How to Read Effects of T2S on the settlement of the European post-trading industry : Master Thesis DOC
The main institutions active in the European post-trading industry as custodians and Central Securities Depositories (CSDs) will be influenced by the introduction of TARGET2-Securities (T2S), a new platform for cross-border and domestic settlement. T2S, the largest infrastructure project which was launched by the Eurosystem, will provide harmonised Delivery versus Payment (DvP) settlement in central bank money for almost all traded securities in Europe. The introduction of T2S will change the current settlement process of the European post-trading industry significantly. Settlement is part of the post-trading process. After each trade, regardless of whether the trade will be done over a stock exchange or over the counter (OTC) and regardless of the type of security, post-trading services are required to make securities settlement efficient and safe. In general the whole post-trading process consists of five main functions: clearing, settlement, custody, safekeeping and notary. These main functions are provided by (I)CSDs, custodians, common depositories and registrars and suplemented by additional banking services. Increasing crossborder activities implicate more complexity as well as uncertainty about financial power of the involved parties. Credit risks, liquidity risks, operational risks and legal risks have to be considered and will be partially reduced by the introduction of T2S. T2S will be cost efficient for investors, but not for CSDs since the increasing margin pressure will reduce CSD´s revenues. With the planned conception of a common CSD directive for the whole European Union further changes of the post-trading industry cannot be foreseen. Apart from the reduction of six Giovannini barriers by a single IT-platform, the question remains, if further consolidation in the industry will be an answer of sustainable growth in the European post-trading industry.
