Wave 4 migration puts T2S concerns to bed

Wave 4 migration puts T2S concerns to bed

The latest migration to T2S, the European Central Bank’s settlement platform, means the project is back on course to deliver the wide range of benefits that had been promised, experts claim.

Wave 4, the largest phase of the entire project, occurred over the weekend and involved six central securities depositories (CSDs), including Clearstream Frankfurt and LuxCSD, joining the platform. CSDs in Hungary, Slovenia, Slovakia and Austria also took part.

First conceived in 2008, T2S is designed to lower costs for cross-border settlements in European securities. It also eliminates the need for banks to hold collateral and liquidity buffers in silos across EU markets.

Delays have damaged faith in the project while connection costs have been high and transaction volumes well below what many had expected.

However, this weekend’s migration means that that more than 80% of the European securities migrating to T2S now settle on the platform.

“This successful stage of the project puts to bed any concerns raised in Wave 4 market testing that caused some institutions to question the benefits T2S will deliver,” said Tom Casteleyn, head of product management for custody, cash and FX at BNY Mellon.

“With most major CSDs now directly connected to T2S, it is time for the industry to focus on realising the settlement efficiencies and collateral management opportunities the new market infrastructure offers."

Equally, Casteleyn said firms should not lose sight of the fact that some of the markets that have already converted to T2S have not yet fully conformed to the T2S harmonization standards. 

"Most of these loose ends relate to corporate actions and market claims, and need to be tied up in order to generate some of the project’s expected efficiencies," he added.

Clearsteam Frankfurt migration about 40% to the overall volume on the ECB's settlement platform when it joined this weekend.

Euroclear Belgium, Euroclear France and Euroclear Nederland connected in September last year, also adding around 40% in corporate bonds, equities and funds for T2S markets.

Euroclear Finland will join as part of the final wave scheduled for 18 September 2017.

Berthold Kracke, chief executive of Clearstream Banking AG, said the conclusion of the fourth T2S migration wave “brings T2S very close to the finishing line”.

“As of 6 February, our clients will be able to consolidate all eligible assets at our CSD Clearstream.

“Customers will be able to benefit from Clearstream's T2S offering, which enables them to profit from unique economies of scale as well as improved liquidity and collateral management via the new platform," he added.

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