A new SWIFT whitepaper shows market participants are embracing a direct route to TARGET2-Securities (T2S) that will enable greater market opportunities.
As the deadline approaches in June 2015 for the first of four waves of migration to the European Central Bank’s settlement platform, institutions have adopted a ‘wait and see’ approach to the first wave to see how the direct route will give the Directly Connected Participants (DCPs) access to new markets and will deliver new services to clients.
The ability to connect directly to the platform offers more competition; better access to markets and therefore allows institutions to offer the best deadlines; quick reaction to settlement issues and also liquidity benefits.
SWIFT’s whitepaper looks at how T2S will transform and affect every participant in the European post-trade landscape, with its aim to harmonise the Eurozone post-trade settlement space.
There are many concerns within institutions about budgets, implementation costs and availability of resources of T2S and many global firms will have to prepare clients and be ready for each wave of migration.
The study has found, that in the long term, T2S is a catalyst for innovation and change, and will help clients overcome key regulatory challenges in areas such as asset protection, collateral and liquidity management.
“As a large harmonisation project, T2S does not come without challenges for market participants. Many of the organisations that have chosen to become DCPs have done so in an environment of competing industry and regulatory initiatives.”
“As an originator of the harmonisation process and the de facto provider for connectivity and interoperability services in the European clearing and settlement environment, the use of SWIFT’s Value-Added Network (VAN) Solution for T2S means that users will not have to make significant changes to connect to T2S,” said Isabelle Olivier, head of clearing and settlement for Europe, Middle East and Africa at SWIFT.
When T2S was first mooted in 2006, the main focus was on savings and cost benefits. Now, with the platform about to be launched, SWIFT identifies that there is a realisation that T2S will deliver many benefits to users beyond cost savings.
