12 February 2016

Clearstream to pass on EUR30 million T2S development costs to customers

20 December 2012  |  6375 views  |  2 cash

European depository Clearstream plans to pass on to its customers an estimated EUR30 million in development costs for migrating to the European Central bank's Target2-Securities (T2S) system.

Clearstream says the EUR30 million price tag represents about one third of its overall T2S development costs.

The clawback be achieved by adding EUR 0.094 to each instruction settled on the German CSD's settlement system Cascade between 1 April 2013 and the company's planned migration in November 2016. Users will have the opportunity to recoup the layout through a one-off share in possible profits Clearstream makes through T2S.

The depository also says that once the system goes live, it will provide T2S settlement at the lowest possible price by passing on the ECB settlement fee without adding any margin and without charging any settlement fee on its own.

Stefan Lepp, CEO of Clearstream Banking says: "Now that T2S is coming, banks and financial institutions will have to choose how to access the emerging pan-European settlement platform - for example via a national central securities depository like us. In establishing the cornerstones of a cost model, coupled with a clear strategy based on our industry leading collateral management services, we support our customers in moving towards T2S."

The harmonised settlement platform aims to significantly reduce settlement costs in cross-border securities trading.

However, the European Central Bank recently admitted that it may be forced into a rethink of the charging structure for the platform as weak trading in Eurozone markets hits previously optimistic volume assumptions.

The ECB had previously stated that fees for trades passed over T2S would be set at 15 cents per transaction based on "conservative assumptions" about volume throughput.

But in a quarterly update on the project published in November, Jean-Michel Goddefroy, chairman of the T2S board, says that settlement volumes reported by the 23 CSDs that have committed to the system are around 18% lower than was anticipated in 2010 for this period.

Comments: (2)

A Finextra member | 20 December, 2012, 15:58

At the end of the day its all about cost and efficiency and T2S has not yet proved either to be available.At least at the moment.With volume based cost structures the return is always difficult to predict and without the UK being involved the costs look like being over an extended period. That still leaves efficiency that we wont know until it starts to go live. At this stage T2S still looks like a risk but it could be worth it? Who knows?

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Andrew Gibbons - Thomas Murray - London | 21 December, 2012, 13:23

Current users paying for development to a service that they may not use in the future? hmmmm....final abuse of a monopoly position methinks.

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