Events | Capital Markets Forum
Tata Consultancy Services’ Capital Markets Forum, held on 26 June at the heart of Europe’s political centre, the Maison Grand-Place in Brussels, provided a wake-up call for fi nancial institutions not yet leveraging the TARGET2 Securities project. Delivering low-cost cross border settlement, T2S will break down a signifi cant barrier in the creation of a single European equities marketplace. At the forum, entitled TARGET2 – Securities – Will you be Ready? leaders of the T2S programme at various institutions gave the audience an insight into the next stages of development.
to T2S. The agreement for the euro has been fully signed up; the agreement for non-euro currencies has been signed by Denmark for whom it will come into effect in 2018. We do not expect other non-euro currencies to sign up for next month but there is a chance for a combined initiative in the Scandinavian region in the coming years. Timing is not such a concern for central banks to sign up; there is no deadline and the technical aspect is much less complex for them than for the CSDs.
The main countries not signed up are UK,
Norway, Sweden and Poland. While Switzerland’s CSD is participating, its central bank is not, and although the CSDs of Hungary and Romania have adapted to T2S, neither country’s central bank is considering putting their own currencies onto the platform at this stage.
In May the Council of the European Union’s Economic and Financial Affairs Committee, made up of the fi nance ministers from national governments, reiterated its support for the project to go ahead. The ECB is working closely with the European Commission on its CSD regulation. This is an important plan which will help deliver a harmonised framework between the different markets. It is increasing the legal safety of the CSDs who come to T2S around the specifi city of outsourcing by a private entity to a public entity. The regulation will also establish applicable law on securities accounts, and it will help to ensure a level playing fi eld among market participants. The harmonisation work is now centred on two
Best Execution | Autumn 2012
objectives: fi nalising the defi nition of the relevant standards; and the improvement of tools and procedures for monitoring the implementation of harmonisation standards by all project participants. This will help increasing the benefi ts of joining T2S, in particular for the custodian banks.
Axel Pierron, senior vice president for Celent’s securities & investments group: Leveraging T2S infrastructure – what are the options?
A study was conducted by Celent, late last year, to form
a picture of the costs and savings that T2S offers, based on the views of six major market participants. Overall, non-international CSDs and local custodians will face the biggest impact. Sub-custodians operating in a single country will have diffi culty in weathering the changes driven by T2S, so there will inevitably be consolidation amongst them. Those CSDs without an international business really need to move up the value chain to offer an asset servicing business or to become a utility. Three scenarios are projected for fi nancial intermediaries to change their post trade arrangements: 1. Doing nothing and relying on agent banks or an investor’s CSD services
2. Direct connectivity to T2S for settlement and using an external provider for asset servicing, either a custodian or a CSD
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