The last few months of 2011 saw some significant developments in the T2S project. Here we round up some of the associated commentary from industry experts and the financial press.
T2S Delayed Until 2015
The ECB’s announcement that the implementation of T2S had been pushed back until 2015 produced a range of reactions.
ICFA Magazine called for the ECB to stick to its revised plan and to reassure market participants that the Euro zone’s issues would not further delay progress. Thomas Zeeb of SIX Securities Services also gave his view in the magazine, stating that the delay was not surprising given the original aggressive timetable and the complexity of bringing markets together. T2S had already made a positive contribution in his view, by encouraging a move towards commoditising settlement in Europe. Other commentators welcomed the delay in some respects, as it would allow time to work out the remaining issues including liability and governance.
Some market participants, however, were extremely disappointed by the delay, stating that T2S addressed a key challenge for global custodians, which was greater fees for international custody in Europe. Delays could also mean more costs for the industry, since market participants have teams of people working full time on implementing the programme.
Change of ECB President and Euro Zone Crisis Raise Doubts
New leadership at the ECB and the challenges facing the Euro zone led some market participants to say that T2S could be indefinitely delayed or even abandoned.
Some commentators speculated that Mario Draghi’s appointment as ECB president could result in a new direction for the ECB and a narrower interpretation of its remit. Others, however, noted that Mr Draghi had voted in favour of the platform as governor of the Banca d’Italia.
The second reason for questioning T2S’s future was the euro zone crisis, which could mean that T2S was simply unaffordable. In an editorial, ICFA Magazine said that the industry’s doubts about the completion of T2S were “understandable”, with the future of the euro zone in the balance.
Framework Agreement Endorsed
The ECB’s suggestion in September that the Framework Agreement would be concluded within a month was met by some scepticism, with the media reporting industry experts’ views that there were still issues to be negotiated.
The announcement in mid-November that the ECB had finally endorsed the Framework Agreement, along with a financial incentives package for early signatories, was met with little comment.
T2S Settlement Fee Questioned
With the Bank of England and the Swiss central bank declining to take part in T2S at this stage, some industry commentators questioned whether T2S will be able to achieve its target of a €0.15 fee. The media cited concerns that with the two countries representing one quarter of trading activity in Europe, it would be difficult to achieve the necessary volumes.
The ECB, however, said that its assumptions underlying the €0.15 did not need to change. Paul Bodart of Bank of New York Mellon was also supportive, according to Financial News, saying that the currency of trading was not important. In his view, the target fee was not at risk.
Expert Group on Market Infrastructures Report Published
The EGMI published its report, concluding that despite the work done in the previous decade, there was still more to do to achieve a truly pan-European post-trade infrastructure. There was consensus on the need to progress this work and the EGMI suggested policy options that would deliver this.