15 January 2014

Clearstream will make eurobonds and securities from non-T2S markets eligible for settlement in T2S

Clearstream will make its ICSD-issued securities (i.e. eurobonds) and also securities issued outside Europe available via T2S, which represents a significant expansion of scope compared to the original universe of the T2S project. Through Clearstream’s single network approach, which combines the CSD and ICSD network capacity, T2S settlements in EUR central bank money via the German CSD could go beyond the European markets to include securities issued e.g. in Asia or Australia.

Clearstream will be in a position to offer customers of all Clearstream entities (both the ICSD and the CSDs) the choice of settlement in commercial bank money (via the ICSD) and EUR central bank money (via the CSDs) for the full universe of securities.

By widening the range of securities eligible in T2S, market participants will also be able to further reap the benefits of T2S such as capital savings by pooling their cash accounts, which will help them meet Basel III requirements. Pooled cash accounts in T2S would allow participants to centralise and net off cash payment obligations associated with their settlement activity in all T2S participating markets, enabling them to realise capital savings on the back of significant liquidity efficiencies in cash settlement.

Mark Gem, Head of Business Management and Strategy and Member of the Executive Board of Clearstream, said: “Clearstream’s strategy for TARGET-2 Securities (T2S) aims to enable the market to achieve significant savings on the indirect costs imposed by today’s fragmented settlement landscape in Europe. Chief among these is the potential to concentrate collateral holdings by ensuring optimal collateral mobility between participants. But the liquidity costs associated with the cash side of settlement have been overlooked by many, including T2S stakeholders, until now. A key potential benefit of T2S that our strategy aims to unlock is to enable clients to settle from a single EUR treasury position, whether that is held in the TARGET2 payment system, with a commercial correspondent or with an ICSD.

Clearstream will enable significant savings on the direct costs of settlement by passing on T2S fees at no margin. But the twin indirect savings that market participants will be able to realise through collateral mobility and liquidity efficiency are even more significant. That is the reason why we have decided to ensure that Eurobonds and all other products in Clearstream’s ICSD network will be eligible for settlement in T2S”.

Full article

© Clearstream