On the day of announcing its full year results, the London Stock Exchange Group (LSEG) said it wants to focus on capturing more of the €800 million settlement market in the eurozone as it prepares for TARGET-2 Securities (T2S), the harmonized settlement platform for securities in Europe. In an interview with Global Custodian, Paolo Cittadini, CEO of Monte Titoli, the LSEG’s CSD subsidiary outlines how it will do this.
What are the current drivers of your business?
PC: Often people aren’t aware of how broad-based and international Monte Titoli already is. We manage more than 40,000 financial instruments worth €3.2 trillion under custody, we are connected with about 400 intermediaries, nine trading platforms, seven CCPs, and nine CSDs. Recently we have been given the highest AA rating currently applied to a CSD by Thomas Murray. It’s that breadth that makes the business so interesting, and means we have a significant foundation for further growth.
What is the strategy of the company given the upcoming changes in the post trade space, particularly T2S?
PC: We’re at a crucial turning point for structural and regulatory development in the post trade industry. T2S is going to increase competition among CSDs and custodian banks at the international level; as the largest CSD in Wave 1, Monte Titoli will look to pioneer the new European platform by ushering in a wide range of directly and indirectly connected participants to the new environment. We are also drawing on the expertise throughout London Stock Exchange Group, in capital formation, intellectual property and technology, to inspire new Post Trade product developments across Europe.
What is your approach (in terms of connectivity) to T2S and what will your service proposition be under the new framework?
PC: We are working very closely with the ECB to ensure a smooth transition, and to ensure the benefits of T2S can be accessed from day one. Furthermore Monte Titoli is paving the way for the implementation of the new European platform updating in advance all the services to the standards provided by the Corporate Action Joint Working Group, in view of T2S corporate actions standards.
What share of the settlement market would you like to capture under T2S?
PC: We believe that T2S will become the core base for a wider range of services in the post trade area including asset services and collateral management. Our leadership in the T2S project signals our seriousness as a modern ICSD, and puts us in a strong position in terms of attracting new business. Separately, we’re really excited by some of the products we’re developing. That combination of integrity and innovation is what makes us confident for the future.
What is your strategy in terms of alliances and partnerships in the post trade space?
PC: We already act as a single gateway to a certain number of securities markets, and we have a direct link with the US national CSD. This is a strong foundation on which to operate under the new framework. Clearly, the arrival of LCH.Clearnet into London Stock Exchange Group gives us exposure and connections to a huge pool of expertise and experience in the post trade space. For now, we’re focussed on ensuring we offer the best service in the context of the T2S project, and continue to work closely with customers on our new product pipeline.
How are you preparing for other infrastructure market reforms such as CSD-R?
PC: We are operating in an environment of enormous change with almost unprecedented levels of reform across settlement, custody and asset servicing, such as CSD-R. The key legislation emerging from Europe emphasizes the need to reduce risk, introduce greater efficiency and open up competition for participants in the new world. These principles are at the heart of our on-going innovation as a modern ICSD.
Where does Monte Titoli see itself in the future, given the regulatory change?
PC: The regulatory change clearly presents large-scale opportunity. Being able to leverage the expertise, connections and resources of the wider Group, and combining it with our strong foundations and leading position in the T2S project will put us in a fantastic position to seize opportunities, grow our market share, and become a true leader in the ICSD space. We’re very excited about the future.