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Like the single European currency and the Channel Tunnel, another ‘euro fantasy’ is now reality. T2S (TARGET2-Securities) is ambitious: a new, bespoke technology solution providing a best-of-breed settlement model. It will handle a substantial portion of European transaction volumes, transferring securities against payment across many different geographies.

We have seen a series of cross-border mergers of market infrastructures, creating the conditions for the development of a single clearing and settlement solution across markets. The ‘big but’ is that no consolidated technology solution was provided in the course of these mergers. This leaves largely the same fragmented pre-merger systems.

Today however, strong political will exists at European Commission, Parliament and Council level to reduce complexity and costs associated with EU post-trade market infrastructures. Combined with the CSD Regulation, this provides a significant success factor for delivery.

T2S will create opportunities to reduce costs and settlement fees and complexity associated with issuing securities, as well as managing liquidity across countries. The impact on market dynamics will be comparable to that of SEPA.

For those affected, the time has come to understand the implications and choices. This means focusing on the following key areas:

  • Look at the top and bottom line. Your organisation must assess the benefits T2S can bring to the business model
  • Understand the supply chain. It’s a critical cost and efficiency factor
  • Decide. Stay put? Or change provider? Stick with the status quo or consider alternative providers?
  • Change: assess, understand and prepare. Changes to back office systems are unavoidable
  • Clearly identify the possible change pathways. Alternative ways should be defined to execute and deliver required system changes

T2S is a game-changer. But the industry is in need of a new breed of solution provider. The key question now is: who will step up with a new service offering that drives T2S to be much more than a race to the bottom on fees?

What is your institution doing to understand and leverage T2S? Join the discussion.



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