Target 2 Securities: Are You on Target?

Read this report to learn the implications of TARGET2-Securities (T2S) on the European clearing and settlement industry—and key things that organizations should consider for a post-T2S strategy.

In Europe, the clearing and settlement industry continues to face the “Giovanni Barriers”—tax, legal and other considerations that result in a fragmented landscape. Consequently, the TARGET2-Securities (T2S) initiative is designed to reduce inefficiencies in post-trade areas and make the European Union more competitive.

Since its announcement in 2006, the T2S initiative has faced two delays and a doubling of development costs. In light of these challenges, what are five questions that market players need to ask—and what should they consider as they strategize for a post-T2S landscape? Read this report to learn Accenture’s analysis and recommendations.

TARGET2-Securities (T2S) is a pan-European securities settlement platform that is designed to reduce post-trade inefficiencies. T2S will provide commoditized delivery versus payment (DVP) settlement services, in central bank money, to participating members. The T2S platform will be available to all Central Securities Depositories (CSDs) that sign the T2S Framework Agreement.

The benefits of T2S include a level playing field among CSDs, increased competition and greater cross-border settlement efficiency. However, despite progress on the requirements of T2S, deployment of the platform requires substantial investment by several parties:

• The Eurosystem, which includes the European Central Bank and national central banks (NCBs) of the eurozone.
• Participating CSDs and NCBs
• Custodians
• Investment banks

Accenture believes that, in addition to considering the investment required to connect to T2S, market players should take the opportunity to rethink business models and strategize for a post-T2S environment. In particular, organizations should assess the long-term viability of their offerings, especially services related to:

• Settlement
• Custody
• Cash
• Collateral management
• Customer reporting
  
  

In this report, we explore five key questions that organizations must ask as they prepare for T2S.

As organizations develop their strategies for a market after T2S, Accenture recommends that they:

• Consider economic and political uncertainty when defining new business models.
  
  
• Determine how to evaluate and identify partners that can offer reduced settlement fees due to T2S.
  
  
• Clarify how new harmonized rules and tools will affect systems and processes.
  
  
• Look for intermediary providers that can leverage T2S in the most efficient and cost-effective manner.
  
  
• Reassess business models of securities settlement.
  
  
• Understand how to minimize inefficiencies with respect to liquidity with T2S.