Nine central securities depositories (CSDs) in Europe, including major players such as Clearstream in Germany, have signed up to take part in the European Central Bank's (ECB) long-running Target 2 Securities (T2S) platform, which is intended to streamline securities settlement across the Eurozone, but is still proving controversial with many CSDs still not signing up.
The contract with the nine initial CSDs signed up this week, covering Greece, Spain, Romania, Luxembourg, Italy, Belgium and Denmark, plus Germany, account for roughly two thirds of the settlement volumes in the euro area but with London – where many trades are processed – and other international markets remaining outside T2S attracting further volume may be difficult.
The contract covers the legal relationship between the Eurosystem and each CSD participating in T2S. It was finalised in November last year prior to this week’s official signing, after the ECB announced a delay at last year’s Sibos conference in Toronto, Canada in the autumn, following two years of protracted negotiations between the project management team and recalcitrant CSDs. The extra time appears to have ironed out some objections, but by no means all.
Significant price cuts are understood to have been offered to the nine CSDs signed up this week, but nonetheless 22 of Europe's CSDs remain outside the agreement. The final extended deadline for the ‘nay-sayers’ to sign up is the end of June, with a projected ‘go live’ date of 2015 for T2S. As pricing is dependent upon volumes and economies-of-scale savings, however, the ECB may struggle in the summer if others do not sign up quickly and it fails to attract more international volumes.
By Neil Ainger