T2S enters make-or-break phase as ECB doles out incentives for participation

T2S enters make-or-break phase as ECB doles out incentives for participation

The European Central Bank is to offer 'early bird' incentives to central securities depositories that sign up to the Target 2 Securities (T2S) platform, as the controversial project to streamline the Euro area's securities settlements systems reaches a critical make-or-break stage in its development.

The ECB is offering significant price cuts to CSDs that sign up to a newly minted Framework Agreement - the contract between the Eurosystem and the CSDs that will participate in T2S - by April 2012.

The Agreement, a 700-page legal document which covers all aspects of the project, including the parties' rights and obligations, the governance structure, testing and migration, liability and termination, service levels and the project plan, was finalised in mid-November, after two years of protracted negotiations between the project management team and recalcitrant CSDs.

In a status update, the ECB says: "The signature of the Framework Agreement is of the utmost importance for the success of the project. For this reason, in the T2S Advisory Group meeting at the end of November, the signature of the Framework Agreement by the CSDs will be given a "Red" risk assessment by the T2S Programme Office."

As an inducement, CSDs that decide to sign the contract early will benefit from reduced T2S prices, including a waiver of the one-off entry fee, fee-free access for the first three months and cut-price charges until the final migration wave is completed by end-2015.

Jean-Michel Godeffroy, chairman of the T2S Programme Board, has also moved to dismiss suggestions that T2S may have to raise its transaction fees from the 15 cent level specified in early drafts, after the Swiss National Bank and the Bank of England decided to step away from participation in the summer.

"The pricing model has been calibrated on the basis of conservative assumptions," he says. "The 15 cent commitment only requires 20% of volumes to be made up of non-euro currencies, which can still be achieved without the participation of the Swiss franc and the pound sterling."

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