T2S - TARGET2-Securities
What is T2S?
T2S (TARGET2-Securities) is a European securities settlement engine which offers centralised delivery-versus-payment (DvP) settlement in central bank money across all European securities markets. T2S has removed barriers and eliminated differences between domestic and cross-border settlement by offering a single market infrastructure solution.
After market consultations and a decision by the ECB’s Governing Council, the T2S project was launched in 2008 and the platform became operational on 22 June 2015. The T2S Framework Agreement, negotiated between central securities depositories (CSDs) and the Eurosystem, has been signed by over 20 CSDs, which will migrate to the T2S platform in five waves between June 2015 and September 2017. T2S itself is not a CSD; it is a platform which enables CSDs to increase their competitiveness.
T2S also enables non-euro area central banks to connect to T2S with their currencies. The T2S platform allows DvP settlement in central bank money in any of the available currencies. For the time being, Denmark is the only non-euro area country which will make its currency available for settlement on T2S (scheduled for 2018).
The fundamental objective of the T2S project is to integrate and harmonise the highly fragmented securities settlement infrastructure in Europe. It aims to reduce the costs of cross-border securities settlement and increase competition and choice among providers of post-trading services in Europe. It is therefore a critical step forward in the creation of a true single market for financial services in the EU.
The development and operation of T2S was assigned to four Eurosystem central banks – those of France, Germany, Italy and Spain. The project is coordinated by the ECB and run on a cost-recovery basis. The IT platform itself is owned and operated by the Eurosystem to ensure it is resilient and stable. But what makes the Eurosystem best suited to run T2S?
Settlement in central bank money is a very important feature that eliminates settlement risk – this can only be offered by central banks
- As a supranational organisation, the Eurosystem is neutral towards all EU countries and stakeholders
- The Eurosystem has no economic interest and only works towards full cost recovery
- The Eurosystem has experience in successfully designing and implementing Europe-wide financial infrastructures, such as TARGET and TARGET2
All relevant stakeholders affected by the project are closely involved in the governance of T2S. The Market Infrastructure Board is the main body tasked by the ECB’s Governing Council with the management of the T2S project and the relationship with market stakeholders.
Objectives and benefits
As one of the largest infrastructure projects launched by the Eurosystem to date, T2S brings substantial benefits to the European post-trade industry.
- Cost-reduction: One of the objectives of T2S is to reduce the cost of securities settlement in Europe, in particular for transactions across EU countries, which can be ten times more expensive than domestic transactions.
- Deepening market integration: The T2S settlement engine also brings us a step closer to a single market for financial services and deeper financial integration in Europe. Furthermore, T2S has harmonised post-trade practices across Europe.
- Improving collateral management: The platform also helps banks optimise their collateral and liquidity management by creating a single pool, essentially ensuring that collateral is not blocked in local markets but can quickly be moved to where it is needed.
T2S PROJECT - SAMPLE MESSAGES