2016年-SWIFT环球同业银行金融电讯_European_CSDs_are_still_authors_of_their_own_destiny_6页_884kb

European CSDs are Still Authors of Their Own Destiny

Core Content

The document discusses the impact of the TARGET2-Securities (T2S) platform on the European Central Securities Depositories (CSDs) and their strategic positioning in a post-T2S environment. T2S, launched in 2015, is a pan-European securities settlement platform that is changing the competitive landscape of the securities market infrastructures in Europe. It is expected to trigger a major realignment of market infrastructures over the next two years, with the first wave of CSDs joining the platform.

Main Points

• T2S and Market Realignment: T2S is creating a new platform that is centralizing and harmonizing the settlement process across Europe, which is forcing CSDs to adapt their strategies to remain competitive.
• Competition with Custodians: The platform is intensifying competition between CSDs and custodians, particularly in areas such as settlement, safekeeping, and asset servicing.
• Strategic Re-positioning: While some strategic re-positioning is expected, significant changes such as CSD consolidation are not anticipated before the end of the T2S migration in 2017.
• Opportunities for CSDs: T2S provides new functionalities such as harmonized rules, a single settlement window, and centralized liquidity management, which can be leveraged by CSDs to offer new services without the need for a new platform.
• Cost and Adaptation: Cost control and timely adaptation to T2S are critical for CSDs to remain competitive, especially for smaller ones. The one-off adaptation cost is a threshold cost that can be spread over larger volumes, giving a pricing advantage.
• Differentiation Between CSDs and Custodians: CSDs and custodians have fundamentally different service propositions. CSDs typically offer settlement and basic portfolio services, while custodians can offer a broader range of services, including liability and credit aspects, and customized service levels.
• Need for Harmonization: T2S alone is not sufficient to create a level playing field. Further harmonization of post-trade activities, such as corporate actions and collateral management, is necessary to enable effective competition and market benefits.

Key Information

• T2S Launch and Membership: T2S was launched successfully in 2015, with the admission of Greek, Italian, Maltese, Romanian, and Swiss depositories.
• Four Waves of CSDs: Over the next two years, four waves of CSDs from 21 European countries are expected to join T2S.
• Regulatory Context: The Regulation on Settlement and Central Securities Depositories (CSDR) is a key regulatory framework that supports T2S, but full implementation is still pending.
• Market Benefits: A 2014 study suggested that T2S could lead to significant savings for market participants, particularly in liquidity management.
• CSD Strategy Development: CSDs need to develop their own business strategies based on their history, size, and client base, rather than directly competing with larger CSDs.
• Future Outlook: The future shape of European securities market infrastructures will be determined by the actions of CSDs, custodians, and T2S over the next two years.

Quotes

• Philippe Leblanc: "T2S triggers harmonization and centralization of the settlement process, but does not make CSDs disappear."
• Indars Ascucks: "To be successful as a CSD going forward, you need to be either big or beautiful – by which I mean excelling as a specialist, and being highly efficient."
• Alex Dockx: "The bigger the volumes you can process, the more you can spread that cost, which is not linear. This gives you a pricing advantage, but size and scale alone will not make a CSD or an institution successful."
• Luca Terzaghi: "Clients value smaller custodians for the customized services we can offer. Even if the competitive landscape is changing, T2S represents an opportunity for banks like ICBPI."

Conclusion

T2S is a transformative initiative that is reshaping the European securities market infrastructure. While it introduces new challenges and opportunities for CSDs, the ultimate direction of the market will depend on how CSDs adapt, innovate, and position themselves in the evolving landscape. The document emphasizes that CSDs are not passive participants but active decision-makers in their future.