Target 2 securities: target missed for Italy

The Eurosystem's Target2 Securities (T2S) initiative aimed to drive integration, harmonization and reduce cost of settlement, particularly for cross border transactions, has finally gone live. Several European CSDs planned to join T2S in 4 separate phases, the first phase being scheduled for June 2015. Four of the five CSDs (Greece, Malta, Romania, and Switzerland) that were planned to go live on T2s in the first phase did join as planned. However, Italy's Monte Titoli, that was perhaps most closely watched, delayed its implementation and is now expected to launch in August, 2015. T2S has been in planning for almost a decade now, and it was anticipated that a project of such large scale may face some technical difficulties, and its roll out may not be as smooth as planned. Last year Celent conducted a research to understand the strategies different market participants were looking to follow to adapt to the post T2S world. In that research we found that except for some players, particularly large regional custodians, most others were following a wait and watch approach and was looking for more information about the system's eventual roll out. Their reasons were several, but the precise issue of technical hic-ups was one that we heard from several participants. While the exact reasons behind Monte Titoli’s decision to delay its implementation are not known (and it could well be due to circumstances specific to Monte Titoli rather than a general T2S challenge), this heightens the focus on participants scheduled to join in the next phases. How Monte Titoli and others in next phases gear up to their T2S plans will be closely watched by participants who are still evaluating their options as to how to operate in Europe - i.e., if to become a directly connected party, consolidate sub-custody network and so on. From that perspective, some of our key findings that market participants are still waiting for more clarity and understanding still hold good for many institutions even though a year has passed and T2S is officially live now. You may find our research findings published in 2 separate reports here: one on settlement, the other on asset servicing.