10 August 2015

ICMA: TARGET2-Securities - Observations relating to Monte Titoli and the repo product

The ICMA note highlights the practical and procedural interpretations of these which the organization hopes will reduce operational risk during and after the migration to the new system.

 The note focuses on three key issues related to repos and MT post-T2S:

(i) Off-leg rep mismatches

(ii) Term repos

(iii) Standard settlement instructions

Off leg repo mismatches

When an open repo is terminated at the option of the buyer or seller or a fixed-term repo is terminated early, the confirmation/affirmation and settlement instructions for the close-out leg must include its transaction date.

Some parties have used the transaction date of the opening leg of the repo but others (who book repos as separate transactions for reasons of operational simplicity) have used the transaction (trade) date of the close-out leg.

Parties currently using the latter practice who intend to settle across T2S will need to address this problem.

In order to mitigate this, it would be recommended to ensure regular reporting is enabled with the agent and bilateral discussions ensued with clients to agree conventions and practice on bookings. Instructions could also be provided to agents to match the trade date of incoming transactions which would still break straight-through-processing (STP) but reduce the delay in processing with the additional workflow for approval and repair.

Term Repos

Any trades that are matched will be copied automatically by Monte Titoli to T2S in an already matched status. Any unmatched trades should be re-instructed into T2S by the local agent who will attempt to map to the new Standard Settlement Instructions, however this process should be confirmed directly with local agent prior to the migration date.

Standard Settlement Instructions

Post T2S the SSI where firms have a segregated account (60086) at Monte Titoli will need to be linked to the unique BIC11 PARBITMM018 to distinguish it from other agent owned accounts. These accounts should be advised to third parties before the migration and allow sufficient time for this information to be loaded in firms’ data warehousing.

Full note

© ICMA