The first and highly innovative partnership solution for TARGET2-Securities (T2S), involving Deutsche Bank, Euroclear and Northern Trust
The collaboration is based on a new operating model in securities services, where the traditional value chain is delivered by the integration of multiple parties – a global custodian, a central securities depository (CSD) and an asset servicing agent - into a single service offering.
T2S harmonises the cross-border settlement of securities for select markets in Europe and allows participants to settle securities in central bank money, delivery versus payment (DVP), in the core European markets. In this first live operation of a multi-provider component solution, Northern Trust, as global custodian, performs settlement and provides central bank funding; Euroclear, as an issuer CSD, offers a single CSD Account structure in the French market as well as access to tri-party services, and Deutsche Bank offers local connectivity, asset servicing and end to end reconciliation.
Graham Ray, Head of Securities Services Product Management, Deutsche Bank said: “This launch is a significant milestone on a journey towards collaborative business models within the European post trade landscape, the smarter custody product solution has involved a platform and operating model change to deliver component based client products that meet those institutions unique set of challenges given the changing landscape and understanding of their needs.”
The innovative solution was conceived across the three parties, and was the first large scale T2S mandate announced in the market. Through detailed analysis of the processing flows across core European markets and in-depth collaboration, this vision became a reality when the solution entered live operations for the French market.
This collaborative model demonstrates how such component-based modular solutions can reshape the operation of post-trade service landscape of Europe.
Northern Trust President of Corporate & Institutional Services Peter Cherecwich said: “The collaboration enables us to achieve efficiency benefits for our clients through a consolidated settlement platform and central bank funding across European securities markets. It also enables us to hold investors’ assets in separate accounts at a single central securities depository (CSD), leverage the functionality of T2S and deliver a true investor CSD model.”
Edwin De Pauw, Managing Director, European Head of Product Management, Euroclear commented: "This joint effort is a significant step in achieving the end goal of T2S, reducing market fragmentation and creating a single integrated settlement model. Our investor CSD offering and open architecture structure allows market participants to consolidate, optimise and more efficiently assign their European securities inventory whilst selecting their preferred asset servicing and collateral management provider. This creates cash pooling and netting opportunities across all T2S markets, resulting in reduced credit and collateral consumption for settlement.”
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