TARGET2 Securities

T2S (TARGET2-Securities) is a new European securities settlement engine which aims to offer centralised delivery-versus-payment (DvP) settlement in central bank funds across all European securities markets. It is important to take note of the fact that T2S is not a central securities depository (CSD), but a platform which will enable CSDs to increase their competitiveness.

After market consultations and a decision by the Governing Council of the European Central Bank (ECB), the project was launched in 2008 and the platform is scheduled to start operations in 2015. The T2S Framework Agreement, negotiated between CSDs and the Eurosystem, has been signed by 24 CSDs which will migrate to the T2S platform in four waves between June 2015 and February 2017.

The fundamental objective of the T2S project is to integrate and harmonise the highly fragmented securities settlement infrastructure in Europe. It aims to reduce the costs of cross-border securities settlement and to increase competition and choice amongst providers of post-trading services in Europe. It will therefore be a critical step forward in the creation of the single market for financial services in the European Union (EU).

The development and operation of T2S was assigned to four central banks of the Eurosystem – those of France, Germany, Italy and Spain. The project is being coordinated by the ECB. The IT platform will be owned and operated by the Eurosystem. Technical details of the project are available at the ECB T2S project website.

One of the objectives of T2S is to reduce the cost of securities settlement in Europe, in particular for transactions across EU countries, which can be ten times more expensive than domestic transactions. In addition, banks will be able to optimise their collateral (finance) and liquidity management. The T2S settlement platform is also a step towards a single market for financial services. The T2S project will be a catalyst for further harmonisation of post-trade practices and regulations across Europe. Significant progress has already been made by the T2S governance bodies, composed of industry experts, on harmonisation of instructions management and settlement processes, as well as on the processing of corporate actions on unsettled transactions. As a result of reduced settlement costs, increased competition and greater harmonisation, T2S is expected to have a positive impact on European economic growth. The lower costs of settlement, and potentially the costs for other post-trade services, are expected to be passed on to investors. Furthermore, by making it easier and less costly to access securities in other EU countries, investors could benefit from more diversified bond and equity portfolios. In addition, issuers will gain access to a more diversified investor base.

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Wikipedia