Major banks are noticing liquidity benefits from T2S, according to KPMG, despite yet seeing a reduction in settlement costs.

Vincent Koller, a Luxembourg-based partner at the tax and advisory firm, says banks operating on the platform have noticed lower liquidity requirements to settle transactions.

“This is due to highly efficient optimisation algorithms and dedicated functionalities (single cash account for multiple markets, autocollateralisation, limit management, and others)," he wrote in a note to clients.

One of the benefits of T2S should be a reduction in settlement costs.

However, Koller reckons this will probably not materialise for some time still, due to delays in the project which may increase the settlement fees for a period.

“Not to mention the fact that the institutions already on the platform have heavily invested, and these investments still need to be recovered,” he added.

T2S, short for Target2-Securities, is a pan-European platform for securities settlement in central bank money that went live in June 2015.

The aim of T2S is to standardise and commoditise settlement in Europe through a shared settlement platform operated by the Eurosystem.

As of the present moment three migration waves have happened and two more, containing some of the biggest markets, in particular Germany with 40% of the total volume, are still to come.

KPMG expects competition between CSDs and global custodians will increase in the coming years due to the level playing field introduced by the platform in conjunction with the CSD regulation.

“We also expect to see the development of true investor CSD offerings leveraging the capability to perform cross-border settlement at the same cost as domestic settlements,” Koller added.

“Collateral movements will be easier with a common platform in Europe compared to before, and on this front ICSDs and large CSDs will compete more and more with the usual suspects operating in the collateral management space.”