The ECB has called on central securities depositories (CSDs) to 'efficiently reshape' their IT infrastructure in order to integrate to the T2S platform, its proposed pan-European settlement service which has encountered further delays amid foot-dragging by CSDs and protracted arguments over costs and pricing.
The ECB has claimed that the T2S platform will cut the cost of cross-border settlement by 90% and it released a pricing plan earlier this year with a 15 cent charge per instruction. However, prospective users will also have to factor in a number of unknowns, including costs of connectivity and the add-on fees charged by CSDs to consider.
In terms of connectivity, the ECB has put out a tender for the two licences to provide connectivity services for T2S on the understanding that competition between providers will keep fees in check.
The additional fees charged by CSDs are something that the ECB has less control over. According to Helmut Wacket, head of section at the ECB, the key will be how the CSDs choose to adapt their current infrastructure to cater for T2S.
Wacket sees two basic options for the CSDs - one involves adding the T2S system onto an existing set-up which will involve minimal short-term investment but would create processing duplication in the long-term. The preferable approach, says Wacket, would be for CSDs to integrate fully with the T2S platform and engage in what he calls "efficient reshaping".
"Any CSDs that efficiently reshape their infrastructure would be able to lower their costs over time and to offer T2S savings to their domestic customers," says Wacket. "I think the competition that T2S will create between CSDs will make it difficult for a CSD to compete without an efficient IT reshaping."
A bigger problem, however, may lie in getting the 30 CSDs currently involved in the T2S project to commit pen to paper and formally sign up. Discussions between the ECB and the depositories have been long and involved and increasingly political. The concern for CSDs is that the T2S project will deprive them of revenue gained from existing services that could be marginalised once the T2S platform is introduced.
Wacket says that any outstanding issues have been resolved and he fully expects all the CSDs to sign up in the next coming weeks. "We will finish our current discussions next month and I am confident that all the CSDs will be signed up before the year-end. There are still some outstanding details but I do not expect them to get in the way of the signing."
Further delays to the T2S programme were announced at the Sibos conference in Toronto, Tuesday, pushing the likely 'go live' timetable for the project into 2015.