Connecting settlement across Europe


Thilo Derenbach, newly appointed Head of Clearstream’s T2S Investor-CSD, talks about the challenges and opportunities in establishing a true cross-border solution for TARGET2-Securities (T2S), and introduces the newest member of the Investor-CSD model.


What is the Investor-CSD solution about?

Investor CSD is Clearstream’s strategic positioning in the European custody environment, utilising the “change event” that is T2S, the pan-European settlement platform for central bank money introduced by the European Central Bank. In essence, our Investor-CSD proposition allows our customers to consolidate their securities and cash activities in the T2S-in markets with us, using our German domestic CSD, Clearstream Banking Frankfurt, as their gateway into all current and future T2S-in markets. Doing that, customers will benefit from better liquidity, funding and risk reduction effects while being able to hold their securities in both our ICSD or our German CSD.

Which challenges do you face?

T2S is a great idea – all European settlements on one system without borders. It sounds the right thing to do and it is what market participants wanted. However, the reality still needs some work until we reach that goal. 2018 was yet another year with a full regulatory agenda that kept customers busy. A joint European post-trading strategy is crucial, but time-consuming to implement. This impedes the ambitions of T2S and cross-border settlement volumes are still relatively low. But there is light at the end of the tunnel: this year, we migrated all ESES markets (France, Belgium, the Netherlands), Luxembourg and Italy to our Investor-CSD model and just this week, Austria joined. Thanks to this we have seen increasingly more traffic between different jurisdictions.

So, what’s next?

It would be too easy just to stick to the theme of the movie “Field of Dreams”: “If you build it, they will come”. The reality is more along the lines of: “If you enhance it, they will come”. Approximately 80 per cent of the custody and settlement volume of T2S markets is now available through our Investor-CSD model. To keep that number growing, 2019 will see further enhancements of our product offering and network: Greece will join our Investor-CSD solution and we will expand our French offering into French Registered Shares. We also want to cover further smaller, but equally relevant T2S-in markets. Moreover, as promised, we will expand our offering to Eurobonds in the second half of 2019, which is a commitment that we made to the market a while back and are proud to be able to deliver now.

Beyond geographic coverage, what we have already started and continue to strive for is to enhance the connection to trading venue-driven settlement activities. Our goal is full coverage of our client’s European custody activities.