The business benefit of T2S

Ah!  I can hear you all crying that title as T2S draws ever closer and it creeps on to the development agenda. What is the business benefit? For once it’s not a regulatory driven change (Although it’s certainly political) so why should firms in the market get excited?

Excited is probably the wrong word as it is more about plumbing than rockets to the moon. Politically T2S has a vital role and is virtually a mandate development for the European single market. Without it would a single Capital Market in Europe be realised? The answer is probably between no and maybe and why T2S has been having such a troubled journey to date.

Over the last decade or two, the whole market appears to only develop, because of regulatory push. But T2S gives a real opportunity for the European Capital Markets and its players, including investors, to rebalance portfolios as Pan- European, without the enormous cost of settlement agent selection, system development and the operational risk in cross-border investing and settlement.

Financial Services firms hitherto not putting their clients into Pan European opportunities because of the cost and lack of infra-structure will be able to. Business should be increased due to more investment and should attract more clients on a Pan-European basis. Why shouldn’t a small UK Wealth Manager offer services to a French or German investor? T2S will make this more likely.

The rub, is the cost of T2S and this has been variously published at between EUR 150M to EUR 400M depending on where you look. All this will be recovered with a user charge and presumably break even at no cost at some time in the future.

The decision firms need to make is simple. The cost of taking part vs. the benefit of increased business going forward. But what will be the technology costs in order to play? This is one question I will be posing at the next Post Trade Forum debate on the morning of the 26th June at the London Stock Exchange.