T2S was conceived by the ECB as a mechanism for cutting cross-border trading costs through the creation of a streamlined pan-European platform for securities settlement against central bank money.

However, the project has been dogged by technical delays and wrangles with market participants over pricing and governance issues, which have set back the deadline for its introduction to beyond 2013.

In its latest update, the ECB says fees charged for using the system will be aimed at covering only the costs of developing and running T2S, and there will be no profit margin.

Assuming that the central banks of Denmark, Sweden and Norway come on board, the T2S solution could offer a DvP settlement price of 20 cents, says the ECB. If all of the 30 European central securities depositories (CSDs) that have signed the T2S Memorandum of Understanding join T2S, including the respective currencies, the fee for DvP settlement charged by T2S would amount to only 13 cents per settlement instruction.

The fees reflect an assessment of probable volumes crossing the platform and the latest cost calculations for constructing and running the scheme.

In 2008, total T2S development costs were calculated at €203 million with annual maintenance and running costs of between €65 million and €104 million. The latest estimates show an upward trend, as delays and user demands for more functionality inflate the budget. The ECB now expects costs of €256.4 million for the development of T2S, and €50.7 million on average per year during the running phase.

The central bank says its own costs as co-ordinator of the project are are expected to amount to €90.2 million over the development phase and €9.3 million on average per year. In addition, interest costs for the financing of T2S are currently estimated at €67.5 million with a contingency provision of €36 million.

Despite the cost over-run, the ECB insists the efficiency gains from the new system will be significant, reflecting a 90% reduction in cross-border settlement fees for market users. In addition, says the ECB, less than half of the expected annual T2S benefits would be generated from savings on CSD settlement fees, with the rest arising from the streamlining of back-office functions and collateral savings at the user level.