T2S benefits will ‘come at a high cost’

Concerns raised over costs of T2S implementation, despite potential benefits.

The evolution of T2S will present huge opportunities for a harmonised post trade environment but will come at a cost, according to the director of group services at Commerzbank AG.

Speaking at a FIX Trading Community event in Frankfurt today, Roland Kipper discussed the possible benefits of T2S introduction, expressing enthusiasm for a “harmonised technical environment while also indicating the potential price.

Under a T2S, CSD’s would be enabled to increase their competitiveness and encourage a united European securities settlement infrastructure.

“I am really happy at the prospect of a harmonised structure”

“In the past, CSD’s worked in a monopoly structure because they were their own country and every country had a CSD and therefore had its own borders.

“Working in a market without borders would lead to harmonised market, harmonised procedure which every CSD has to adopt because in the past a CSD wouldn’t have had a chance to go to a CSD in Italy or Spain and now investors can do this.”

However, Mr Kipper also indicated the high cost which would face those operating in the post-trade environment, particularly commercial banks.

“When those in business are looking to return an investment, it has to be considered that T2S costs a huge amount of money divided between the ECB and the CSDs  and commercial banks like Commerzbank and Deutche Bank”

“Furthermore, at the end of the chain commercial banks do not have the opportunity to recover their costs. For all T2S’s benefits, it is not a free lunch.”