T2S Processing 45% of Total Volume
The European Central Bank said TARGET2-Securities is processing 45% of the total transaction volume expected after the end of full migration to the project to harmonize securities settlement in the Eurozone in 2017.
The third wave of migration took place at the weekend when five central securities depositories joined T2S. Euroclear Belgium, France and Nederland; VP Lux (Luxembourg) and VP Securities (Denmark) began operating on the platform on 12 September.
The single IT platform allows settlement in central bank money across borders, central securities depositories and currencies so there is no difference between domestic and cross-border transactions.
T2S began operating a year ago after being launched by the European Central Bank in 2008 to end fragmentation in securities settlement across the Eurozone as the cost of cross-border transactions could be 10 times more expensive than domestic transactions.
Euroclear said in a statement: “Through their migration to the T2S platform, Euroclear Belgium, Euroclear France and Euroclear Nederland connect approximately 40% of the total outstanding in corporate bonds, equities and funds, and 30% of government bonds for T2S markets.”
Euroclear Finland is due to join T2S as part of the final migration scheduled on 18 September 2017.
The CSD said the migration was completed according to plan with the ‘point of no return’ reached at 10:00 on Sunday 11 September. The process involved migrating 343,898 balances and 122,519 pending instructions from clients to T2S with very limited rejections.
Tim Howell, chief executive of the Euroclear group, said in a statement: “The T2S project is a significant undertaking for Europe’s financial community, bringing many opportunities for cross-border trading and enhanced liquidity management.”
VP Securities and VP Lux began preparatory work to join T2S in 2007.
Niels Olsen, chief executive of VP Securities, said in a statement that the firm is the first Nordic CSD with access to T2S. VP Securities will start with T2S issuance in euros as all the other participating CSDs are part of the Eurozone. However T2S is a multi-currency securities settlement platform and settlement in Danish krone is due in 2018.
“The ambitious plan to settle in Danish krone on T2S means that the Danish krone will be the first non-euro currency on the T2S platform,” added Olsen.
The fourth migration wave to T2S is planned for 6 February 2017 and will include Clearstream, Deutsche Börse’s CSD, which is the project’s largest market. Clearstream has held three migration weekend dress rehearsals, together with payments system Swift, the European Central Bank and other wave four CSDs.
“During these tests, all internal targets concerning performance, stability and data quality were fully achieved,” added Clearstream. “The results of these tests therefore confirm Clearstream’s technical readiness for T2S.”
Further dress rehearsals are for next month (without active customer participation) and December (with active customer participation). In addition a customer simulation period has been running from 25 July 2016 and will continue until 11 November 2016 before re-launching next year.
Tom Casteleyn, head of product management for custody, cash and foreign exchange at BNY Mellon said in a statement that a successful third migration would give the market confidence to push ahead with T2S initiatives and allow custodians to develop the products and services that will facilitate more efficient clearing, settlement and collateral management.
He said: “Wave three represents a tipping point which will enable the market to evaluate whether the T2S project justifies the investment companies have made in the platform.”
More on T2S:
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The analysis is based on transactions publicly reported by 30 European APAs and venues.