Full market integration is the only way the European Central Bank’s securities settlement platform can live up to its original promise according to experts at Clearstream.

TARGET2-Securities, more commonly known as T2S, is a single, pan-European platform for securities settlement in central bank money.

It is one of the largest infrastructure projects launched by the Eurosystem so far and involves 20 central securities depositories (CSDs) and national banks.

The fourth migration wave occurred in February and meant Europe took a crucial step forward towards a harmonised settlement landscape.

The aim of T2S is to bring substantial benefits including price, risk reduction, collateral savings and back office streamlining to the European post-trading industry.

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

"The system works perfectly. But this does not mean that T2S has already achieved its ultimate goal," Marc Robert-Nicoud, chief executive of Clearstream Holding AG, wrote in a note this week. 

“The technical integration of the European settlement systems can only be a first step.

“Now, the integration on market level has to follow lead. This is the only way how T2S can live up to its original promise: to make cross-border settlement easier and more efficient for market participants.”

In recent years there have been many efforts to harmonize Europe’s financial markets.

Robert-Nicoud added that the current strained political relations between EU member states and third countries, nationalistic tendencies as well as the looming Brexit are subjecting the Capital Markets Union (CMU) project to severe stress.

Against the current political backdrop, he warned that it is key for policy makers and stakeholders to focus on the execution of CMU objectives.

“Initiatives such as the implementation of a new payment system TARGET2 (T2) and the securities settlement platform T2S show how pan-European cooperation can deliver progressive concrete solutions,” Robert-Nicoud added.

“Over the past ten years, more than 20 central securities depositories, national central banks and the European Central Bank all pulled together, in order to make the complex T2S project a success – and thereby set European standards.

“In order to fully harness the potential and wider benefits of such developments, we need to clear away some serious obstacles on the path to a Capital Markets Union in Europe.

“Further alignment will be necessary of the various European regulatory initiatives with the objectives of market integration initiatives such as T2S.”