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October 26, 2010 12:12 am
The European Central Bank has come up with a more precise estimate for how much the planned pan-European settlement system – known as Target2Securities (T2S) – will cost, setting a fee of 15 euro cents per transaction.
The T2S project, first conceived in 2006, envisages the creation of a single platform for cross-border and domestic securities settlement against central bank money.
T2S is part of a wider European project to harmonise cross-border processes and reduce capital market transaction costs to make the region more competitive with the US.
In September the ECB’s T2S project team had suggested charging central securities depositories (CSDs) 20 euro cents per side of a trade for carrying out the entire settlement process, or 13 euro cents under certain circumstances.
But the ECB said that “in light of the market feedback, the T2S Programme Board has decided to refine certain parameters for the T2S pricing proposal”.
It added: “This new pricing proposal remains consistent with the principle of full cost recovery, while also coinciding with the objective that T2S has always pursued, i.e. to achieve a settlement fee that is lower than any current domestic fee, even if the cost of CSDs are added to the T2S fee.”
The Programme Board said that to “reassure both the market and CSDs”, it would also propose that the proposed fee be maintained unchanged until the end of 2018, under the following conditions:
● non-euro currencies add at least 20 per cent to euro settlement volume;
● that securities settlement volume in the EU is not more than 10 per cent lower than volumes projected by the T2S Programme Office, “which in turn are based on market advice”; and
● that tax authorities confirm that the Eurosystem will not be charged VAT for T2S services.
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