status - T2S: a new basis for post-trading

Trust and competition

With the implementation of TARGET2-Securities (T2S), the European settlement and custody system is being radically reformed. The transformation is in full swing, and both national and international central securities depositories (CSDs and ICSDs) – as well as their customers – need to prepare for the launch of the European Central Bank’s settlement platform. The migration of all participating CSDs, ICSDs and central banks is scheduled to be completed by 2017. Clearstream, Deutsche Börse Group’s settlement and custody services provider, occupies an important and particular place in the field, as it offers both CSD and ICSD services. It is Deutsche Börse Group’s “one-stop shop” for settlement, custody and asset services, as well as highly efficient collateral and liquidity management. Clearstream settles about 40 per cent of European securities trades. Its unique architecture, integrating both depositories, a complete product range across the value chain and (last but not least) the trust it has built over many years are the reasons why many customers decide to entrust Clearstream with their assets in anticipation of T2S.

Karla Amend

Head of Section T2S, Deutsche Börse Group

She heads the section TARGET2-Securities of the Operations Clearstream Department at Deutsche Börse Group.

TARGET2-Securities (T2S)

TARGET2-Securities (T2S) is a major pan-European project of the ECB to harmonise cross-border securities settlements. CSDs and central banks will be implemented on the platform in five waves. Clearstream, representing 40 per cent of T2S’s future settlement volume via its post-trade infrastructure for the German market, will join with the fourth wave in February 2017. Clearstream will be the first European provider to combine global liquidity management with the benefits of a harmonised market via T2S.

Trust and competition

T2S is an ECB initiative to harmonise and simplify securities settlement in 23 European countries. Once the platform has been implemented across participating countries, settling transactions in T2S-eligible securities in central bank money will merely require a cash account at the responsible national central bank.

With T2S, national CSDs will need to cooperate to a much greater extent than before. They have formed the CSD Steering Group (CSG), whose chair is set to alternate at regular intervals. Through the CSG, ECB and CSDs work together on customer-friendly solutions. On a European level, an exemplary model of checks and balances was established between the national CSDs, acknowledging both the importance of players with larger settlement volumes as well as smaller institutions.


Following trading and clearing, securities must be settled, meaning that they need to be booked to the correct securities accounts, and then kept in safe custody. Within Deutsche Börse Group, this function is performed by Clearstream.

Clearstream comprises both a domestic and an international Central Securities Depository (CSD) and provides access to more than 90 currencies and 54 markets. In line with their respective tasks, both CSDs will participate in the uniform European settlement framework (TARGET2-Securities, T2S) from 2017 onwards. Deutsche Börse Group will thus be able to offer a comprehensive, global service to its clients. The international CSD will facilitate T2S settlement using central bank money, not just across European markets, but also for securities issued in Asia, for example. In this way, Deutsche Börse Group allows for the efficient, worldwide use of assets held in custody with the Group – e.g. as collateral.

Custody is a business area of Deutsche Börse Group.

Clearstream finds itself well-positioned for T2S settlement, particularly in light of Deutsche Bundesbank’s prominent role amongst European central banks. Now, it is time to adopt this position emphatically – in the interest of a well-functioning financial market and efficient European securities settlement. Europe’s largest provider is thus positioning itself as a responsible and experienced broker of common interest.

Regulatory timetable


A business model focused on long-term growth

Below the level of cooperation, each CSD has its own business model. Clearstream, for example, providing both CSD and ICSD services, will offer a structured post-trade service for European and global markets, focusing on liquidity management as it grows in importance.
Clearstream has been setting standards in the market for many years. Early on, it published a pricing model for T2S that included the settlement fee being passed on to its customers without adding any margin. In the beginning, this unusual decision caused unrest amongst providers. However, one of the main objectives of the T2S process is cost reduction, and introducing a pricing model contrary to the T2S core theme would have turned out to be counterproductive in the medium term.

Complementing the waiver of its own settlement fees, Clearstream focused on expanding its custody and asset services as well as liquidity and collateral management. Clearstream provides all of these services within its own process chain: via its Luxembourg-based ICSD and its Global Liquidity Hub that enables participants to fulfil their margin obligations vis-à-vis clearing houses, amongst other things. Within this integrated process chain, Clearstream customers may choose whether to settle their securities in euro central bank money or commercial bank money. Deutsche Börse Group also caters to the growing needs of customers in terms of legal, regulatory and tax-specific topics with efficient offerings and services.

Liquidity management

Financial market regulation has tightened banks’ equity capital requirements. Corporate treasury departments have a constantly growing need for liquidity management tools in order to gain relief on their equity. Through Clearstream’s Global Liquidity Hub, Deutsche Börse Group offers financial institutions optimal global liquidity management. What is unique about this hub is the fact that assets pledged as collateral remain in their respective home market, thanks to Clearstream’s network of international partnerships. Since this approach does not create any systemic risk, it is also welcomed by regulators. As another benefit, Clearstream precisely selects collateral in line with the type, credit quality and rating of the securities concerned, in order to precisely cover the financial risk at hand. This means that collateralisation is as efficient as possible, without unnecessarily requiring liquidity.

Collateral and liquidity management is a business area of Deutsche Börse Group.

Clearstream has adjusted its fee schedule for custody services and enlisted the support of its customers in carrying the costs of adapting the new T2S infrastructure – in combination with benefits of a discount scheme applicable until 2020. Trust that has grown over many years is indispensable for long-term customer loyalty. And it is the secret of success for market leaders such as Clearstream.