Eurosystem signs T2S Framework Agreement with first Central Securities Depositories

Today, the European Central Bank (ECB) hosted an event to mark the signing of the T2S Framework Agreement by the Eurosystem and a first group of nine European central securities depositories (CSDs):

• Bank of Greece Securities Settlement System – BOGS (Greece)
• Clearstream Banking AG (Germany)
• Depozitarul Central S.A. (Romania)
• Iberclear (Spain)
• LuxCSD S.A. (Luxembourg)
• Monte Titoli S.p.A. (Italy)
• National Bank of Belgium Securities Settlement System – NBB-SSS (Belgium)
• VP LUX S.á.r.l. (Luxembourg)
• VP Securities A/S (Denmark).

The signing of the Framework Agreement is an important milestone in the T2S project. The agreement governs the legal relationship between the Eurosystem and each CSD participating in T2S. In November 2011, after more than two years of negotiations, the contract was offered to 31 European CSDs, with an invitation to sign by April 2012 or, if additional time was required, by June 2012.

The CSDs that signed the contract today account for around two-thirds of the settlement volumes in the euro area. Other CSDs are expected to sign in June 2012.

Today’s event was attended by senior representatives from across the financial sector. It provided an opportunity for the important contribution of CSDs to the T2S project to be acknowledged. ECB President Mario Draghi described the impact T2S would have on Europe: “The fundamental objective of T2S is to contribute to making Europe a better place to invest, by fostering a single market in post-trade services. It will make financial markets safer and more efficient, and it will increase transparency in the post-trade environment.”

Peter Praet, the ECB Executive Board member responsible for the T2S Programme, outlined how the project is expected to evolve following today’s commitment: “… after today, the spirit of the project will move from negotiation to cooperation. We will work together with CSDs to implement T2S - for the good of European financial markets.”

The T2S project is now more than halfway to delivery, with a go-live date set for 2015.

Note to the Editors

Event marking the signing of the T2S Framework Agreement by the Eurosystem and the first group of central securities depositories on 8 May 2012 in Frankfurt

This event marks the signing of the T2S Framework Agreement by a first group of nine central securities depositories (CSDs), i.e. those that have decided on an early contractual agreement with the Eurosystem regarding their participation in T2S:

• Bank of Greece Securities Settlement System – BOGS (Greece)
• Clearstream Banking AG (Germany)
• Depozitarul Central S. A. (Romania)
• Iberclear (Spain)
• LuxCSD S.A. (Luxembourg)
• Monte Titoli S.p.A. (Italy)
• National Bank of Belgium Securities Settlement System – NBB-SSS (Belgium)
• VP LUX S.á.r.l. (Luxembourg)
• VP Securities A/S (Denmark).

These CSDs account for around two-thirds of the current securities settlement volumes in the euro area. In addition, several other CSDs are expected to sign the T2S Framework Agreement in June.

The signing of the Framework Agreement represents a key milestone in the T2S project. The event has been organised to acknowledge the important contribution to the project made by the first CSDs to join T2S. A financial incentive package awaits those CSDs that will sign the Framework Agreement at this event and migrate early to T2S.

T2S: general background

T2S is the future IT platform of the Eurosystem for the settlement of securities transactions in central bank money, and is set to start operations in 2015. T2S will provide a single harmonised platform on which almost all heavily traded securities circulating in Europe can be settled, with standardised communication protocols and harmonised market practices, and with equal pricing for domestic and cross-border transactions.

T2S will cut cross-border settlement costs and also lower domestic settlement costs by exploiting the economies of scale derived from the concentration of settlement on a single platform. It will provide CSDs with a sophisticated, state-of-the-art and highly robust settlement engine. It will enable banks to centralise their back-office operations and optimise their liquidity and collateral management. It will open up the market to competition and create new business opportunities for both CSDs and end users. The savings on settlement costs are expected to be passed on to end investors through increased competition between intermediaries.

CSDs will be the primary users of the platform. By signing the T2S Framework Agreement, CSDs commit to transferring the operation of their securities accounts to T2S for settlement purposes. CSDs will remain the legal owners of these accounts and will continue to be responsible for all business and legal relations with their customers.

Participation in T2S is voluntary, and the Framework Agreement is the result of over two years of negotiations involving 31 CSDs across Europe. The involvement of market participants in all T2S-related activities has also been extensive, ensuring that the system will meet market needs.

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T2S is a project launched by the Eurosystem to stimulate the integration of the European post-trade market. Hence, it represents an important part of the current market reform process. T2S is a catalyst for harmonisation, and it complements - at the operational level - other current initiatives of a legal or regulatory nature (most importantly, the CSD Regulation proposed by the European Commission on 7 March 2012).

T2S is expected to generate significant benefits and make post-trading in Europe safer and more efficient. It is therefore expected to have a positive impact on financial stability, reducing risks and allowing for a better management of liquidity by banks.