The launch of T2S will be delayed until 2015, Jean-Michel Godeffroy, director general of the European Central Bank and head of the T2S project, revealed in a panel at Sibos.
Initially scheduled to go live in 2013, the latest delay pushes the launch of the platform from 2014 to some time in 2015.
The pan-European settlement platform has been a hot topic at the conference. Custodians and market infrastructures have discussed the controversial T2S project at length, although few are willing to go so far as to criticize the platform.
Rumors have been swirling lately that T2S would not happen at all, although the claims appear to be based on pure speculation. Market players, off the record, have said the track record of Mario Draghi currently governor of the Italian central bank and the upcoming president of the European Central Bank suggests he is less than supportive of T2S.
It seems to me that Draghi is not a fan of the ECB engaging in extracurricular activity, according to an anonymous source in the custody business. His hostile attitude, for example, to the idea of sterilization financed by ECB debt, an idea embraced by Trichet, suggests that he is likely to adopt a narrower interpretation of monetary policy than his predecessor.
However, as governor of the Italian central bank, Draghi voted in support of the platform. Banca d’Italia is one of the four central banks charged with developing T2S.
My reading is that there would need to be some kind of game changer with a clear face-saving strategy for the ECB before even a skeptical president would consider cutting and running, the source says.
The ECB has set a deadline of next month for releasing the framework of T2S, although it looks increasingly unlikely that it will meet that deadline either. The framework itself has been delayed once before: The initial deadline was July this year.
Apart from the potential lack of support from the upcoming head of the ECB, there is other evidence T2S may not pan out. If large markets such as the United Kingdom and Sweden do not join the platform, which is believed to be the case, the resulting volume levels and the pricing 0.15 per transaction may be such that T2S will cost more to run than it will earn in revenue.
Dominic Hobson, editor in chief of Global Custodian, deduced in a Thomas Murray report that T2S will cost as much as 1 billion to develop.
However, those involved in the development of the project say the pricing was established with the assumption that England would not join.
Knowing when we have started the project on this side to develop T2S we made the assumption that the UK market would not be in anyway, says Alain Pochet, head of Banking Services for BNP Paribas Securities Services. When ECB promised settlement price around 15 cents per transaction, it was without the UK volumes. Adding UK could be better, but not adding them is not sanctioning the project.
Pochet adds that around 150 million has already been spent developing the project, so it is unlikely the ECB would pull back now, even under a new leadership.
T2S is still unclear to the market, says Philip Brown, head of client relations for Europe and the Americas at Clearstream. The market is looking for a vision about where we are going to go. What wed hope is over the course of the rest of this year wed get some of that clarity, because a lot of the organizations in the market who are our clients are thinking about how they invest their money to get ready for T2S, and they need some clarity on it.
Click here for all of Global Custodian’s Sibos 2011 coverage.
(CG)