29 April 2014

No ‘Big Bang’ move to a post-T2S world

New SWIFT-sponsored research finds continued uncertainty and ‘wait and see’ attitude around the impact of T2S on settlement, asset servicing and securities payments.

Brussels, 29 April 2014 - SWIFT announces the availability of two new research reports from Celent analysts Arin Ray and Joséphine de Chazournes on the evolution of European post-trade arrangements under T2S. The new papers build on Celent's 2013 report entitled ‘The European Post-Trade Ecosystem under T2S', which was also sponsored by SWIFT.

The 2013 research found major discrepancies among market participants with regard to T2S readiness. The new reports, based on detailed interviews with major participants in the European post-trade environment, find that though there has been progress, the strategies of many players remain unclear.

The first paper, which is subtitled ‘Competition spurs new settlement strategies', predicts the emergence of a number of different settlement models in the European post-trade industry as a result of T2S. These include custody ‘light', account operator model, sponsored settlement, self-clearing/settlement and central securities depository (CSD) rationalisation of settlement.

According to Celent it is still not clear how the overall settlement landscape under T2S will look. "CSDs, iCSDs and Eurozone regional custodians are well ahead of the rest in defining their service offerings; however, most global and local custodians and broker-dealers are still waiting for more clarity because their strategy will largely depend on what the CSDs, iCSDs and Eurozone regional custodians have to offer in the post T2S world," the analysts write.

The second report focuses on the impact of T2S on asset servicing and securities payments. In the asset servicing space there is activity on the supply side, with local and regional custodians, iCSDs and some CSDs innovating and building new capabilities, Celent finds. Moreover, the buyers of services are still waiting for more clarity on what the market will offer them: "Since asset servicing is a crucial part of their post trade arrangement they are currently waiting for this to decide on their overall T2S strategy including settlement," says Arin Ray, Celent analyst and co-author of the reports.

This uncertainty around settlement and asset servicing strategies is also causing a knock-on delay in decision-making around securities payments under T2S.

Joséphine de Chazournes, Senior Analyst at Celent and co-author of the reports, says: "Whichever approach firms follow, the transition to the post-T2S world is unlikely to be a ‘big bang' move. It will rather be a slow and gradual transition, where players will carefully consider all possible alternatives before making a final decision. Therefore, contingency planning during the transition, and even afterwards, will be of importance for most participants."

Alain Raes, Chief Executive, EMEA and Asia Pacific, SWIFT, adds: "It is clear that many market participants still need more information about the services that will be available to them post-T2S. Key players need to adapt to this major market change efficiently and cost-effectively, while realising their business goals in the new European post-trade environment. We are delighted to help to chart the industry's progress towards T2S through our continued work with Celent and to enable that progress with our range of solutions and services for T2S."

For copies of the Celent reports please contact the SWIFT press office.

 

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