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Coming shortly: T2S targeting you

19 December 2006

The benefits that settlement harmonisation will give to the European securities financing industry are clear. But how harmonisation should be organised and who should provide it are not. Marek Sanders looks at the Eurosystem's proposal for its own single settlement platform: Target2-Securities.

Cross-border settlement in Europe's fragmented settlement infrastructure can be a complicated and costly affair. Harmonisation, when it arrives, can only be good for the securities financing industry, and market-led initiatives towards reaching it have begun.

But having waited since the coming of the euro in 1998, the Eurosystem is losing patience. In July the European Central Bank (ECB) proposed taking the wheel itself with Target2-Securities (T2S), a single platform for settlement of equity securities in central bank money for the Eurozone. It's the first time an official European entity has proposed a system that directly impacts the securities industry, and the market has, for the most part, warmly welcomed it.

There are many potential benefits to securities lending with T2S. By reducing the Giovannini barriers to cross-border settlement and clearing in Europe it will, if successfully implemented, offer reductions in settlement costs and risk levels, allowing lenders to increase yields...