Enormous amounts of data are inserted into and have to be processed by the European Central Bank’s securities settlement platform TARGET2-Securities (T2S) day by day.
The system works perfectly. But this does not mean that T2S has already achieved its ultimate goal.
“The technical integration of the European settlement systems can only be a first step,” says Marc Robert-Nicoud, CEO of Clearstream Holding AG, which successfully migrated to T2S earlier this year. “Now, the integration on market level has to follow lead. This is the only way how T2S can live up to its original promise: to make cross-border settlement easier and more efficient for market participants.”
In recent years there have been many efforts to harmonize Europe’s financial markets. Currently strained political relations between EU member states and third countries, nationalistic tendencies as well as the looming Brexit are subjecting the Capital Markets Union (CMU) project to severe stress. Against the current political backdrop, it is key for policy makers and stakeholders to focus on the execution of CMU objectives.
Initiatives such as the implementation of a new payment system TARGET2 (T2) and the securities settlement platform T2S show how pan-European cooperation can deliver progressive concrete solutions. Over the past ten years, more than 20 central securities depositories, national central banks and the European Central Bank all pulled together, in order to make the complex T2S project a success - and thereby set European standards.
It is joint initiatives like T2S, but also new market-driven fintech initiatives, progressing digitization and the growing importance of big data that have the potential to further the integration of European financial markets. Clearstream’s parent company Deutsche Börse has recently set out its “Exchange 4.0” initiative, which bundles together the Group’s innovation activities and looks at similar drivers to boost future growth. Application of Blockchain technology and the firm’s data business will be another focus of Exchange 4.0.
“In order to fully harness the potential and wider benefits of such developments, we need to clear away some serious obstacles on the path to a Capital Markets Union in Europe”, adds Robert-Nicoud. “Further alignment will be necessary of the various European regulatory initiatives with the objectives of market integration initiatives such as T2S.”
After the technical implementation of T2S, the market is now witnessing the emergence of new service offerings, intended to help market participants harness the opportunities of the European settlement infrastructure. Clearstream’s T2S offering comprises ‘one-stop shop’ asset servicing, securities financing and issuance services in central bank and commercial bank funds, while at the same time helping customers navigate a rapidly evolving and challenging regulatory environment.