T2S - gigantic project ready on time
Today, VP SECURITIES in Denmark and VP LUX in Luxembourg opens up for settlement of securities in TARGET2-Securities (T2S), which is the pan-European platform of the European Central Bank (ECB). The T2S project commenced ten years ago, with the aim of harmonising the market for clearing and settlement of securities. VP began the preparatory work back in 2007.
"As a CSD we're fully aware of the importance of an integrated European financial market. This made it natural for VP to be part of T2S, even though Denmark is not in the Eurozone," says CEO Niels Olsen, VP SECURITIES.
Establishing a pan-European platform across the 23 CSDs involved in the project is a gigantic task. In time, T2S will connect the many different settlement systems in Europe, which have impeded trading across national borders.
"From the start, VP has dedicated its efforts to building up the pan-European platform. We've therefore taken part in all working groups under the project. We have invested the required resources in T2S, and VP has build up a fantastic body of knowledge about T2S. I'm sure that this will be to VP's and our clients benefits in the future, when new value added services are to be devised on top of T2S for the European post-trade market," says Niels Olsen.
The ECB has invested one billion EUR in building up T2S. VP has invested DKK 300 million in system adjustments and access to the platform. In terms of both value and significance, this makes T2S the biggest project in VP's history, ever since VP was established in 1983 and dematerialised bonds as the world’s first CSD.
"As always with a project of this size, there are ups and downs. There have been challenges along the way, and especially 2014 was a difficult year. However, we have throughout the project been able to reach the agreed milestones with great effort from our staff as well as the Danish financial community," says Niels Olsen.
A pan-European market
For the project to succeed, 24 harmonisation activities were identified, which the participating countries and CSDs must complete in order to become part of T2S.
"Harmonisation via the T2S project is one of the most important reasons for our participation. This harmonisation creates a level playing field for all CSDs, ensuring fair competition," says Niels Olsen.
In time, T2S will connect the many different settlement systems in Europe, which have impeded securities trading across national borders. In some cases this has made cross-national transactions ten times more expensive than national trades.
"There are great expectations of the harmonisation of transactions across national borders, and it's important that we can support our clients with efficient access to the European market," says Niels Olsen, continuing: " I see T2S as an enormous opportunity for Denmark, since this harmonised, effective platform will be an advantage for issuance and distribution of Danish securities and at the same time provide easy access to European securities via VP."
Today, VP has an updated system landscape with 3.3 million securities accounts. VP's platform is built up with segregated securities accounts, ensuring optimum protection of investors' assets.
"We're actually rather proud of VP's platform and technological capabilities. We were the first to dematerialise bonds, and we're now the first Nordic CSD with access to T2S. Since we're continuing to build on this same foundation, we now have a future-proof platform on which we also can provide segregated securities accounts via T2S," says Niels Olsen.
EUR is just the start
Today, VP opened up for issues in EUR on the T2S platform. All of the other participating CSDs are part of the Eurozone, which makes it natural for VP to start with T2S issuance in EUR. Yet this is just the beginning, since from the start T2S is established as a multi-currency platform for the settlement of securities.
"Today, we're celebrating the completion of a successful project, opening with EUR issuance, and we've already set sail for the next big milestone in VP's history, which will be settlement in Danish kroner, DKK, on the T2S platform in 2018," says Niels Olsen.
The ambitious plan to settle in DKK on T2S means that the Danish krone will be the first non-EUR currency on the T2S platform.