The European Central Bank’s (ECB) Target2-Securities (T2S) settlement system may have been delayed for an indefinite period (likely from the original date of 2013 to 2015), but important discussions are continuing on the possible interaction of the area of corporate actions with the securities settlement system. Paul Bodart, executive vice president and head of EMEA global operations at Bank of New York Mellon Asset Servicing, told delegates to CorpActions 2010 that he is involved in work with the corporate actions sub-group of the T2S project to clarify how the system will impact the corporate actions space.
T2S is aimed at providing a single, borderless pool of pan-European securities and a core, neutral, state of the art settlement process, says the ECB. Market users will be able to access these assets through their national central securities depositories (CSDs) but the aim is to take direct settlement out of the hands of these CSDs in order to benefit from economies of scale and drive down costs, according to the T2S project plans. T2S will therefore likely have far-reaching impacts on the financial services industry as a whole, including on the world of data management and corporate actions.
One of the consequences of inducing these CSDs to outsource the settlement part of their business is that settlement becomes split from areas relevant to reference data management, such as corporate actions processing. T2S will therefore not process corporate actions like the CSDs do today in concert with clearing and settlement process, but will instead have to interact with the CSDs at key points in the corporate actions process. “The main points of interaction will be around buyer protection, market claims and transformation,” noted Bodart. “The rules have largely been defined and some mapping around gaps has been completed.”
The group has also been able to define something of a timeline around when any systems changes need to go into effect, however, the delay of T2S has added a degree of uncertainty into the mix. “We are waiting until June for when the ECB will provide us with the revised timeline for the T2S project overall,” said Bodart.
Justin Chapman, global head of strategic implementation for Asset Servicing at Northern Trust, added that T2S could potentially represent both a help and a hindrance to achieving the overall goal of harmonisation of the corporate actions space. It could force firms to adopt some level of standardisation due to common messaging types within settlement, for example, but the unbundling of corporate actions from clearing and settlement could also prove a hindrance. “This unbundling will be a game changer,” he contended. “It will make corporate actions processing appear more costly and this will likely drive the need for a greater level of consistency at a global level.”