This is the first post in a three-part series on TARGET2-Securities (T2S), providing background on this European initiative designed to reduce post-trade inefficiencies. I will also talk about the opportunities that Accenture sees for market players in the post-T2S landscape.
What is T2S?
T2S is a Pan-European securities settlement platform that will provide commoditized delivery-versus-payment (DVP) settlements services, in central bank money, to members who join on a single processing platform. T2S is neutral and borderless. It aims to reduce post-trade inefficiencies, harmonize settlement processes and foster competition.
How T2S works
The T2S platform enables DVP settlement in central bank money for in-scope transactions. It accomplishes this by outsourcing securities accounts from participating Central Securities Depositories (CSDs), as well as cash accounts from National Credit Banks (NCBs).
In-scope transactions for T2S include:
- Central bank money settlement transactions.
- Transactions of any asset class that have an International Security Identification Number (ISIN) code, are held at a T2S-participating CSD, can be settled in book-entry form and are fungible from the settlement perspective.
- DVP and Free of Payment (FOP) transactions.
Implications of T2S
The implementation of T2S has market players considering the investment required to connect. In addition, Accenture believes that market players should take the opportunity to rethink business models and define a long-term strategy for competitiveness in a post-T2S world.
Businesses should assess the long-term viability of their business offerings. Areas of focus should include:
- Settlement, custody, cash and collateral management services.
- Customer reporting capabilities.
- Client pricing models that account for increased competition, investments and business changes resulting from T2S implementation.
In the next two posts, I will discuss five key questions that market players should consider while preparing for T2S.
To learn more, download TARGET2-Securities: Are You on Target? (pdf; opens in a new window).