The on-going TARGET2 Securities (T2S) project will not be able to handle corporate actions and may conflict with existing tax law according to the European Central Bank (ECB).
Speaking at a joint ECB and European Commission conference in Frankfurt, Yves Mersch, member of the executive board of the ECB suggested certain issues with the T2S initiative remain as the next wave of the project approaches.
“T2S has significantly contributed to the integration of post-trade processes across all participating markets,” said Mersch.
“Nevertheless, some gaps in compliance remain, for example in the area of corporate actions. These are complex business processes for asset servicing, which involve rules and procedures developed by a range of different actors.
“In addition, the T2S harmonisation agenda has identified a number of regulatory and legal barriers to post-trade harmonisation that fall under the regulatory agenda.
“These relate, among others, to issues such as conflict of law and withholding tax procedures, which are expected to be tackled this year.”
Initially proposed in 2006, the T2S initiative was designed to create a harmonised European settlement platform with settlement costs proposed at a maximum of 15 cents per settlement.
Wave four of the initiative is due to take place on 6 February and will see 40% of overall volumes migrate onto the ECB’s platform.
Clearstream Banking Frankfurt along with CSDs from Slovakia and Slovenia are all set to migrate in the next wave.
Mersch also stated that any potential post-trade issues would be addressed by the newly created Advisory Group on Market Infrastructure for Securities and Collateral as well as through the on-going Capital Markets Union (CMU) project.