T2S - TARGET2-Securities - The Pan-European Platform for the Settlement of Securities in Central Bank Money

The launch of TARGET2-Securities (T2S) in June 2015 marked a fundamental step towards the integration of Europe’s post-trading market. The Eurosystem’s decision in 2008 to build a pan-European platform for the settlement of securities in central bank money stemmed from the objectives and tasks embedded in the ESCB/ECB Statute, to define and implement the monetary policy of the Union and promote the smooth operation of payment systems. T2S also represents a key building block of capital market integration in the EU. The platform was realized by Banque de France, Banca d’Italia, Deutsche Bundesbank, Banco de España (4CB). Its project and operational costs were borne by all Eurosystem central banks; these costs will be entirely recovered through the service charges applied to T2S users. Today T2S is well-established in the landscape of European and global payment infrastructures. In 2020, it hosted the operations of twenty-one CSDs from twenty European markets; it settled over seven hundred thousand transactions per day in central bank money on a stable basis, with peaks of over one million. Its functioning is constantly monitored and subject to regular reporting by the Eurosystem to the market. In addition, it is subject to Eurosystem supervision according to the international principles defined for technological infrastructures of systemic importance. The evolution of T2S is a continuous development process; the next objectives concern the integration with other TARGET Services and the reiforcement of IT security and resilience measures, for which work is in progress. The challenges posed by emerging distributed technologies applied to securities settlement do not appear to constitute an alternative to the extremely advanced features of T2S. The European Commission’s issuance programme, which can be reasonably assumed will have propulsive effects for the European capital market, represents on the other hand an opportunity to enhance T2S network effects, increasing the number and size of settled instruments and the business opportunities for the markets connected to it. This work is divided into six chapters. Chapter 1 describes how T2S works. Chapter 2 explains the legal framework and the external governance structure. Chapter 3 focuses on the operations carried out in T2S by the European financial community. Chapter 4 illustrates the tasks carried out by Banca d’Italia. Chapter 5 describes the experiences of three leading Italian operators in T2S since its inception. Chapter 6 provides an account of planning and policy aspects, of the challenges posed by new technologies and of the opportunities to increase the central role of T2S in the European landscape.