Regulatory and operational costs factors may require regional CSDs to band together and overcome these new pressures.
Euroclear has now been granted six licenses for its various CSDs in Belgium, Finland, France, the Netherlands and Sweden.
The new connection aims to facilitate cross-border settlement in TARGET2 Securities (T2S) markets, giving easier access to Baltic securities.
Clearstream went live with the InvestorCSD model last year with the aim of providing banks a single access point to both T2S and its ICSD services.
Euroclear Bank will be able to offer clients the choice between euro settlement in both commercial bank and central bank money.
Clearstream’s current strategy has been focused on the continued rollout of its InvestorCSD, and the expansion of its investment fund services business.
The aim for the new CSD is to provide a harmonised platform for the issuance, trading, settlement and custody for commercial paper.
Sub-custodians are now forced to adapt their businesses to accommodate the competition posed by Investor CSD models.
Industry experts argued further consolidation in the custody industry could be likely, but doubted it will happen within the next 12 months to five years.
Earlier this month, the ECB granted SWIFT the first network licence enabling it to provide connectivity services to the ESMIG.