T2S about to see migration ‘big bang’

State Street’s MD says market impact not be felt until the forthcoming waves have migrated.
By Paul Walsh
The true impact of the Target2Securities (T2S) initiative will only be felt once the next wave of migration is complete, according to a State Street managing director.

Speaking to Global Custodian, Swen Werner suggested that the effect on settlement efficiency would be felt when larger CSDs had migrated.

Wave three of the project is due to take place on September 12 with Euroclear ESES markets (France, Netherlands and Belgium) due to migrate on this date along with CSDs from Denmark and Luxembourg.

Wave four, which represents around 40% of overall volumes, includes CSDs from Germany, Slovakia and Slovenia and is set to migrate in February 2017.

“T2S has now been in operation for a year but the biggest impact will be felt once the ESES markets migrate because these are the markets where the CSDs have a lot of cross border activity,” said Werner.

“In terms of addressing cross border settlement efficiency within a CSD environment, we haven’t seen much yet because the relevant players are not onboard.”

“We are waiting for the big bang having gone gradually at first.”

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.

It has since faced scrutiny from industry participants.

Global Custodian reported last month that Clearstream had experienced issues in its T2S implementation testing that were later confirmed to be external and would not affect its migration schedule.

Early this month HSBC‘s head of regulatory affairs Henry Raschen also warned that T2S participants may experience an initial increase in domestic settlement costs.