Getting ready for TARGET2 Securities (T2S): The time is now

Abstract

Launching in four phases starting in 2015, the new TARGET2-Securities (T2S) European settlement engine will have a dramatic effect on the European securities industry. This initiative aims to offer centralised delivery-versus-payment (DVP) settlement in central bank funds across all European securities markets. The infrastructural changes in Europe could potentially have a big influence on the structures that continue to exist. Central securities depositories (CSD), custodians and participants each have unique roles to play in T2S, bringing with them specific needs, impacts and challenges. Now is the time for all these organisations to evaluate their options for T2S, make decisions on participation and service offerings, and implement required technology changes and solutions to address the new settlement environment. Participants need to evaluate their options and begin asking their custodians detailed questions about the support they will provide and what will be required of them in terms of modifying their systems to meet new messaging demands. In addition, firms should review the mechanisms they need in place to reduce risk and optimise their daily positions within the new settlement environment.