ECB

One of the main stated aims of T2S (TARGET2Securities) was to reduce settlement costs across Europe. This is something that has, so far, not been achieved as the volumes simply do not exist on the system to achieve a reduction in the cost of settlement through T2S. The ECB is in full cost recovery mode at the moment, so economies of scale are vital – the more that goes into T2S, the more that will be gained from it.

When Euroclear announced last month that it’s ESES CSD’s, those under its umbrella in the Netherlands, Belgium and, most importantly, France, would not be able to migrate to the European Central Bank’s single settlement platform for Europe, T2S on time to join Wave 2 in March 2016, it raised a number of questions and came as a big setback for the flagship programme.

Euroclear has announced that its Belgian, Dutch and French CSDs will not be migrating to the ECBs flagship settlement platform, T2S (Target2-Securites) on 28 March 2016 as originally planned. This is the date for Wave 2 migration to the platform, following on from Wave 1 on 22 June 2015 and what some have termed Wave 1a on 31 August.

As we looked at last week, Northern Trust mapped out its response to T2S very early on, meaning that it had everything in place for when the pan-European settlement platform went live on 22 June.

Northern Trust surprised its competitors by announcing how it would manage the transition to T2S a good nine months before the first markets joined the new settlement platform on 22 June 2015. Its solution was a practical one, which recognises the fact T2S is essentially a settlement platform. It combines direct access to T2S settlement services, with a single asset-servicing agent. To access central bank money at the ECB, Northern Trust is using its full bank branch in Luxembourg to enter the euro-system via the Banque Centrale du Luxembourg.

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