Seizing the opportunity amid geopolitical shifts
The current geopolitical shifts present a unique opportunity for Europe. Often perceived as an outdated, complex, low-growth area, Europe can – and should – leverage the present turmoil to position itself as a prime destination for doing business and driving innovation. To achieve this swiftly, Europe must significantly boost investment to stimulate growth.
Addressing the savings and investment mismatch in the European Capital Markets
Capital markets align investment needs with savings, enabling innovation and business expansion and thus boosting economic productivity. Europe’s capital markets must be able to make use of the savings of the European population to ignite a powerful and rapid transformation.
Fortunately, Europe boasts substantial savings – over €35 trillion – yet several significant challenges must be addressed. A mere 30% of European savings are channelled into capital markets, with the remainder languishing in cash deposits.
Of these savings, a substantial portion is invested outside Europe, with €10 trillion allocated to US assets.
Additionally, when savings do reach European capital markets, they tend to remain within domestic boundaries; for example, 60% of retail equity investments are domestic, meaning savings do not always support the most promising projects.
Lastly, Europe also struggles to attract savings from outside the continent, missing the opportunity to utilise them for investments.
Addressing these issues is the primary goal of the Savings and Investments Union, and policymakers are rightly prioritising this. However, as the ancient Greeks knew, “the gods help those who help themselves”. Finance in general, and the post-trade industry in particular, must not only advocate for public intervention, but must also take proactive measures independently.
Post-trade fragmentation: overcoming geographical barriers
As Alberto Giovannini, author of the famous Giovannini Report, noted 25 years ago: “Post-trade is like a square, where people meet, and one person brings the cash, and the other person brings the goods.” He firmly believed that a truly integrated European market requires a properly integrated ‘square’, or post-trade system.
Despite numerous reports and efforts to address post-trade fragmentation over the past 25 years, the persistence of these issues underscores the accuracy of his insight. Europe’s ‘square’ remains geographically fragmented. Participants in the European securities industry still organise their activities around the different markets, essentially meaning countries. In each country, different asset classes such as equities, government bonds, corporate bonds or structured investment products are issued, held, and settled in that country’s domestic central securities depositories (CSDs).
There have been many attempts to overcome this fragmentation. Harmonisation efforts and the implementation of Target2-Securities are notable examples.
Other initiatives include offshore issuance models for specific asset classes, such as international ETFs. These have simplified processes for certain issuers but have not really addressed the challenges of distribution networks, which continue to prefer to connect to their domestic CSDs and do not operate on Target2-Securities, thereby creating a new form of fragmentation.
So, what action can we take now?
Euronext’s strategic actions: implementing key initiatives for market integration
At Euronext, we are focused on a select set of strategic actions and are actively implementing them.
Maximising the potential of Target2-Securities
The powerful policy concept behind Target2-Securities was to move Europe to a single settlement platform.
However, as long as some CSDs maintain proprietary settlement platforms outside Target2-Securities, settlement and inventory management will continue to face friction.
We therefore plan to move Euronext Securities Copenhagen fully to T2S by 2027 and we advocate for Norway to join T2S as soon as practically possible. We call for other CSDs to follow the same logic.
Maximising T2S also means enhancing the platform itself, through measures such as extended operating hours, lower fees (especially for retail accounts), and improving the ability to settle in non-domestic currencies, such as US dollars, through Target2-Securtities participating CSDs.
Strategic investments to modernise the tech stack supporting European markets
The goal: make the infrastructure underpinning European markets future-proof. There are no high-performing capital markets without a high-performing post-trade infrastructure.
At Euronext, we are heavily investing in a new harmonised CSD platform through our Convergence programme. The new platform will be rolled out across Europe to allow clients to benefit from the latest technologies and optimise their operations.
Consolidation to increase integration benefits
We are committed to enabling market participants to overcome geographical fragmentation.
This is the rationale behind our decision to consolidate the settlement of the French, Dutch, Italian and Belgian markets in Euronext Securities Milan, announced in March this year. From September 2026, clients will, for the first time, be able to manage settlement for all four markets in one place.
We will achieve this by opening the closed links between domestic trading and domestic settlement in each of these countries’ exchanges. This integration will allow clients to streamline their operations, secure better pricing, and, for local players, to expand their business reach across borders.
This approach tackles geographical fragmentation in a concrete way, while avoiding the risk of creating what some might call ‘functional’ fragmentation, where trades executed on Euronext venues settle in one CSD, while trades executed on other venues or bilaterally would settle in another (CSD).
Indeed, we expect non-Euronext trading and clearing venues to respect clients’ choice to settle in Euronext Securities and allow them to concentrate their activity accordingly.
What’s more, we will bring true competition into this layer of infrastructure. The key enabler here is Target2-Securities: thanks to its automatic and cost-neutral realignment functionality, clients will be able to settle and safekeep assets in Euronext Securities, even if other participants use different T2S CSDs, without any extra friction or fragmentation. As the largest provider of cross-border settlement volumes in T2S, we know this model works, in reality and at scale.
A truly European CSD model
By September 2026, clients will, for the first time, have a credible and competitive alternative to the purely domestic CSD settlement model for equities on a number of markets, leading to significant operational and financial savings.
This is just a first step towards a truly European CSD model, one that European clients deserve. In this model, not only custody and settlement, but also issuance activities can be centralised across markets within a single CSD, delivering scale benefits for the entire market.
In 2015, at the very beginning of the Capital Markets Union, Lord Jonathan Hill, then EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, said: “[We must] make sure we strike the best possible balance between managing risk and fostering growth…. When I said we need stability, I do not mean the stability of the graveyard.”
Ten years later, we now have the opportunity to foster growth and make the Savings and Investments Union a real success, helping issuers and investors grasp its multiple benefits!