Access to TARGET2-Securities platform - International Law Office

TARGET2-Securities platform
Access for Swiss financial centre

TARGET2-Securities platform

Settlement across European countries is fragmented and rather complex. Even the creation of a single currency more than 10 years ago did not facilitate post-trading services. TARGET2-Securities (T2S) is a large infrastructure project built, owned and operated by the European Central Bank and 17 national central banks (collectively known as the 'Eurosystem').

The platform will:

• integrate and harmonise the fragmented securities settlement infrastructure in Europe; and
• reduce settlement costs of cross-border transactions within the euro area and participating non-euro countries.

It is intended to replace (totally or partially) the existing national settlement systems of central securities depositories. T2S is scheduled to go live in 2015.(1)

Access for Swiss financial centre

In 2009 SIX Swiss Exchange AG (SIX) signed a memorandum of intent on taking part in T2S with regard to euro transactions. On June 19 2012 SIX announced that its board of directors has decided to sign the framework agreement, which sets out the contractual rights and obligations of the Eurosystem and each contracting central securities depository, and covers the development and operation of T2S.

At present, SIX Securities Services, SIX's post-trade services department, settles over 50% of cross-border transactions in T2S markets, which represents 15% of its entire transaction volume. This highlights the importance of direct access to the new trading platform for SIX and its clients.

Moreover, SIX's decision is of benefit to the entire Swiss financial centre. The European Central Bank is interested in increasing the number of currencies used in T2S. Following discussion among the Swiss National Bank, SIX and various market participants, it was recognised that there is no urgent requirement for the Swiss franc to be included in T2S. In addition, the Swiss National Bank was of the opinion that the contractual conditions for participation were not ideal. Therefore, the Swiss National Bank notified the European Central Bank in September 2011 that the Swiss franc would not be available as a settlement currency in T2S.

From the point of view of an individual market participant, it is crucial that access to T2S as a modern IT platform is provided in order to cut costs and facilitate transactions. If the Swiss National Bank is not willing to support access, efforts of individual depositories are all the more important.

In light of this background, it is welcome news that SIX has decided to become the first non-EU central securities depository to offer access to the T2S platform.

For further information on this topic please contact Mark-Oliver Baumgarten or David W Frei at Staiger, Schwald & Partner by telephone (+41 58 387 80 00), fax (+41 58 387 80 99) or email (mark-oliver.baumgarten@ssplaw.ch or david.frei@ssplaw.ch). The Staiger, Schwald & Partner website can be accessed at www.ssplaw.ch.

Endnotes

(1) For further information on T2S, please visit the European Central Bank website at www.ecb.europa.eu/paym/t2s/about/about/html/index.en.html.