T2S must master Europe first warns BNY

Recent industry commentary has focused on whether T2S can be expanded into wider markets.
By Paul Walsh
Potential expansion plans for the Target 2 Securities (T2S) initiative must focus on additional areas of Europe before expanding into wider markets according to BNY Mellon.

Speaking to Global Custodian, head of product management for custody, cash and FX at BNY Mellon, Tom Casteleyn, and MD head of broker dealer services, Scott Coey, stressed that greater areas of Europe should be the primary focus as the project nears wave three.

However, recent industry comments have focused on the implementation of T2S-like systems in markets further afield such as Asia.

“The potential for T2S expansion is in the European countries that are not currently part of it. Currently Scandinavia and Eastern Europe are viewed as expansion areas,” said Casteleyn.

“This conversation is one we should be having in 18 months or so.”

Implemented by the Eurosystem and operated by four European central banks, T2S was created with the aim of creating a single, pan-European, harmonised settlement structure.

Earlier this week VP Securities and VP Lux, CSDs from Denmark and Luxembourg respectively, confirmed that all of their clients have indicated their readiness ahead of the third wave of T2S implementation due to take place on 12 September.

Euroclear similarly confirmed that its central securities depositories in Belgium, France and the Netherlands remain on track to migrate to the project on this deadline.

Coey also suggested that additional circumstances might prevent the initiative being rolled out into Asian and US markets.

“Over the last 18 months, discussions have taken place about the possibility of T2S moving into Asia but prior to 2006 nobody thought this would go beyond Europe.”

“There are also political and geographical challenges attached with Asia.

“Equally, the US already has a harmonised platform in place with a single currency, single core exchanges and single core central system,” said Coey.

Following the planned migration of wave three on September 12, wave four, representing around 40% of overall volumes and including German CSD Clearstream, is set to be implemented in February 2017.