The impact of Target 2 Securities on sub-custodians

Abstract

This paper analyses the impact on sub-custodians of the European Central Bank’s Target 2 Securities (T2S) project. The launch of T2S, together with other ongoing harmonisation developments in European post-trade infrastructure, will change the landscape for sub-custody business permanently. The amount of traditional sub-custody services will decrease when part of the sub-custodians’ client base become direct participants in more markets and insource settlement when T2S harmonises settlement processing in Europe. However, the limited scope of the project will also break the bond between settlement and asset servicing. This will also create a demand for new types of services. This demand will be mainly in the field of asset-ser­vicing processing. Another impact of T2S is that it will dismantle the difference between domestic and cross-border transactions. This will change the way value chains are looked at. Instead of looking at one market across the service layers it will move to look at service layers across many markets. This also will create new types of demands for sub-custodians.