T2S, IT Backbone of European Capital Market – DEMYSTIFYING THE NXT GEN

Trading is a bundle of Risks, Rules, Regulations and Rotation of assets. As you are aware, the process of trading is simple (Buy or sell using your DEMAT account).  But the actual Risks and Regulations bother when performing post trade functions. In the capital markets, payment and securities settlement systems play crucial role. The importance of cash and securities settlement systems in modern economies has grown considerably over the last two decades due to the growth in the volume foreign exchange and financial markets globally. Indian Capital Markets (majorly BSE and NSE) being done its trading with single currency and performing domestic transactions; rolling settlement is done on (T+2) cycle basis. Imagine EUCM (European Capital Market) where settlement has to be done not only for domestic trading (within a country) but also for cross-border trading (across countries with multiple currencies) is planning to do the settlement irrespective of domestic or cross-border, intraday (T+0), would it  change the financial market structure of entire Europe? Yes, this paper gives an overview of how Europe is going to achieve this using T2S (Target 2 Securities), an enhancement service of the existing TARGET2 application. This paper also gives an idea of various post trade functions of EUCM and how T2S helps in bringing down the time and cost.

Benefit summary to Trader:

• With T2S, the major benefit to the traders is cross-border settlements (both cash and securities) also can be done with same fees as for a domestic settlement
•  Settlements are done intraday with accelerated process of harmonization⁸ and standardization
• Risk of delaying implementation of solutions aimed at taking apart of Giovannini barriers is mitigated
• The market and every post trading function would be transparent as T2S is an online direct connectivity to the trading application
• Secured risk profile can be achieved by handling project risks, operational risks, systemic risks and securities lending activities effectively

Future actions: It is recommended to explore detailed functionality (Various participants) and technology layers for better idea of working of/with T2S.

Full article is at: http://nousinfo.wordpress.com/2011/04/20/t2s-it-backbone-of-european-capital-market-%E2%80%93-demystifying-the-nxt-gen/

About the Article / Author:

When this article was published, Uday Kamatham was a part of the Technical Solutions Team at Nous Infosystems, Bangalore. He has been with Nous Infosystems for over a year and specializes in the Banking, Financial Services and Capital Markets domains with technical expertise in cloud computing and SaaS applications.

This Article was developed for a white paper contest organized within Nous Infosystems.

Currently Uday Kamatham is working with Accenture, Bangalore as a Proposal Architect with Technology Sales Support Center (The team).