T2S

<<Name of

process

owning

entity>>

<<Name of Activity within the process>>

<<Name of Task>>


<<Name of Task>>


<<Name of the process in the E2E Business Process>>



<<Name of the

process

owning

entity>>







<<Name of

ProcessOwning

Entity>>



Depicts a TASK within an activity

Depicts a T2S business service (for

e.g., Query Service or Report

Generation Service)

Depicts a T2S business service

component (for e.g., Settlement-related

query service component)

Interactions between the E2E business

process and T2S business services

<<Name of the T2S Business Service Component>>


<<Name of T2S business

service component type>>

<<Name of T2S business

service component type>>

Depicts a T2S business service component

type (for e.g., Securities Balance Query or

Settlement Instructions Query within the

Settlement-related query service component)

2

5.2 Drafting Methodology 3

This section of a T2S BPD document provides information regarding the 4

T2S reference and mapping details of the process in an E2E business process 5

Process Name Name of the process

Convention for a naming a process <Verb> + <Business Object>


Drafting Methodology


For example, Capture CA

Process Reference ID T2S reference identifier of the process

Business Actors It includes

name of the entity that executes the process

name(s) of the entities that participate in the process

Business Objects Specifies the business objects referenced, modified or created in the

process

T2S Service Class Name

Name of T2S Service Class and T2S Service Class Identifier

T2S Service Description document includes the detailed description of

T2S Business Services

For example, Settlement Service Class, Liquidity Management Service

Class, etc

T2S Use Case Name Name of T2S use case describing the interaction of the business

applications of T2S Actors (CSDs or NCBs) with T2S

T2S UDFS document includes the description of T2S use cases

The use case should also be referenced in the description of the process

to ensure that the reader understands the context in which the use case is

relevant

Trigger Event(s) that start the process

Precondition List of conditions that must be true for a process to begin

1

Codification Methodology 2

o For codification of a process < T2S.xx.yyyy.zzzz.nnn > 3

“xxx” (alphabets only) stands for abbreviated document name (e.g. “BP” in this 4

case) 5

“yyyy” (alphabets only) stands for category of E2E business process (e.g. “CORP” 6

for corporate actions, SETT for settlements, etc) 7

“zzzz” (alphabets only) stands for abbreviated name of E2E business process (e.g. 8

“SECD” for securities distribution) 9


Diagram Conventions and Standards


“nnn” (numeric only) stands for the process number (e.g. “010”, “020”, etc) 1

For example, T2S.BP.CORP.SECD.020 is the T2S reference identifier of the 2

process Notify CA 3

4

o For codification of an activity < T2S.xx.yyyy.nnn > 5

“xx” (alphabets only) stands for abbreviated document name (e.g. “AC” in this case) 6

“yyyy” (alphabets only) stands for category of E2E business process (e.g. “CORP” 7

for corporate actions, SETT for settlements, etc) 8

“nn” (numeric only) stands for the activity number within a category (e.g. “010”, 9

“020”, etc) 10

For example, T2S.AC.INF.010 is the T2S reference identifier of the activity Obtain 11

Securities Position and Pending Instruction Details 12

Activities can be used across different business processes. e.g. Obtain Securities 13

Position and Pending Instruction Details can be used in different corporate action 14

notifications. 15

o For codification of a task in an activity 16

“MM” (numeric only) represents a Task within an Activity. The possible values are 17

“01” thru “99” 18

5.3 Diagram Conventions and Standards 19

5.3.1 Basic diagramming concepts 20

A business process diagram consists of a set of graphical elements. The four basic categories of elements are: 21

Flow Objects; 22

Connecting Objects; 23

Swimlanes; and 24

ArtifactsArtefacts 25

The small set of notation categories enables the reader of a BPD to easily recognize the basic types of 26

elements and understand the diagram. Within the basic categories of elements, additional variation and 27

information can be added to support the requirements for complexity without dramatically changing the 28




basic look-and-feel of the diagram. 1

Flow Objects 2

These are the core elements of a business process diagram. The three Flow Objects are: 3

1. Process (or Activity or Task) 4

They are represented in rounded rectangles 5

6

They can be performed once or can have internally defined loops 7

Looping Process (or

Activity or Task)

8

For a collapsed version of a Process (or Activity), the details of the Process are not visible in the 9

Diagram. A “plus” sign in the lower-center of the shape indicates that the Process can be 10

decomposed into activities. 11

Collapsed

Process

12

For an expanded version of a process, the details are visible within its boundary 13

Expanded Process

14

In case of Task, markers or icons can be added to help identify the type of task (e.g., manual task). 15

However, the marker must not conflict with any other standard BPMN element 16

17

2. Events 18

They are represented by a circle and is something that “happens” during the course of a business process. 19

The events affect the flow of the process and usually have a cause (trigger) or an impact (result). Events are 20

circles with open centers to allow internal markers to differentiate different triggers or results. There are 21

three types of Events (type of boundary determines the type of event), based on when they affect the flow: 22

Start, Intermediate, and End 23

A. Start Events 24

Start Events indicate where a process will begin 25




There are different “Triggers” that indicate the specific circumstances that start the process 1

None Start Events are used to mark the start of a process or when the start is undefined 2

Any one of the triggers included in a Multiple Start Event will start the process 3

4

CAPTURE

CA

5

6

a. Intermediate Events 7

Intermediate Events occur after a process has been started and before a process is ended 8

There are different “Triggers” that indicate the specific circumstances of the Event 9

They can be placed in the normal flow of the Process or attached to the boundary of an activity 10

Events placed within the process flow represent things that happen during the normal 11

operations of the process. They may represent the response to an event or the creation of an 12

event (i.e., receipt of a message or sending of a message) 13

REPORT

GENERATION

SERVICES

[T2S.SD.INF.020]

RECEIVE REPORTS -


INSTRUCTIONS[T2S.BPD.CORP.SECD.020.A03]

T2S Reports - T2S Securities Positions and


14

Events attached to the boundary of a process (or activity or task) indicate that the process 15

should be interrupted when the event is triggered. They are used for error handling and 16

exception handling 17




NOTIFY

CA

[T2S.BPD.CORP.SECD.020]

Until

Record Date 1

b. End Events 2

End Events indicates where a process will end 3

There are different “Results” that indicate the specific circumstances that end the Process 4

Table Summary of different types of triggers and their applicability to start, intermediate and end events 5




1




1

3. Gateways 2

They are represented by the diamond shape and used to control the divergence and convergence of Sequence 3

Flow. Thus, it will determine traditional decisions, as well as the forking, merging, and joining of paths. 4

Different internal markers indicate the different types of behaviour control. 5

6

A. Exclusive Gateways (XOR) 7

Exclusive Gateways (Decisions) are locations within a business process where the Sequence Flow can take 8

two or more alternative paths (or used to merge the Sequence Flow). It is a “fork in the road” for a process 9

and only one of the possible outgoing paths is taken during the process execution. There are two types of 10

decision mechanism: 11

12

Data Mechanism (e.g., condition expressions) 13

These are the most commonly used type of Gateways. They can be shown with or without an internal “X” 14

marker (without is the most common use). The Gateway (Decision) creates alternative paths based on 15

defined conditions 16

17




Note: A hatch mark at the line beginning shows the default Sequence Flow. The default path is chosen only 1

if all the other conditions of the Gateway are False. 2

3

Event Mechanism (e.g., receipt of alternate messages) 4

This type of decision represents a branching point in the process where the alternatives are based on events 5

that occur at that point in the process, rather than conditions. The Multiple Intermediate Event is used to 6

identify the Gateway. The Event that follows the Gateway Diamond determines the chosen path. The first 7

event triggered wins. 8

9

10

Note: Exclusive Merge is a useful tool for modelling data based or event based merges. Exclusive means that 11

the process chooses only one of the many inputs as the output from the gate. 12

13

14

B. Inclusive Gateways 15

Inclusive Gateways are decisions where there is more than one possible outcome (one or more outgoing 16

Sequence Flows from a decision may be taken). The Gateways is identified by a “O” marker. 17




1

For Inclusive or Decision Gateways there cannot be zero output flows. A default output flow is 2

necessary. The merging Inclusive Gateways follow decision Inclusive Gateway. 3

4

5

For Inclusive or Merge Gateways, the process flow continues when the first signal arrives from any of 6

the input Sequence Flows. If other signals arrive subsequently from the other input Sequence Flows, 7

they are not used. The merging Inclusive Gateways follows the decision Inclusive Gateway. 8

9

10

C. Complex Gateways 11

Complex Gateways define a more advanced definition of behaviour. An asterisk marker (bold) identifies this 12

gateway. 13

For complex decision gateways, the complex expression determines which output flow is taken. 14




1

For complex merge gateways, the complex expression determines when the process starts 2

3

4

5

D. Parallel Gateways 6

Parallel Gateways is also called an “AND” gateway (for defining multiple parallel paths). All Sequence 7

Flows out of AND gateway are taken. The “+” marker is used to identify this Gateway. The Gateway 8

synchronises (wait for) parallel paths. 9

10

For parallel forking gateway, all sequence flows drawn out of the AND gateways are taken 11

12




For parallel joining gateway, the AND gate must receive an input signal from all input Sequence Flows 1

for the output flow to be taken. The process flow waits for all signals to arrive at the AND gateway 2

before it can continue 3

4

5

Connecting Objects 6

1. Sequence Flow 7

A Sequence Flow shows the order of activities in a process. A solid line with a solid arrowhead represents a 8

Sequence Flow. The source and target must be one of the following objects: Events, Activities, and 9

Gateways. A Sequence Flow cannot cross a Sub-Process boundary or a Pool boundary. 10

11

12

13

2. Message flow 14

A Message Flow shows the flow of messages between two separate process participants (business entities or 15

business roles) that are prepared to send and receive them. A dashed line with an open arrowhead represents 16

a Message Flow. 17

In BPMN, two separate Pools (see section on Swim Lanes) in the diagram will represent the two 18

Participants. A Message Flow can connect to the boundary of the Pool or to an object within the Pool. 19

Message Flow are not allowed between objects within a single Pool 20




1

2

3. Association 3

An Association links data, information and artifactsartefacts with flow objects. It shows data input to and 4

output from Activities. Text Annotations can be associated with objects. 5

6

7

8

9

ArtifactsArtefacts 10

ArtifactsArtefacts provide the capability to show information beyond the basic flow-chart structure of the 11

Process. There are currently three standard ArtifactsArtefacts in BPMN: Data Objects, Text Annotations and 12

Groups. 13

1. Data objects 14




Data Objects are ArtifactsArtefacts that show the use of data and documents in a Process (define the input 1

and output of activities). A standard document shape (rectangle with one corner bent over) represents a Data 2

Object. “State” of a Data Object shows how a document may be changed or updated within the Process. 3

4

5

2. Text annotation 6

Text Annotations are a mechanism to provide additional information about a Process. It is possible to 7

connect Text Annotations to a specific object on the Diagram using Association. 8

9

10

11

3. Group 12

Groups highlight certain sections of a diagram without adding additional constraints for performance – as 13

applicable in case of a process that can be decomposed further. Groups categorize elements for reporting 14

purposes. The restrictions of Pools and Lanes do not apply to Groups. Dashed rounded rectangle surrounding 15

a group of flow objects represents a Group. 16




1

Swim lanes 2

BPMN uses the concept known as “swimlanes” to help partition and/organize activities. There are two main 3

types of swimlanes: Pool and Lane. 4

5

1. Pools 6

Pools represent Participants in an interactive (B2B) Business Process Diagram. A Participant may be a 7

business role (e.g., “buyer” or “seller”) or may a business entity (e.g., “IBM” or “OMG”). A Pool may be a 8

“black box” or may contain a Process. Message Flow handles interaction between Pools. Sequence Flow 9

cannot cross the boundary of a Pool (i.e., a Process is fully contained within a Pool) 10

11

12

2. Lanes 13

Lanes represent sub-partitions for the objects within a Pool. They often represent organization roles (e.g., 14




Manager, Associate), but can represent any desired process characteristic. Sequence Flow can cross Lane 1

boundaries 2

3

5.3.2 Advanced diagramming concepts 4

Data Flow 5

6

1. Sequence Flow and Data Flow are decoupled 7

8

9

2. Sequence Flow and Data Flow are bound together 10

11




Exception Handling 1

Intermediate Events attached to the boundary of an activity represent triggers that can interrupt the activity. 2

All work within the activity stops and flow will proceed from the Event. Timer, Errors, Messages, etc. can be 3

Triggers. 4

5

6

Timers 7

8

1. Timers to add delays to the process 9

10

11

2. Timeouts for exception handling 12

13

14

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