Second T2S wave may be disappointment says BNY Mellon

The second wave of T2S implementation may be anticlimactic for participants wishing to recover costs according to BNY Mellon.

Tom Casteleyn, head of product management for custody, cash and FX suggests that plans to recoup costs in wave two may be unsuccessful causing many participants to question the project.

“An anticlimactic wave two could cause market participants to question the short to medium term benefits associated with T2S, in which they have invested significant resources,“ said Casteleyn.

“The harmonisation benefits that the T2S project promotes will remain largely unobtainable for many companies as the CSDs joining the platform under waves one and two generate little or no cross- border settlement.”

“While wave two represents an incremental step towards full harmonisation, there is still some way to go before companies can derive the benefits to compensate for upgrades they are making to their infrastructure.”

The T2S platform is a Eurosystem-led initiative designed to create a harmonised European settlement platform with the second wave set to go live on March 28.

Latest T2S developments have generated controversy as Clearstream chairman Jeffrey Tessler suggested proposed initial savings on settlement costs would be harder to achieve than initially thought.

In addition earlier this month, Alex Dockx, T2S program director at JP Morgan, claimed that current infrastructure costs of T2S were unsustainable.

BNY Mellon’s Casteleyn also suggested that market participants would have to wait longer to see T2S’s proposed benefits.

“The question of costs versus benefits bears importance not only for financial companies, but also the ECB, which is trying to recuperate the costs of the project through the operation of the platform.”



“For all industry participants that are adapting their systems to incorporate T2S, there will be a longer wait before the benefits emerge from this investment. They will have to adapt their conversion timelines and set new deadlines in response to changes to the wider market’s T2S timetable,” Casteleyn added.