The European Central Bank's (ECB) plan to create a single settlement process for all European securities, Target 2 Securities (T2S), appears to have gained more industry acceptance at last, although significant issues still remain about the eventual cost of the service and its governance.
A panel session at this year's Sibos, the annual conference of financial mesaging body Swift, saw the ECB present its latest price proposals alongside panellists representing central securities depositories (CSDs) and agent banks.
The ECB had originally presented a pricing plan to market participants back in September that suggested a figure between 24 and 12 cent per transaction, a proposal that shocked many, Andreas Wolf, chief executive of Germany-based CSD Clearstream Banking Frankurt told Finextra. "The figure of 24 cent is higher than in the German market and a range from 12 to 24 cent is too broad."
Wolf says that the revised figure of 15 cent is "a good starting point", although concerns remain over the calculations behind the figure and the ECB's prediction of future volume, especially the amount of volume it expects from non-Euro markets such as the UK. "In the short-term I think the ECB's figure is too optimistic, however in the longer-term as T2S becomes more successful and the non-Euro markets are forced to join, then this figure could be more realistic."
Wolf concedes that market participants are now more accepting of the T2S project than in the past. "There are issues still on the table but there is an understanding that we need a central system and that T2S is the most concrete proposal we have to deliver the benefits of harmonisation to the market."
Panellists at the afternoon session stressed the need for the ECB to remain transparent about the possible costs of the project.
"Ultimately the banks will be the ones that pay for T2S so costs are very important to us," said Jane Levi, managing director of the Association for Financial Markets In Europe, a wholesale banking lobby group. "The new certainty we have on pricing allows us to now look at some of the other issues and gives us somewhere to start in terms of the total cost and understanding the the additional costs that will be involved."
These additional costs are likely to involve the charges of the CSDs for the services that they provide to their customers and also the cost they face in adapting to the T2S system.