EuroCCP chief: T2S savings in collateral, not settlement

Cost savings under Target2 Securities (T2S) will primarily benefit collateral managers, according to the chief executive officer of EuroCCP.

GC Legend Diana Chan suggested that the market may have evolved away from those looking to save money on reduced settlement costs through the initiative.

“There are still people who are not convinced by the cost reduction brought about by T2S. On infrastructure projects such as this, the beneficiaries and those who have to pay for it are not always the same group, said Chan.”

“Those who will feel the immediate benefit from it are those who are moving collateral as these firms will find this much easier now. Those who pay for settlement may at the moment find it difficult to justify the investment, if they don’t take into account the benefits of higher efficiency.”

Initially proposed in 2006 by the ECB, the T2S initiative was designed to create a harmonised European settlement platform with settlement costs proposed at a maximum of 15 cents per settlement.

In February this year, Clearstream chairman Jeffrey Tessler suggested that the proposed settlement savings would be harder to achieve than initially thought.

The project has also been hit by delays with its final implementation date not scheduled until February 2017.

Chan suggests that those involved with the project in the collateral space, since its infancy would also reap the benefits as it nears full implementation.

“Firms that started to build a collateral management capability when the T2S project was first announced will have had a considerable head start compared to those who did not have the foresight.”