[ I N
D E P T H
|
T 2 S ]
“Standards problems are
underlying it [T2S], and to
get that fixed there would
have to be a regulatory
mandate and there simply
aren't enough mandates out
there.”
VIRGINIE O'SHEA,
RESEARCH DIRECTOR, AITE GROUP.
On the corporate actions side, there
is also room for improvement. A report
by the ECB in March 2018 found cer-
tain markets have not met standards on
corporate actions. In the report, the ECB
differences in national rules relating to
corporate actions have been identified
as one of the most critical barriers to an
integrated EU post-trade environment.
Standard problems
The Corporate Action Sub Group (T2S-
CASG) was formed in-line with the new
system to focus on developing market
claims and transformations, and contin-
ues to try to tackle the corporate actions
standards issues.
“Standards problems are underlying it
[T2S], and to get that fixed there would
have to be a regulatory mandate and
One of the biggest differences in tech-
nology now compared to 2006 is the
arrival of distributed ledger technology
(DLT), and naturally the use of this has
been linked to T2S.
A report from Standard Chartered
in 2016 added fuel to the fire when it
suggested blockchain could potentially
replace T2S if the technology developed
exponentially quickly.
“T2S was built around the world when
they started that lengthy process, but the
world is changing,” says Tom Wooders,
head of clearing solutions at GPP. “Block-
chain has the potential to revolutionise
this part of the industry. Traceability,
transparency, automation that’s what
DLT could bring to the table and there-
fore one has to wonder whether this is an
area where new solutions could come to
“T2S was built around the world when they started that
lengthy process, but the world is changing. Blockchain has
the potential to revolutionise this part of the industry.”
TOM WOODERS, HEAD OF CLEARING SOLUTIONS, GPP
there simply aren’t enough mandates out
there,” adds O’Shea.
“The biggest opportunity was placing
regulation and the project together more
closely, there would have been less costs
and more adherence if CSDR had come in
at the same time.”
44
Global Custodian
Spring 2019
the fore.
With the projects going on around the
world using DLT – proxy voting, set-
tlement, ASX replacing its post-trade
systems – the technology has been pretty
much suggested as a solution to any
industry problem. Some have dismissed
its intervention when it comes to T2S
though.
“DLT is a step too far,” adds Casteleyn.
“There is no proven implementation of
that scale and scope that would justify
that decision. It would have been inves-
tigated but personally I don’t think if
you would start such a project today you
would concentrate solely.”
The ECB has also warned adoption of
blockchain technology in post-trade pro-
cesses could destabilise its pan-European
securities settlement platform. While
benefits of DLT in the securities settle-
ment and asset servicing process can be
seen, there would be issues harmonising
DLT platforms with the principles of T2S.
“An instance where DLT solutions
currently under development appear to
be diverging from standards agreed in the
T2S community is that of securities and
cash account numbering, where the use
of public keys to identify DLT users may
diverge from T2S agreed standards,” the
ECB said in its report.
So the chest has been opened and the
elements of T2S to assess have been re-
leased for judgement by the market. The
ultimate goal of harmonising the Europe-
an settlement market has been a success,
but it took a long time and a lot of money
to get there, while issues remain around
corporate actions standards, the lack of
harmonisation regarding withholding tax
relief procedures, the differences in su-
pervision of securities issuance and many
of the touted benefits not yet realised.