Clearstream’s monthly report / TARGET2-Securities success needs to be followed up by full market integration

16.03.2017

Enormous amounts of data are inserted into and have to be processed by the ECB’s securities settlement platform TARGET2-Securities (T2S) day by day. The system works perfectly. But this does not mean that T2S has already achieved its (ultimate) goal.

“The technical integration of the European settlement systems can only be a first step,” says Marc Robert-Nicoud, CEO Clearstream Holding, which successfully migrated to T2S earlier this year. “Now, the integration on market level has to follow. This is the only way how T2S can live up to its original promise: to make cross-border settlement easier and more efficient for market participants.”

In recent years there have been many efforts to harmonise Europe’s financial markets. Currently strained political relations between EU member states, nationalistic tendencies as well as the looming Brexit are subjecting the Capital Markets Union (CMU) project to severe stress. Given the dire political backdrop, it has to be wondered if CMU can be realised at all.

Initiatives such as the implementation of a new payment system TARGET2 (T2) and the securities settlement platform T2S show how pan-European cooperation can still work even when the overall political and economic environment is unpromising. Over the past ten years, more than 20 central securities depositories, national central banks and the ECB all pulled together, in order to make the complex T2S project a success – and thereby set European standards.

It is joint initiatives like T2S, but also new market-driven fintech initiatives, progressing digitisation and the growing importance of big data that have the potential to further the integration of European financial markets. Clearstream’s parent company Deutsche Börse has recently set out its “Exchange 4.0” initiative, which bundles together the Group’s innovation activities and looks at similar drivers to boost future growth. Application of Blockchain technology and the firm’s data business will be another focus of Exchange 4.0.

“In order to fully harness the potential and wider benefits of such developments, we need to clear away some serious obstacles on the path to a Capital Markets Union in Europe”, adds Robert-Nicoud. “One major hurdle remains the uncertainty regarding the regulatory framework.”

After the technical implementation of T2S, the market is now witnessing the emergence of new service offerings, intended to help market participants harness the opportunities of the European settlement infrastructure. Clearstream’s T2S offering comprises ‘one-stop shop’ Asset Servicing, Collateral Management and Issuance Services, while at the same time helping customers navigate a rapidly evolving and challenging regulatory environment.

Business overview

 

February
2017

February
2016

Change (%)*

YTD 2017

YTD 2016

Change (%)*

International business (ICSD)

Securities deposits (EUR bn)

6,838

6,689

2%

6,817

6,688

2%

Number of transactions (mn)

3.5

2.9

21%

7.0

5.5

27%

Domestic business (CSD)

Securities deposits (EUR bn)

4,596

4,415

4%

4,569

4,442

3%

Number of transactions (mn)

6.5

7.1

-8%

13.0

13.6

-4%

Investment Funds Services (IFS)

Securities deposits (EUR bn)

2,144

1,833

17%

2,109

1,825

16%

Number of transactions (mn)

1.8

1.6

17%

3.7

3.1

20%

Global Securities Financing (GSF)

Volume outstanding (EUR bn)

489.4

532.7

-8%

492.2

526.3

-6%

Total

Assets under Custody (EUR bn)

13,578

12,937

5%

13,495

12,955

4%

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1. Due to rounding, growth rates cannot be calculated from figures in the chart.