Are you ready for T2S? - Euroclear

opportunity to rationalise and examine
the need for large intermediary networks.
That said, we are convinced that many
banks and other financial institutions will
continue to appoint an agent or ICSD
to help them access multiple European
markets and beyond because it simply
makes good business sense.
Market infrastructures are opening their
architecture to extend their platforms and
operational expertise, to eliminate the need to
create what already exists. Market participants
benefit from additional economies of scale
and cost mutualisation opportunities.
Where are you
Let’s look at how different business
segments could consider their options.
Custodian businesses may want to hold
securities in or as close to the ‘issuer
CSD’ as possible and want to centralise
their central bank money liquidity for all
T2S markets. Those custodians might
be looking for a provider that offers
direct access to CSDs and central bank
money liquidity, and highly competitive
settlement, asset servicing and collateral
management services.
the options for their own activity and
assets, but for their underlying clients as
well, some of which are already insisting
on segregated account structures. Global
custodians and ICSDs have worked handin-hand
for decades and we suspect this
will continue in a T2S environment. In fact,
we are seeing many partnerships between
global custodians and Euroclear Bank for
collateral management services in the
run-up to T2S.
Broker-dealer businesses will require a
top-class service to ensure high settlement
efficiency, very rapid turn around time,
wide access to trading counterparties
and seamless access to financing through
efficient collateral management services.
Depending on settlement activity scale and
breadth, inhouse expertise and capacity,
self-settlement at the launch of T2S or
thereafter may be appealing.
It may be necessary to have direct CSD
access for certain markets, with a provider
that can manage CSD relationships you
choose not to manage yourself. It would
be important to select a partner that can
evolve with you, without imposing sizeabe
transition costs, to manage T2S-related
uncertainties, such as the level of CSD
interoperability that will need to evolve.
to benefit from T2S. Nevertheless, there
are some crucial decisions that are already,
or should be, under consideration by
securities professionals.
We are confident that Euroclear can
accommodate any T2S scenario that
securities professionals decide is the best
for them in this changing environment.
There is no other group of CSDs in Europe
that will be as connected to T2S as you
will find at Euroclear, as Euroclear Belgium,
Euroclear Finland, Euroclear France and
Euroclear Nederland will all be migrating
to T2S. Each of them will provide entry to
T2S, with a range of relevant services. Easy
access to non-T2S markets, such as the UK
and Eurobond markets, also need to be
brought into the picture.
T2S time-to-market is fast approaching.
Deciding your way in, and how much
effort it will take, is clearly an agenda item
for 2013.
This article is reprinted with the kind
permission of International Securities
Services magazine.
Global custodians will be attracted by the
largest pools of liquidity. T2S is unlikely to
change this fact, although it remains to be
seen whether T2S will - drastically - change
the location of liquidity pools for some
domestic securities.
For example, in certain T2S markets such
as France, liquidity is to be found locally,
encouraging those firms that are active in
French securities to have direct access to
the local issuer CSD. In other cases, such
as German bunds, a significant part of
Bund trading activity settles on the books
of Euroclear Bank, the ICSD.
Global custodians will not only consider
Firms that today specialise in a given
domestic market and look to target
non-domestic business growth
opportunities will want to leverage their
domestic CSD relationship in order to
access and service other T2S market
securities. While not wanting to have
direct CSD relationships in all markets, they
may consider an ‘investor CSD’ approach.
Partnering on the T2S
journey
With differing business objectives and
priorities, there is no ‘one-size fits all’
solution for the many avenues of approach
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