Participant Meeting 23.10.2018 Agenda Business facts & figures - - PowerPoint PPT Presentation

OeKB CSD Participant Meeting

23.10.2018

Agenda

• Business facts & figures
• Authorisation to act as CSD under CSDR
• T2S/SWIFT release
• Backup procedure: Instructions in case of disruption of the SWIFT connection in ICP-

mode

• Austrian bearer shares on MTFs
• Developments in the BMF FinTech advisory board relevant for OeKB CSD
• AOB

23.10.2018 2

Business Facts & Figures

Business Facts & Figures: as of 30.09.2018

23.10.2018 4

31.12.2017 31.01.2018 28.02.2018 31.03.2018 30.04.2018 31.05.2018 30.06.2018 31.07.2018 31.08.2018 30.09.2018 Issuer CSD 312,985 307,880 308,737 308,613 309,127 310,609 312,099 313,345 313,591 314,825 Investor CSD 15,508 14,791 13,821 13,866 14,243 14,224 14,141 13,632 13,431 13,718 Issuer CSD 282,231 289,284 283,914 281,241 294,983 299,912 294,518 302,940 297,549 298,839 Investor CSD 3,275 2,819 2,662 2,622 2,581 2,308 2,185 2,189 2,165 2,120 Issuer CSD 8,908 8,851 8,807 8,743 8,856 8,755 7,856 7,915 7,900 7,895 Investor CSD 420 411 403 402 402 387 394 397 396 397 Issuer CSD 14,510 14,998 15,061 14,372 14,875 15,021 14,078 14,467 15,021 14,763 Investor CSD 1,414 1,454 1,477 1,486 1,511 1,375 1,391 1,367 1,372 1,364 31.12.2017 31.01.2018 28.02.2018 31.03.2018 30.04.2018 31.05.2018 30.06.2018 31.07.2018 31.08.2018 30.09.2018 Domestic 56 56 55 54 54 54 54 54 53 53 Non-domestic 23 23 23 23 23 23 23 23 23 24 Number of Account Holders Number of securities categories Safekeeping Securities with Nominal Value in Euro million Unit-listed securities Market Value in Euro million Units in million Account Holders ØM 2018 01/ 2018 02/ 2018 03/ 2018 04/ 2018 05/ 2018 06/ 2018 07/ 2018 08/ 2018 09/2018 ∑ 01-09/ 2018 Intra 104,488 115,757 108,589 109,934 99,355 99,945 108,294 103,243 100,555 94,719 940,391 Cross/External 2,904 3,446 2,531 2,344 2,279 2,840 3,012 3,499 3,351 2,834 26,136 Settlement Number of Transactions

Authorisation to act as CSD under CSDR

23.10.2018 13

Authorisation to act as CSD under CSDR (1/2)

• OeKB CSD was granted the licence as CSD and the licence for the

provision of banking-type ancillary services according to EU Regulation ((EU) No. 909/2014 ("CSDR")) on 01.08.2018 by the Financial Market Authority (FMA).

• This confirms compliance with the comprehensive regulatory requirements

governing the organisation of CSDs in the EU and is a prerequisite for OeKB CSD to continue providing its core services to the Austrian capital market.

• The license comprises the following services:
• The 3 CSDR core services:
• Initial recording of securities in a book-entry system (notary service). Under this function we accept securities in order to

hold and administer them as Issuer CSD.

• Providing and maintaining securities accounts at the top tier level (central maintenance service). Under this function we

maintain securities accounts for credit institutions, investment firms, central securities depositories, central counterparties and special institutions.

• Operating a securities settlement system (settlement service). Under this function we process instructions (booking
• rders) placed by securities account and cash account holders. In this context, we are a system as defined by Section 2
• para. 2 of the Austrian Finality Act (Finalitätsgesetz).
• Non-banking-type ancillary service:
• Processing of corporate actions, including tax, general meetings.
• Collection of income for securities due.
• Banking-type ancillary service:
• Administration of cash accounts in Euro and common currencies on behalf of our clients.
• The purpose of the cash accounts is limited to our activities as a CSD.

23.10.2018 7

Authorisation to act as CSD under CSDR (2/2)

T2S/SWIFT Release

Q1 2018 Problem Release

PROD: 17/02/2018 Development and deployment: 22 PBs

Q2 2018 Major Release

PROD: 08/06/2018 Development and deployment: 18CRs + 53PBs

Q3 2018 Problem Release

PROD: 15/09/2018 Development and deployment: 26 PBs

Q4 2018 Minor Release

Start of Release Deployment to PROD: 17/11/2018 Last discussed scope: 6 Problem Tickets

23.10.2018 13

Eurosystem T2S Releases in 2018

DKK Migration*

* T2S introduces a new settlement currency „Danish Kroner (DKK)“ on the platform. The migration weekend starts on Friday, Oct. 26th, 2018 at 06:45 p.m. and ends on Saturday, Oct. 27th, 2018 according to the latest planning.

SWIFT Standards MT Release 2018 (1/2)

• The change of the SWIFT test environment to the new message syntax

table 2018 (Future Mode) was on Monday, September 24th, 2018.

• Our SWIFT communication channels will be closed:
• from Saturday, November 17th, 2018 from 04:00 p.m.
• to Sunday, November 18th, 2018 until 02:00 p.m.

During this time, we will not be able to accept any instructions. All instructions will be queued.

• SWIFT users will need to update their system to receive the updated

message formats, qualifiers and values.

23.10.2018 10

SWIFT Standards MT Release 2018 (2/2)

Details on the changes (only for settlement instructions)

New codes SWIF and SWIT:

• MT540-MT543: If the new codes SWIF or SWIT are used in field :22F::SETR (sequence

e-settlement details), the codes will be accepted but the instruction will be sent as TRAD to T2S and will be resent as TRAD as well.

• The new codes will also not be reported in MT548 messages.

New qualifier RSCH:

• The new qualifier RSCH for field :19A: will be accepted but disregarded for processing.
• The new qualifier will also not be reported in MT544-547 messages.

For further information, please refer to Annex 18 ‘User Manual Settlement SWIFT ISO 15022’

23.10.2018 11

Backup Procedure: Instructions in Case of Disruption of the SWIFT Connection in ICP-Mode

Backup Procedure: Instructions in Case of Disruption

• f the SWIFT Connection in ICP-Mode (1/3)

13 23.10.2018

23.10.2018

Backup Procedure: Instructions in Case of Disruption

• f the SWIFT Connection in ICP-Mode (2/3)

Methods for Issuing Instructions for Booking of Securities:

Backup Procedure: Instructions in Case of Disruption

• f the SWIFT Connection in ICP-Mode (3/3)
• Contractual condition

“Agreement on the use of the Filebox” between OeKB CSD and the securities account holder. Please refer to GTC, section 5.2 (4) – update available soon.

• Procedure and requirements

Please refer to “Agreement on the use of the Filebox”.

• Pricing

Flat fee for the provision of the Filebox: 500 EUR for each calendar year.

• Testing possibilities

23.10.2018 15

Austrian Bearer Shares on MTFs

Austrian Bearer Shares on MTFs (1/6)

History:

• The Bearer Share had been by far the dominant type of share when it came to stocks traded on any

market segment (either the top-tier-segment or market segments with less strict rules like Multilateral Trading Facilities). The Registered Share on the other hand was traditionally frequently used by issuers with a very limited number of shareholders, mostly „Familien-Aktiengesellschaften“.

• The FATF (Financial Action Task Force [on Money Laundering]), founded 1989 in Paris, in the meantime

gained importance and weight and issued about 40 so called “recommendations” (Soft Law). The FATF also issues lists of NCCT-countries (non-cooperative countries and territories).

• After the Lehmann-crisis authorities became generally more concerned and increasingly reacted to the

threat of money laundering and terrorism financing. „Bearer Shares“ started to be seen as problematic.

• In order to avoid being put on any list other than „white“ (grey, dark-grey or black) by the FATF, the

Austrian government reacted.

23.10.2018 17

Austrian Bearer Shares on MTFs (2/6)

• The GesRÄG 2011 (Gesellschaftsänderungsgesetz 2011) stipulated that the Registered Share is the
• rule. Exceptions form the rule would only be accepted for those shares whose issuers are listed on a

„regulated market“ (Note: we are only speaking of shares issued by Austrian issuers!)

• The term „regulated market“ was defined by § 3 AktG and currently is only applicable to the top-

segments of the Austrian Stock Exchange – not the so-called Third Market, a MTF (Multilateral Trading Facility) – which was originally designed as an entry-segment to the capital market.

• The law foresaw some exceptions for issuers who were already using the Third Market, but the outcome

was very harsh regarding the accessability of the Austrian capital market - as seen from the perspective of companies who wanted to grow or who had to grow in order to finance R&D or needed new equity or to access export markets.

23.10.2018 18

Austrian Bearer Shares on MTFs (3/6)

• Registered Shares are no problem for issuers with a small number of known investors (in small

companies shareholders are often relatives, partners, long-time relations). The need to have a share register and the additional prerequisite by the Austrian law that payments are only to be made to an investor‘s account registered in the share register (!) made it very impractical to access the capital market for companies who wanted to grow their investors beyond family and friends. Those companies are mainly SME-sized and not prepared/fit for the regulated market with its strict and expensive rules.

• The outcome was that for about seven years no Austrian company was able to enter the Third Market.

The entry market was effectively closed to domestic issuers (Note: foreign issuers on the other hand could use the MTF, they were not restricted by the GesRÄG 2011).

• Many attempts had been made since 2011 to resolve the situation. One solution would have been to

create a nation-wide share register, another - partially - solution would have been to allow payments along the chain of deposit holders. Experts were also looking at Germany, where the CASCADE RS system dealt with a similar problem – although imperfectly so.

23.10.2018 19

Austrian Bearer Shares on MTFs (4/6)

• In Germany – coming from a very similar history of dominace of Bearer Shares in the past

– the salvation came with the „Aktienrechtsreform“, becoming effective on December 31st, 2015: The issuer can freely choose if its shares will be either Bearer Shares

• r Registered Shares if some prerequisites are fulfilled:
• The shares have to be deposited with a CSD
• The shares have to be represented by a Global Certificate
• The shares have to be immobilized.
• Several attempts were made to convince the Austrian government to follow the German

example in order to re-open the entry-level-market in Vienna for Austrian issuers.

• The problem never made it to the top of the agenda in recent years though. It was

argued that FATF would not like Austria to dilute the commitment to Registered Shares.

23.10.2018 20

Austrian Bearer Shares on MTFs (5/6)

• Finally, with the agenda of the new Austrian government to strengthen the capital

market, a new dynamic emerged. In September 2018, a draft for an amendment of § 10 of the Austrian AktG was issued. The draft now grants the issuer the choice to issue Bearer Shares if the shares are:

• Listed on a regulated stock exchange (defined by § 3 AktG) or – and this is new (!) – the

shares are (to be) traded at an MTF (multilateral trading system).

• Represented by one (or several) Global Certificates and they
• Have to be deposited with a CSD („immobilized“)
• This means that from the time the new amendment will come into force (planned for

early 2019) Austrian companies will (again, after seven years) be able to access the entry level market in Vienna for equity by issuing Bearer Shares (for which the Global Certificate has to be deposited with a CSD).

23.10.2018 21

Austrian Bearer Shares on MTFs (6/6)

Overview of the market structure at the Vienna Stock Exchange (WBAG)

source: https://www.wienerborse.at/emittenten/boersegang-ipo/rechtliche-voraussetzungen/:

WBAG states on its website that the market structure/segmentation will be streamlined in 2019. There will be a new segment called direct market plus.

23.10.2018 22

Developments in the BMF FinTech Advisory Board relevant for OeKB CSD

Developments in the BMF FinTech Advisory Board relevant for OeKB CSD

• Sub working Group „Scotty“
• Definition of the potential legal basis for dematerialised securities
• Creation of an Austrian debenture bond act (Schuldverschreibungsgesetz)
• Sub working Group ICO/Token
• Among other, definition of the regulatory framework for Security/Investment Token

23.10.2018 24

AOB

Holiday Calendar 2019

Date Day Public Holiday OeKB CSD Service Center open OeKB CSD Settlement Vienna Stock Exchange Trading day 01/01 Tue. New Year's Day No No No 06/01 Sun. Epiphany No No No 19/04 Fri. Good Friday No No No 22/04 Mon. Easter Monday No No No 01/05 Wed. Labour Day No Yes (only FOP) No 30/05 Thu. Ascension Day Yes Yes Yes 10/06 Mon. Whit Monday Yes Yes No 20/06 Thu. Corpus Christi Yes Yes Yes 15/08 Thu. Assumption Day Yes Yes Yes 26/10 Sat. National Holiday No No No 01/11 Fri. All Saints' Day Yes Yes Yes 08/12 Sun. Immaculate Conception No No No 24/12 Tue. Christmas Eve Yes Yes No 25/12 Wed. Christmas Day No No No 26/12 Thu.

• St. Stephen's Day

No No No 31/12 Tue. New Year's Eve Yes Yes No

23.10.2018 26

Shareholder Rights Directive

23.10.2018 27

Listed issuers have the right to identify shareholders, intermediaries have to cooperate in this process

• Directive (EU) 2017/828 of the European Parliament and of the Council of May 17th, 2017 amending Directive

2007/36/EC as regards the encouragement of long-term shareholder engagement

• Facilitating interaction between companies and shareholders
• Transparency of institutional investors, asset managers and proxy advisors
• Remuneration and related party transactions
• Commission Implementing Regulation (EU) 2018/1212 of September 3rd, 2018 laying down minimum

requirements implementing the provisions of Directive 2007/36/EC of the European Parliament and of the Council as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights

• This Regulation aims to prevent the diverging implementation of the provisions of Directive 2007/36/EC
• Status: in the process of being implemented in national law. Deadline: June 2019
• Status Assessment: Several countries have not yet completed their homework. „Technical“ questions have been
• vershadowed by political issues (like say-on-pay, related parties, etc.). This assessment is based on ECSDA‘s

information on the ongoing process (i.e. on Oct. 11th, 2108 „Table on Shareholder Rights Implementing Regulation”)

sources: https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32017L0828, https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1536270703333&uri=CELEX:32018R1212

Settlement Discipline Regime (1/2)

23.10.2018 28

• Approval/publication of relevant Level 2 texts
• The RTS on Settlement Discipline were published on the September13th, 2018 of in the Official

Journal of the European Union

• “Stable assumptions”
• Informal clarifications / guidance from Regulators that are to be published in Q&As or Guidelines in a

second step. The bulk of regulatory clarifications has been provided between 06 and 09/2018.

• As a result, the “earliest” release to consider for the implementation of a penalty mechanism in the

IT platform T2S is T2S-Release 4.2, planned in November 2020.

Source: ECB

• OeKB CSD’s penalty mechanism will be based on the penalty mechanism of the IT-

platform T2S. OeKB CSD will inform the participants about the implementation including the plan in due course.

Settlement Discipline Regime (2/2)

• Compliance gap
• As the RTS on Settlement Discipline enter into force 24 months after publication,

this creates a 2 months compliance gap for CSDs as the T2S penalty mechanism will be implemented in November 2020

Source: ECB

23.10.2018 29

Timeline

Implementation

• f T2S penalty

mechanism

Entry into force of RTS on Settlement Discipline

September 2020 November 2020

2 months regulatory compliance gap

Thank you for your kind attention!