The EU’s post trade landscape has remained siloed despite initiatives supposed to lead to a single financial market. Cross-border transactions in Europe, relative to say the US, remain expensive and involves a range of intermediaries, adding unnecessary cost; galling perhaps as financial institutions remain constrained.
As the euro, algorithmic trading, cross-border M&A and market initiatives such as UCITS continue to encourage trading across national boundaries in Europe, inefficiencies in the post trade infrastructure have been glaring. Aligned with efforts to remove the so called Giovanni barriers to seamless cross-border trading, the EU has tried to encourage harmonisation systematically. Alongside CSD-Regulation, Target-2 Securities (T2S) is designed to essentially create a pan-European ‘domestic’ market for securities settlement, bringing down cross-border settlement costs over the medium term more in line with domestic charges.
The T2S project intends to build a pan-European domestic settlement marketplace. The platform is owned and developed by the Eurosystem monetary authority and will be operated by the European Central Bank (ECB), as T2S is designed to settle exclusively in central bank money (CeBM) over non-central banks (NCBs) to achieve market efficiency and safe settlement. It will also be capable of settling securities transactions from non-euro markets, subject to the participation of the respective central banks.
Essentially, T2S is a platform that receives settlement instructions, matches them and reaching settlement, creates irrevocable booking entries. T2S is a technical platform to which national CSDs can outsource their settlement process; however the CSDs will retain ownership of custodial services.
The impact of T2S is huge. It will affect all market participants substantially and will force many of them to change their fundamental business models. Central Securities Depositaries (CSD), for example, which are traditional pillars of the post trade infrastructure, will have to contend with lost revenue from settlement services and will encourage CSDs to diversify their business models to compensate. There is also the likelihood in the long term that not all of Europe’s CSDs will survive the introduction of T2S. Custodians too will not be immune from change; in particular sub-custodian providers will see a decline in the revenue they generate from providing services to global custodians.
That’s the background to this discussion, which brings together experts from the custodian and CSD worlds to debate and explain what the changes will mean for them and their clients in practice.
Setting the scene
GUIDO WILLE, HEAD OF MARKET DEVELOPMENT AT CLEARSTREAM: T2S introduces two things: competition for us and our peers where in the past there was none or very little. We like that; and more importantly, it introduces an option beyond the mandatory change for market participants to alter the way they access domestic markets. We’ve worked hard in our investor CSD product to create an offering to clients that provides access direct into domestic markets. After we join T2S in 2016, our investor CSD product will allow market participants to access settlement in the T2S zone with less intermediation accessing central bank infrastructure for payments and a single EUR cash liquidity pool and a direct infrastructure (CSD) account with us for a single central securities pool across T2S and integrated, via collateral management, with our Luxembourg ICSD.
MARK PROFETI, SECURITIES POST TRADE STRATEGY – LEAD STRATEGIST FOR T2S, BARCLAYS: T2S gives firms the opportunity to reconsider their post-trade infrastructure model and how they access markets across the Euro zone. Some of the key strategic drivers include operational and cost efficiency and effectiveness. More importantly perhaps, it brings opportunities to realise collateral and cash liquidity benefits.
MIKE CLARKE, GLOBAL PRODUCT MANAGEMENT, INVESTOR SERVICES, DEUTSCHE BANK: We look at T2S in a wider context: specifically how T2S affects the market alongside regulation. We work with clients and the market to understand how we need to bring together the different components in our product set as an agent bank and bring them to bear on the very different demands that each of our clients has, within the T2S framework. We then work towards bringing the right components of our product set together to make sure we deliver the right solution to our client that supports infrastructure they have.
PAUL BODART, MEMBER OF THE T2S BOARD, ECB: The Eurosystem has established the T2S Board, a specific body that monitors the progress of T2S and ensures the platform is developed and launched in June 2015. Within the T2S Board, I help ensure that the deadlines of the four phases of the T2S development plan meets are met. I also bring an in-depth knowledge and understanding of how the industry operates to board discussions. I try to bring a business perspective that I believe ensures that any decisions made will benefit the market as a whole. Now, there is a lot of discussion around next steps: what additional developments are required in Europe around the T2S program.
ALEX DOCKX, T2S PROGRAMME DIRECTOR, JP MORGAN: We actively work with the ECB, CSDs and agent banks to make sure we are ready for T2S Wave 1 which is going live mid-2015. In addition, we are executing upon a firm wide JP Morgan strategy on how to best access T2S directly in key markets and derive the maximum benefits from it. T2S is not only a major and much welcomed infrastructure project designed to harmonise settlement in post-trade processing in Europe, but also it is opening the door to efficiency, cost improvements, risk reduction, and also more competition.
JUSTIN CHAPMAN, GLOBAL HEAD, INDUSTRY MANAGEMENT, NORTHERN TRUST: At Northern we see T2S and a number of the regulations as an opportunity for innovation. Our market in Europe on the custody side is service and asset owners together with investment managers and we think that the infrastructure change in the regulations allows us to take a fresh look at how this should operate within this European landscape. As we have less issues with legacy structure as maybe some institutions, it has given us a really good opportunity to develop new solutions with partners in the industry. Our job is to always put clients' asset safety at the forefront of everything we do. We are also trying to manage the cost of ownership through the asset chain, all the way from funds through to the end custodial chain, which is an important element, and provide additional liquidity in both securities and cash for our clients within this infrastructure. We've been running our T2S programme for nearly three years, as most people around the table have , and we are getting to the stage now where we really know where we are going, what we are doing and we are presenting those options to the clients and giving them optionality of leverage in this infrastructure.
HARNESSING THE INTERPLAY OF REGULATION
ALEX DOCKX: Clearly, T2S interplays with other rules. CSD Regulation (CSDR) came into force in September, which regulates what CSDs are, how they're structured, what they can and cannot do. It was crucial that CSD Regulation was put in place because the CSDs will outsource their settlement activity to T2S.
GUIDO WILLE: More precisely Alex, what would you consider detrimental and what beneficial in terms of settlement discipline?
ALEX DOCKX: We are an advocate of improvements in settlement efficiency. The closer we can get to a settlement rate of 100% on a given day, the better it is. If that can happen through greater incentives (both on the positive and on the negative side) and if calibrated well, it could work. We've seen the example in the United States where the introduction of a fail compensation regime by the industry had a very positive effect on settlement efficiency but the balance is very fine. T2S will bring a number of benefits, in terms of making cross-border settlement more efficient. Even so, we need to be very careful in seeing how a penalty and buy-in regime is calibrated so that there is essentially still an economic incentive for a participant to do a trade. If the cost of failing or buy-ins starts to exceed any commercial benefit participants make out of trading, the results will be less trading and thus less settlements, and less liquidity at higher rates. This is mostly the case for bond markets, where spreads are very thin and market makers provide much needed liquidity.
GUIDO WILLE: I’d like to spend a few moments on where we still need more harmonisation, which we don't have in CSDR. Some of it has not been dealt with either at the level of the T2S project. There is still a lot of market fragmentation and there remain a number of barriers to entry. They typically exist in disguise as technical requirements, legal requirements in a number of markets that make it rather difficult for investor CSDs to offer a full scale product. Let me provide an example: if I can't participate as a market participant in a primary market in a given country because that given country rules that to participate in the primary market options I have to have an account in the local CSD. That regulation exists in a number of countries. There are other questions around CCP trades, where margin collateral has to be put at CCPs and there are different rules at different CCPs. A lot of these are being addressed at the moment, and a number of CCPs have made announcements and will use T2S. We welcome that; though there's still some way to go.
FRANCESCA CARNEVALE: Mark, do you see this interplay between the regulations as fundamentally changing market structures for the better?
MARK PROFETI: Absolutely. We've touched upon the settlement efficiency and the harmonisation and standardisation of the settlement process on a pan-European level. However, there are other aspects of CSDR that are quite fundamental and important, such as allowing the passporting of CSD functions across borders, where a CSD is able to set up operations in other jurisdictions. Probably one of the less understood or less highlighted reforms of the CSD Regulation is that it allows issuers to choose any CSD it likes to issue its securities. In the short-term I don't expect it to have a dramatic effect , but over the long-term as we start to see how the CSD landscape evolves, it will help to drive some of the commercial and service decisions that certain CSDs need to make about future offerings. As CSD Regulation divorces banking ancillary services from the core CSD services it will encourage CSDs to look closely at their core service offering including issuance services. You're going to find CSDs either operating in all three areas (custody, issuance and banking ancillary services) or a combination, which is more likely in most cases. It will be interesting to see how the landscape evolves over the next two or three years.
FRANCESCA CARNEVALE: Europe looks to have a cocktail of rules, directives and regulation, all leading to the same place. Do we need it in fragmented elements? Could we not just do with a unified field of legislation?
PAUL BODART: There are layers and they complement each other. T2S is just a platform. What is important is to have a harmonised usage of the T2S platform to the extent that that is possible. If you bring all transactions for 24 CSDs on one platform and then some CSDs settle on T+3 and others on T+2, it will be create frictions and the users of the platform will not get all its benefits. Nokia shares are a good example. They are listed on eight or nine exchanges, some shares trade on some markets on T+2 and others on T+3. Therefore you will have fails by design because a player who tries to arbitrage between two markets might be supposed to deliver before he receives the securities. If you have penalties for fails in some markets and not in others, you will have a problem of competition if everything is on one platform. If you have buy-in rules for some transactions in some markets and other not, you will have problems. Alex is right; if we do not calibrate it well, we may have a problem. The issue is making sure that the right people do the right thing. So, for example, requiring CSDs to charge penalties or to manage a buy-in is the wrong approach. These days buy-ins are not processed by CSDs, they are processed by actors based on certain market rules. In those markets where there is a rule, as in the eurobonds market, they work extremely well. You can trigger buy-in but it's not the CSDs that should have to do it.
MIKE CLARKE: That’s incredibly important in terms of the chain because who is the CSD raising the buy-in against? Does that mean that, instead of the original parties creating the need for the buy-in, we are moving up the chain so that the agent has to initiate the buy-in against the global custodian? Then it moves up to the global custodian to create a claim, and then to the end party? I don’t think it is clear at all.
PAUL BODART: CCPs trigger buy-in but CCPS have different rules and the buy-in rules for CCPs work extremely well. I am a little bit nervous about the Level II measures. I hope that in the end ESMA will listen to the industry, as there will be consultations, and what will come out will be a set of rules that will be reasonable and manageable because otherwise, as Alex said, you may have more pain than what you intended.
GUIDO WILLE: One of our concerns is obviously that we will be the ones to deal with an administrative beast that won’t be welcome in the industry. To Alex's earlier point in terms of how it could turn out, we hope the regulator will find a solution that works in practice and that also does not impose fine levels that undermine how markets work. In any case, we don't think we are the right organisations to run with this. We already have a lot of change to deal with in the context of T2S. This is change we welcome and we can handle it but, frankly, it’s demanding. So, we don't need new activities which could be quite bureaucratic, as Mike has just outlined, and which also would be very difficult for us to handle in practise.
FRANCESCA CARNEVALE: Guido and Alex are clearly highlighting significant infrastructure change. How might that seep through to traditional market services? How will an investor CSD, for example, live in the same market as a custodian provider? Paul?
PAUL BODART: What is an investor CSD? It's a CSD that says I'm going to start offering to my clients the possibility to keep assets from other markets in my CSD and by doing that they are stepping on the shoes of global custodians. On the other hand, we've seen Bank of New York Mellon saying it believes that it should also become a CSD for a different reason, including such things as collateral management, issuer services; all domains where Bank of New York Mellon believes that by being a CSD they will be able to service the client better. So, I'm convinced that the line which was relatively clear up to now between CSDs on one side and custodians on the other is going to blur. The second thing that you will see is that I am not sure that a sub-custodian active in only one market will be able to survive. The sub-custodians that will probably survive are the ones that I call regional sub-custodians and are present in many markets. A regional sub-custodian is not very different from a regional global custodian. So, again, you see the line between sub-custodians and global custodians blurring. So, for BNP, Deutsche Bank and HSBC, these guys are present in many open markets and to a certain extent they are not very different from global custodians. Inevitably, over the long term, the number of intermediaries in the chain between investor and the CSD will be diminished. I can see the day coming soon when the big asset managers will open accounts directly with the CSDs. I can also see global custodians keeping their sub-custodian, but also going directly to the CSD or going to an investor CSD which will offer similar services. I believe it to be, potentially, a massive transformation.
FRANCESCA CARNEVALE: Justin, are custodian providers prepared for this upheaval? Do you see it as an opportunity or a threat?
JUSTIN CHAPMAN: I've not really seen it as a problem. My technical guys on delivery may have other comments to make in terms of practical implementation solutions but if you look at it from a macro strategic perspective, it is clearly an opportunity. I've mentioned we began our transformative programme over three years ago; at that time we were using 17 agent banks within the European area. We are using less now and come 2016 we will be using significantly less. Also the opportunity to leverage investor CSD structures is a big advantage for our clients and us. You’ve mentioned Francesca the overlay of so many regulations, in that mix who have to take into account initiatives such as AIFMD and UCITS V, CRD IV and Basel III. All these initiatives will ultimately drive liquidity into central pools. Now, there is conflict there with shareholder directives which are trying to segregate those assets versus keeping them in a pool, which gives us plenty of opportunity to work with clients to handle these conflicts and which we do not think the CSDs will want to compete in this space. Equally, we do not believe there will be a huge number of CSDs that can offer pan-European services; though some will offer a European capability, but not on the issuance side but on the investor side. Equally, there will only be a small number of agents that can offer full services on a regional basis in an agent bank; and I am not convinced that the regional sub-custodians have the same product set to compete with global custodians on a global basis. So, a large asset owner on a global mandate would definitely look at a global custodian, not a regional European custodian, although a very European-focussed asset owner may have an option to go into that route. Taking these considerations, among others, into account, I am convinced we have the ability to leverage this new infrastructure with less threat and less issues than maybe some of the more domestically-focused organisations that currently sit in the market. That is why I think it is a huge opportunity for us.
FRANCESCA CARNEVALE: Inevitably, all this regulation and all this change, raises barriers to entry and encourages a dash to quality. Will the core securities services business become only the preserve of a few large players and how does that help clients in the long run?
ALEX DOCKX: T2S and other initiatives will fundamentally impact the role of providers in post-trade. As these changes have taken time to gather momentum, some people have been lulled perhaps into a false sense of confidence, thinking that not much is happening. That is not correct. Although slow in the beginning, the pace of change is now very fast. Market infrastructures are changing, rules are changing, and providers are expanding their offerings (going into more markets and/or by going up the service value chain). No one can say these days that they are not going to do anything about these changes. It is simply not an option and it would not be a good service to our clients to take a wait and see approach. Will the big players benefit? Certainly, scale is an important element these days. One of the key drivers behind T2S is to lower the cost of transaction processing in Europe. There's always a fixed cost of running a business; so the more volume you process, the lower your unit cost. Winners and losers are hard to predict at present because there are various drivers which sometimes push in different directions, the desire for cost and processing efficiency will drive business into the hands of fewer large-scale players who excel at what they do. On the other hand, if you only do your business with one or very few providers, it increases dependency and concentration risk. The upshot is that there is no one size fits all solution, and different institutions (depending on their drivers) will have different solutions. That applies also to large firms such as JP Morgan, where various lines of business have different objectives [and benefits] they expect from T2S. On the fixed income side the focus is on liquidity and collateral; on the equity side it's about the costs of processing a settlement; and on the custody side the focus is on client benefits and risk. We managed to bring all these drivers into a single T2S strategy for JP Morgan, however I don't think we'll see one single model emerging as a result of T2S. There will be a variety of models, depending on what clients want.
JUSTIN CHAPMAN: Alex is right: you'll start to see, even in institutions that have wider business models, they are looking at slightly different opportunities for clients as they execute in this environment. If you have a slightly narrower business set, you might have less things to think about in the overall scheme of things when implementing your overall strategy but actually there is also the response of the client to make sure that you can offer them availability of optionality. Large pension funds and institutions really would like as much safety as possible and you'll start to see more partnering and more shift and actually people will be picking more componentised services with multiple providers, back to Alex's point, rather than concentrating maybe on an end-to-end chain with a single provider through that value.
MIKE CLARKE: There is a blurring of lines, but to me the key thing is that there's no one size fits all solution. If you look at what a domestic custodian provides, a domestic custodian is providing you with on the ground local experience in a market that's close to the regulator. Again, it's a clear differentiator from potentially how an investor CSD set up, or how a global custodian is set up. So, although you may have a multiple direct option via an investor CSD or an agent bank, it's very different to a global custodian. We also think that as a provider, wherever you sit in the settlement chain, you have to recognise the various needs of the different sectors you are dealing with and even the business units within an organisation. The different divisions of an organisation that you're talking to need to understand the problems that they are facing so that you can choose the components that bring real value from the right provider(s) for example, “is local market expertise key for me?” Regional access may be a key priority as you don't need certain services in terms of settlement that were needed before T2S, where the process was less harmonised. You may also still need cash and liquidity opportunities through an agent bank and picking and choosing the right components for the right solution will become more prevalent and there will be a blurring of the lines between providers. It really comes down to the unique selling propositions of each of the types of organisation in this room and how we work together. In some areas we will compete and in some areas we will partner and that’s how the market will evolve. The providers that will continue to thrive and be successful going forward are the ones that have recognised that via componentisation [sic], you can tailor a service by picking standard components that are either from one provider or multiple providers.
JUSTIN CHAPMAN: What’s been interesting here, as we look at the development of products and solutions through the value chain, is actually how the market will charge for these services and products going forward. When you're having these conversations, you have to look at where the value is, and as you unbundle activities, how to get the true value of those activities that may have been hidden away within other costs within the value chain. That's becoming more and more important and will begin to feed into regulation at some stage. If you look at other trends such as pension fund reform, they're starting to look at true value through the value chain, which is ultimately reported back to funds. Actually, this has been one of the more interesting areas to look at, particularly when we are working with our partners, to try and work out what's commercially viable for the institution. It is vital so everyone feels they get right value to be able to operate at a consistent high quality level of service within the operating model.
PAUL BODART: A good example is traditionally when you appoint a sub-custodian. You agree with him on the price for the transaction and then you agree on safekeeping fees and perhaps ancillary fees. As you've heard, you may have your own account at the CSD serviced by the sub-custodian and so the dynamic and the pricing dynamic has changed. Now you see the big actors like Clearstream and all of those starting to say, well, what will I offer at what price and, as Justin said, he's also in negotiation with BNP, Deutsche Bank and all of them and asking them too: well, what can you offer? What model do you offer and at what price? He does that because he has to make an offer to his client based on what he is going to pay. All these things are becoming clearer as T2S approaches However, there is a secondary concern. It's not easy to move from one custodian to another or to change custodians. It takes time; particularly if a firm has been using the same custodian for a long time. So, for an asset manager to make a decision to say, okay, for me it may be better to have my own corner to CSD, it's safer and so on, it makes sense for them to also say they would still want the support of a custodian.
REGULATION AS A DRIVER OF SAFETY? OR A CREATOR OF PROBLEMS?
PAUL BODART: Mark said something very important. The more the market is complicated, the more you need a local player to help. Okay? So, you may have complex tax rules, complex actions. So, if all that is being simplified, harmonised and so on, the less you will need a local player. MIKE CLARKE: Regulators have acknowledged that the biggest gap in the market was mitigating systemic risk. EMIR was introduced to address that specific issue in the CCP clearing space and also to introduce transparency around the OTC derivatives markets. CSD Regulation underpins T2S. It wasn't designed specifically to address or to encourage more liquidity into the marketplace, or to help the markets increase their performance, it was about what risks exist in the marketplace today, what could potentially bring the marketplace down in its entirety and how do we address those gaps?
ALEX DOCKX: We are approaching the limits of our capacity to absorb change very quickly. That came out not just on post-trade but everywhere in the industry we've seen a barrage of regulations. Actually, the market has coped pretty well up to now and the roll out of much of the regulation has not flagged unsurmountable problems. But this avalanche of rules and directives is becoming harder to assimilate.
GUIDO WILLE: It seems like an unstoppable tsunami.
ALEX DOCKX: Post-trade is a very system-based, high-volume environment. Most changes in this space –whether it’s the result of infrastructure changes such as T2S, or of regulations have major system and processing impacts. Even for big infrastructures and big banks this is a challenge. It also requires a lot of investment. Therefore, if at the same time the objective is to better structure markets and to reduce cost, the short-term impact on costs may not always be positive. We are a large firm, with a supportive infrastructure. Smaller players do not always have the bandwidth to do all of these things, and that risk needs to be considered as well.
MARK PROFETI: The bandwidth issue is a very important consideration. While so much change is going on, to determine the right operating model for the future is quite difficult. We’re all looking at the regulatory agenda and the underlying themes and the impact that it has on firms’ post-trade operating models. T2S is a huge enabler as it provides a significant opportunity for firms to simplify their post-trade infrastructure model. However, the post-trade service providers are taking the brunt of the changes as they are having to look after the now, as well as manage their clients future service needs and implement the market infrastructure changes. As Paul said earlier, change is happening now within the providers, and the change scope for securities service providers is growing. Ultimately, it’s great for their clients, who will have much more service choice going forward; it’s also good long term that T2S will deliver clear benefits for the market. Nevertheless, delivering the scope and scale of change is challenging.
MIKE CLARKE: It is understanding what your desired end state looks like and then defining the journey to achieve that end state. A trap that a lot of organisations fall into is trying to do everything all at once and get there by the quickest possible route and therefore the consequences and the risks attached to that approach are often overlooked, particularly by decision-makers. People who realise that it's a longer journey and that the overall benefits are much more sustainable if you approach it in a much more prudent way. That is where we want to be, at what point do we want to be there, how do we get there and how do we start to realise some of those benefits on an interim basis during the course of that journey.
JUSTIN CHAPMAN: There was an interesting discussion a number of years ago with my management group around how the European landscape would evolve and the impact of complex regulation. It is clear, that for many of our clients, we still have to provide a road map that gets us from here to there. We are still in the initial stages of the roll out of regulation, and that roadmap is not always immediately apparent. It involves building new structures, new products, new relationships; but we do see the light at the end of the tunnel. We make the decision about whether we become a CSD, or whether we invest in a CSD, or whether we carry on with a standard agent network, in that journey. We review and revisit the ideas, some fall off the route, and others don’t. This approach works really well rather than dealing with the silo-based approach which historically this industry has dealt with and, frankly, we are much more aware of the interaction of these elements in the market right now. With that in mind, testing our outlook, systems and approaches at every turn is really important now.
THE ROLL OUT OF T2S: WHERE ARE WE, WHAT’S DOWN THE ROAD?
PAUL BODART: CSDs confirmed that they would start user testing in October. The results of the testing we undertook in late summer are better than what we expected. By that I mean the number of defects that we have found is (from benchmarks that we have received) slightly lower than what you could expect from a project of that size and complexity. The effect is not small but there are no critical defects, not a lot of high defects. Now the key point is at which speed the four central banks that are developing will be able to correct these defects and what is important for us is really to see how the CSD will adjust. Bilateral testing will go on until the end of the year. Each CSD tests the system bilaterally with us. Then in January we will start a new phase of testing, we will start multilateral testing, where all the CSDs together to test the system. Then in March next year we start community testing. At that point we involve local banks and all the people that are clients of the CSDs will be able to start testing the system. So, that's really where we are. Has it been difficult? Yes, it has been difficult. The important point here is the discipline that we have imposed on ourselves. We have received multiple requests for change and when you launch a project of that size and complexity, if you make too many changes in the middle of the road, you will have the delay. It was important that we were very disciplined; to ask ourselves whether we really needed to make this change or that change, or whether there is something else that can be done to avoid change. Stability in the design of what you want to do is critical and that discipline is paying off. We are delivering and we are going to reach a synchronisation point at the pace that we were expecting. So far none of the synchronisation points has been missed. I'm not saying that the last months will not be hectic. I expect to get some interesting feedback from in particular the large CSDs which have an army of people ready to test. So, they will come with 7,000 test cases and they will try to kill the platform and that's what we need. We need to make sure that this platform works smoothly.
FRANCESCA CARNEVALE: Alex, you're smiling and it is a wicked smile.
ALEX DOCKX: This is a large run-up into T2S but we are now near to the delivery stage. For a project this size and this complexity, it's gone fairly well. There has been a good balance between the need to make the system user-friendly against the need to deliver on time. Even so, regarding change requests, the number we ended up with is in the hundreds. This good balance has been achieved in no small part because of the good governance structure put in place for T2S. Clearly everyone wants their own tweaks, but overall the somewhat surprising conclusion is although different parties have different drivers, there has so far always been a way to obtain a majority view, if not a consensus, which I think is very hopeful. That being said, the system testing needs to be exhaustive. As from June next year much of Europe will start to move to a new, single platform, and that is a major challenge. We all have to ensure the seamless processing of our transactions from July 2015 onwards, which is and should be at the forefront of everyone’s thinking.
FRANCESCA CARNEVALE: Mike, where are the pressure points?
MIKE CLARKE: For us, key pressures at the moment are where we don't know key information. There's a lot of things that are unknown still in terms of where we are. We are in a situation where we don't know what the price is going to be in some of the markets that are there in Wave 1; and that's an incredible challenge when we are trying to understand how we can pass benefits on to clients. When it comes down to harmonisation and certain processes in the corporate actions process, we still face challenges where not everything is fully defined in terms of how the market will operate. We have had to make assumptions and move forward make sure that come Day 1 of Wave 1 we are there and we continue to process our client’s business.
GUIDO WILLE: The place where we see most issues is uncertainty around the ability to implement what I called before this optional change enabled by T2S. The option is, for me to offer a service to market participants that is different in structure and in terms of access from today, and that's because for that we need information from other markets and Mike has just mentioned one important example,