Global Custodian Spring 2019 | Page 44

[ 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.