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TARGET-2 Securities Platform: Implications for the Post-Trade Arena


T2S is an important step in fixing Europe’s frag¬mented settlement system and could provide much-needed financial stabil¬ity by reducing the risks and costs associated with cross-border transactions.

T2S is an important step in fixing Europe’s frag¬mented settlement system and could provide much-needed financial stabil¬ity by reducing the risks and costs associated with cross-border transactions.

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  • 1. • Cognizant ReportsTARGET2-Securities Platform:Implications for the Post-Trade Arena Executive Summary been fueled by the Undertakings for Collective Over the past two decades, the European Union’s Investment in Transferable Securities (UCITS) IV (EU) single financial market initiative has deliv- directive, the cross-border merger of corporations ered price stability, reduced exchange rate uncer- and algorithmic trading. With this increase, the tainty and sliced transaction costs. However, the inefficiencies of the fragmented infrastructure, EU’s financial market infrastructure remains combined with disconnected practices, have largely fragmented. While regulations such as the exacerbated an already expensive proposition — Markets in Financial Instruments Directive (MiFID) that of rising transaction costs, post-trade. aim to bring interoperability to the pre-trade space, the post-trade arena continues to languish Numerous studies, conducted across multiple in silo fashion, adding unnecessary costs at a time levels of the ailing European securities market, when financial houses large and small are strug- have pointed to many of the root causes of gling to make ends meet. In fact, cross-border post-trade cost creep; however, the most transactions in the EU vis-à-vis the U.S. are highly significant is a report issued by the Giovannini expensive and involve numerous intermediaries. Group1 that identifies the barriers to an efficient pan-European market infrastructure and makes The great disparity in costs results from Europe’s recommendations for removing them. longstanding fragmented post-trade infrastruc- ture that originates from different nationalistic In alignment with efforts to remove the “Giovan- standards and practices. While clearing and nini barriers,” several market-led initiatives settlement systems in various EU countries are have been undertaken that aim to harmonize efficient in meeting domestic market require- practices at the pan-European level and system- ments, they have not been updated to atically address the legal and structural issues. accommodate the rising requirements of cross- Target2-Securities (T2S) is one such market-led border settlements that are so critical in today’s initiative developed to address several of the global economy. Giovannini barriers. In Europe, several factors have worked to shift The T2S platform is conceptualized and designed the trading focus to pan-European, cross-border to create a “pan-European domestic” market for strategies. While the advent of the euro paved securities settlement, with a clear objective of the way, the rise in cross-border trade has also aligning the costs for cross-border settlement in cognizant reports | january 2012
  • 2. the Eurozone with the levels of domestic settle- T2S does mark a starting point to a truly harmo-ment costs. T2S’s impact on market participants nized European settlement landscape. However, inwould be huge, causing some players to consider the long run, further harmonization, in areas suchfundamentally changing their business models. as securities laws and tax, will be key to reducingFor example, the impact on Central Securities transaction costs for banks across the continent.Depositories (CSD) would include the following: Lost revenue from settlement services, driving What is T2S? CSDs to expand their services. The T2S project intends to build a pan-European Likely consolidation in the long run. domestic settlement marketplace, similar to MiFID The need to reshape their IT infrastructure. for pre-trade and the Single European Payment Area (SEPA) initiative for payments. The plat-Meanwhile, the impact on global custodians would form, conceptualized in 2006, is owned andinclude the following: developed by the Eurosystem monetary authority and will also be operated by this organization. It is The opportunity to rationalize their settlement built on the same concept as the Trans-European value chain. Automated Real-Time Gross Settlement Express The need to invest in systems upgrades to Transfer System (TARGET2). T2S is designed to achieve full benefits. settle exclusively in central bank money (CeBM)3 Declining revenues for sub-custodians, from over respective NCBs4 to achieve higher market services to global custodians. efficiency and safe settlement. It will also be The option to use local expertise to provide capable of settling securities transactions from niche offerings, such as tax services. non-Euro markets, subject to the participation of the respective central banks.The European Central Bank (ECB) has been ableto generate significant buy-in from domestic In essence, T2S is a platform capable ofEuropean players. However, the project has expe- receiving settlement instructions, matchingrienced repeated delays; in fact, its expected them and reaching settlement, finally resultinggo-live date of 2013 was first postponed to in the generation of irrevocable booking entries.September 2014 and then further delayed to It will act as a technical platform to which the2015. The project has attracted its share of National Central Securities Depositories (NCSDs)5controversy, with national banks in the UK and can outsource their settlement process (seeSwitzerland opting out of participation in the Figure 1). NCSDs continue to retain the ownershipinitial wave of migration,2 amid questions of custody accounts and other custodial servicessurrounding the platform’s value proposition. for their customers; in that sense, they remain the designated settlement system under the Settlement Finality Directive (SFD).The T2S Framework T2S Validation and matching Securities CSD A CSD A Optimization NCB A NCB A accounts of settlement accounts CSD B CSD B Settlement and NCB B NCB B accounts realignment accounts CSD C NCB C CSD C NCB C accounts accountsSource: European Central BankFigure 1 cognizant reports 2
  • 3. Key aspects of T2S that have significant business cross-border securities trading to soar. However,implications include: the post-trade areas of clearing and settlement have not been integrated across national EU Support for ISO 20022 messages, exclusively. boundaries (see Figure 2). There are 41 CSDs Harmonized settlement calendar for all operating in the current trading landscape. participating markets (NCSDs). Optional participation of NCSDs, even in the Comparatively, the U.S. has a centralized clearing Eurozone. However, it is believed that market and settlement infrastructure — the Depository forces will automatically encourage NCSDs to Trust and Clearing Corporation (DTCC), which participate. handles clearing and settlement of corporate A multi-currency platform that can be bonds and equities — and the Federal Reserve extended beyond the Eurozone to achieve System, which processes securities issued by additional economies of scale to further drive the U.S. government, federal agencies and down settlement costs. government-sponsored enterprises (see Figure 3, Requirement for national-level specificities page 5). to be externalized and managed by respec- tive NCSDs, due to a design that encourages The cost of cross-border transactions in the EU is a harmonized settlement process at a pan- said to be 10 times6 higher than domestic equity European level. It is not yet clear if NCSDs will transactions. An end-to-end cross-border securi- be able to decommission their current settle- ties trade in Europe may require the involvement ment platform and migrate to T2S to support a of as many as 11 intermediaries and 14 instructions pan-European settlement platform for domes- between trading parties. This results in increased tic as well as cross-border settlement. The liquidity, counterparty and settlement risks. The inability to shut down or decommission the settlement landscape in Europe is typified by legacy (domestic) settlement infrastructure different rules, settlement cycles and charges may be the key barrier preventing banks from levied by different countries. These differences reaping the cost benefits associated with T2S. add complexity to the trading process, making it Ability for market participants to choose difficult for banks to mitigate the risks involved in whether they become direct participants in delivery vs. payment (DvP) across borders. T2S, while still retaining their relationship with respective NCSDs. The involvement of numerous intermediar- ies (custodian/agent banks) in cross-border transactions adds significant cost. Furthermore,Need for T2S various business models have emerged in EUThe euro, combined with other market forces countries over the past few years that have added(see sidebar, next page), has caused European to the complexity of settlement. In Germany,Securities Settlement Landscape in Europe Before T2S Market Participants Custodians CSD A CSD C CSD E CSD B Custodians CSD x CSD D LinksNote: No integrated cross-border settlement process in a single market; includes two ICSDs and multiple national CSDs.Source: “The European Post-Trading Environment and T2S”, Central Bank of Cyprus, 2009.Figure 2 cognizant reports 3
  • 4. Major Forces Driving Cross-Border Trade in the European Union The number of cross-border mergers is on the rise. With the advent of the euro, the investment strategy and asset allocation of many banks has become more sectoral than traditional currency-/country-based activities, resulting in the virtual elimination of country considerations. The development of trading strategies, such as algorithmic trading, is exploiting technological advancements in the trading arena. These strategies derive their value from very fine price differentials; profitability of a trade depends on the total cost of executing it – including the direct and indirect cost of clearing and settlement. The introduction of UCITS IV legislation allows fund managers domiciled in one European Union to distribute funds across the EU. UCITS IV also supports cross-border investments across the European Union through master feeder structures.for example, Deutsche Börse (a stock exchange), Real-time gross, commoditized and harmo-Eurex Clearing (the CCP) and Clearstream nized DvP settlement in central bank money.Banking Frankfurt (the CSD) belong to the same Optimized collateral management throughgroup (a vertically integrated model). Euroclear intraday transfer of collateral among CSDshas created a common settlement engine for over an extended time window, working inBelgium, France and the Netherlands (an example conjunction with the Collateral Central Bankof more horizontal, cross-border consolidation Management Model (CCBM2) and TARGET2.and harmonization). An IT platform to accommodate market participants’ central bank cash and securitiesHowever, a lack of common standards, ineffective accounts in one practices and a fragmented infrastruc-ture that is not conducive to interoperability is By creating a single platform for securitieshindering progress. This results in higher costs settlement, T2S is expected to enable competi-for market participants, as their systems, organi- tion in the area and will have important implica-zational structures and processes need to reflect tions for market participants in the post-tradethese variations. They also need to maintain a value chain, including CSDs, global custodians andmultiple set of agent institutions to participate in sub-custodians. For these market participants,different markets. Moreover, the high degree of T2S will also kickstart the move toward harmo-intermediation required for settling transactions nized market practices and adoption of newis hindering the EU’s goal of a single, harmonized messaging market. These developments augur well for investors,The Giovannini report lists 15 barriers to an which are expected to benefit the most fromefficient EU securities market infrastructure. this platform, through reduced costs and opti-These barriers must be overcome to create a mized spreads that result from more timelyharmonized trading landscape. T2S will play a settlement. The scope for reducing settle-key role in this regard (see Figure 4, page 5) ment duration will be influenced by the largerand will lay the technological foundation for reforms of different nations eyeing convergenceovercoming intermediation challenges. around a single settlement cycle of T+2.T2S aims to enable the following: Impact of T2S on Market Participants Reduced cross-border settlement costs T2S aims to create a more efficient and through a single IT platform, as well as stan- investor-friendly marketplace, and its introduc- dardized communication protocols for settling tion will have a significant impact on all market securities in the EU. participants in the EU (see Figure 5, page 6). cognizant reports 4
  • 5. Settlement Landscape Comparison: EU vs. U.S. Europe United States MTFs LU Euro- NYSE BME London SWX MTFs (e.g., (e.g., Nasdag Deutsche Nasdaq S.E. next Borsa Group Stock Group Chi-X/Turquoise) BATS) Börse OMX PT, Italiana DK, EE, BE, Exchange Trading LV, LT, FR, FI, SE, IS NL Eurex Clearing LCH LCH NSCC FICC LCH Clear- Clear- SIS EMCF Euro- Clear- net net x-clear CCP net SA SA Ltd. Clearing Clear- stream Banking Euroclear Frank- furt Clear- . DTCC V . Inter- Monte Asset IBER Stream bolsa U SIS CSD P . Titoli Servicing Clear Banking K Luxem- B F F N S & bourg E I R L E I E Federal Reserve Security and cash C B B . B B B B B settlement u D S D S BdE C . d N d N O I BdL SNB NCB B N . P R L P B f B E r a e Note: The shaded boxes indicate groups of companies resulting from mergers and acquisitionsSource: European Central BankFigure 3Presently, the disconnected markets are adeterrent to risk-averse investors. T2S-enabled Removal of Barrierssettlement cycles are expected to result in lower T2S is expected to help remove themargin and collateral requirements and mitigate following Giovannini barriers:systemic risk. This also means that firms need National differences in informationto standardize workflows, adopt new messaging technology and interfaces.standards and improve data management. National clearing and settlement restrictions that require the use ofIn terms of impacted entities, NCSDs are multiple systems.impacted the most in terms of adopting new busi- Differences in national rules relating toness models and messaging standards, as well corporate actions, beneficial ownershipas the likelihood of decommissioning significant and of their existing settlement systems. Also, Absence of intra-day settlement of the major focus areas of T2S is to encour- Practical impediments to remote access toage competition among NCSDs, providing market national clearing and settlement systems.participants7 with options to choose their National differences in operating hours/depository relationship, with settlement occur- settlement deadlines.ring on T2S. Source: “Giovannini Barriers to be Reduced by T2S,” European Central Bank.However, the implications of T2S are not Figure 4restricted to NCSDs alone; they are likely toreach a far greater level, leading to a significant Global Custodiansrationalization of the post-trade value chain. T2S presents a mixed bag for custodians. TheyThis increased competitiveness among key already face complex data delivery demandsmarket participants,8 enabled by an increasingly from clients. Preparing for T2S could mean addedlevel playing field delivered by T2S, is expected costs. Various regulations that followed theto drive cost optimization. financial crisis placed significant pressure on cognizant reports 5
  • 6. the custody business in terms of compliance and In our opinion, global custodian banks willtransparency requirements. Most custodians possibly look at direct settlement through T2S,operate in the fragmented European markets consolidating the relationship in a single CSDthrough sub-custodians. With T2S, they will (or a selected few) and will look at CSDs/nichehave an opportunity to optimize the number of service providers to fill service gaps in localintermediaries with which they work. Custodians markets such as income collection and taxhope that T2S will offer easier and more direct processing. With their traditional revenueaccess to various CSDs operating in the European streams becoming commoditized and collateralmarkets. management becoming the mainstream of newer revenues, and here these banks might even lookGlobal custodians looking to benefit from T2S at establishing CSDs in these eliminating intermediaries will need todevelop expertise in-house, which could mean Sub-Custodiansadditional investment. T2S will require different T2S will have significant implications for sub-cus-business models for global custodians to operate in todians. Smaller regional players that normallyEuropean markets, each with its own pros and act as sub-custodians for global custodians willcons (see Figure 6, page 7). have to rethink their business models and rewireImpact of T2S on Market Participants Stakeholder Current Scenario Post-T2S Scenario Central Securities Handle settlement and Handling of settlements by T2S; handling of depository Depository (CSD) depository functions. functions only by CSDs. Gain significant wallet share Significant change in the revenue mix, with a reduced of revenue from settlement. share of settlement revenue. The need to expand the service catalog and identify alternative revenue sources to compensate for the loss of settlement revenue. Consolidation, as market participants can choose to consolidate relationships with select CSDs. Ability to reap the advantages of T2S by rationalizing the existing IT infrastructure and re-design of existing systems. Global Custodians Provide custody administra- Opportunity to gain the most, as T2S provides options to tion services to institutional rationalize their settlement value chain. investors. The need to make significant investments to achieve U.S. players operate in the greater benefits (e.g., support for the ISO 20022 messag- European market via sub- ing standard to achieve direct connectivity to T2S). custodians. Opportunity to enter the market directly, without a sub- custodian, resulting in in-sourcing some of the services currently provided by sub-custodians. Sub-Custodians Provide custody administration Loss of revenues, as global custodians can connect services to domestic clients. directly to T2S (through a CSD). Also act on behalf of global custodians that may not have Increased competition, as CSDs in search of alternate a local presence. revenue sources enter the traditional revenue terrain of sub-custodians, resulting in increased competition. Creation of niches by some providers that specialize in services such as tax services.Source:, Cognizant Business ConsultingFigure 5 cognizant reports 6
  • 7. operations by developing new services, as large as asset optimization, tax-related services andcustodian banks may decide to reduce the num- income collection.ber of intermediaries with which they operate.This will require fresh investment in infrastruc- Depositoriesture, which will add to their costs. T2S’s single settlement platform, standardized communication and reduced cost of cross-CSDMoreover, not all sub-custodians will be able to settlement will facilitate lower long-term operat-bear this. Not surprisingly, among sub-custody ing costs. It will further reduce the entry barrierplayers there seems to be a negative opinion to players that want to offer cross-border CSDabout T2S. The fragmented nature of European has been helpful in some ways for thedomestic custodians. Some find it useful as a test T2S will put pressure on revenues from settle-bed for taking their business models global.9 ment services, as it will assume the majority of the Eurozone’s settlement activity. As a result,With clients having the ability to directly connect CSDs will have to develop new services and pos-to T2S, their settlement revenues could decrease. sibly tap into the services traditionally offered byAdditionally, there is also the likelihood that local custodians. This will require fresh invest-CSDs — particularly those that could lose busi- ments. While large depositories might be able toness due to T2S’s settlement role — will enter the manage this, smaller ones may find fresh invest-custody space, whereas custodians cannot offer ment hard to come by. The T2S platform will alsothe services of a depository. Therefore, smaller, provide a possible opportunity for large CSDs todomestic custodians could find it particularly enter new markets and potentially become issuerhard to avoid the loss of revenue as compared CSDs in these local markets.with larger players. Competition from interna-tional players that offer a single entry point for Going forward, CSDs will need to invest in reshap-all European markets is also likely to intensify. ing their IT infrastructure to reap the full benefits of T2S. Owing to increased competition, they willAs a result, it is possible that local custodians will likely need to scale up their services. Some areasconsolidate and transform, although not in the they will need to revisit include speeding up datanear term, into regional specialists that serve feeds, creating a seamless information flow offoreign participants in multiple European mar- securities and adopting ISO formats in a morekets. Further, as the settlement business declines, efficient communications structure.these entities may start transforming their busi-ness models to operate more like a utility that One element of concern to NCSDs is T2S’sprovides a bouquet of services to custodians such limitations with respect to settlement services.Global Custodian Engagement Model Alternatives in the Post-T2S ArenaScenario A Scenario B Scenario CDirect connection to T2S through Direct connection to T2S through an Remain with the presentan account at NCSD. account at NCSD (without a local agent). model and operate through a sub-custodian.This could be a practical scenario Apart from direct clearing, the custo- There are no benefits orin the short to mid-term. Here, dian becomes a direct participant of T2S implications of T2S. Trades arethe custodian chooses a direct through its account with NCSDs and initi- settled with the sub-custodianclearing participant of a selected ates and manages settlement instructions in the CoBM model.NCSD. The accounting relationship directly with T2S. The custodian will have tois maintained with the NCSD; there in-source local market services. It is impor-is an opportunity to consolidate tant to balance the in-sourcing decisionNCSD relations, while a local agent against the advantages of direct clearing/is appointed for services such as connectivity. Done correctly, this could beincome collection and registration. an efficient long-term option.Source: Cognizant Business ConsultingFigure 6 cognizant reports 7
  • 8. NCSDs continue to own all relationships and Standardizing or automating workflows tocustody services for the participants. This is increase straight-through processing ratesquite different from the U.S. model, where the and avoid error-prone manual intervention.DTCC provides a complete set of settlement, As a result, cross-border volumes are expectedcustody and asset servicing. Also, domestic to increase several-fold, making the securitiessettlement costs in Europe are on par with the trading business increasingly attractive toU.S. and hence do not merit routing transactions investors.via T2S. Therefore, NCSDs do not feel compelled Embracing ISO 20022-compliant messagingto decommission their existing settlement infra- standards that would also support existing ISOstructure for domestic trades. 15022 messaging in a transparent and low- cost manner to keep operating expenses at a manageable level.Winning in the T2S Era Centralizing data management systems toThe T2S platform is meant to help investors by improve process efficiency and reporting.reducing cross-border settlement costs and risk.For market players, however, it is a harbinger of While much remains in limbo regarding winningsignificant change. By making it easier for inter- player and business models, it is clear that inves-national players to operate in the EU markets, tors stand to benefit, as T2S is bound to introduceT2S could spur consolidation in the depository increased competition for their assets.and custody spaces. The dramatic changes beingbrought about in Europe through regulatory- andmarket-led initiatives are directed at achiev- Harmonization is the Way Forwarding the core purpose of the EU (i.e., facilitating Uncertainties regarding the timelines fora single economic market) and bringing implementation of the T2S platform have ledtransparency and competition to the securities to concerns about whether it will ever take The T2S platform furthers this cause The ongoing global financial crisis has addedand, hence, should be given higher priority by to the delays. Concerns over turbulent EUEuropean market players. economies have trumped the harmonization efforts. The decision by the Bank of England andGreater harmonization, driven by technology, the Swiss National Bank to not participate inbodes well for investors, as they would be able the initial migration waves has not helpedto significantly optimize their operations and matters. These issues have added to the anxi-technology platforms in a consolidating mar- ety of market players, such as global custodians,ket space. For market players, this also means that expect T2S to help reduce costs.that they need to invest in renovating and align-ing their systems and adopting new evolving The initiative has gained traction among marketbusiness models that allow them to more effec- players that recognize the long-term benefits oftively leverage the benefits enabled by these harmonization, not just in the settlements arearegulatory- and market-led initiatives. but also across the trading lifecycle. Thirty out of the aforementioned 41 CSDs in Europe haveFirms will also have to look at moving toward already agreed to join the T2S platform.the ISO 20022 messaging standard. This stan-dard supports a broad range of processes and For T2S to achieve its business case and recoverprovides improved data quality and integration. costs within the stipulated time, it is importantA move to this standard is also necessitated by that the platform garner significant settlementcorporate actions notifications, since the volumes in the early phases of migration. AnyISO 15022 standard was insufficient in handling delay in Eurozone NCSDs joining T2S, or some ofissues such as complexities surrounding corpo- the larger “foreign” markets such as the UK, mayrate reorganizations. potentially jeopardize the T2S business case/ economic model.While forcing players to reinvent their core valueproposition, T2S will require important techno- Continued efforts by the ECB and the EU are keylogical changes. Key technology imperatives for to achieving this harmonization. Settlement willindustry players include: only be truly accelerated when all the processes cognizant reports 8
  • 9. leading to it are also improved. But there are chal- The harmonization of the European financiallenges that go beyond the realm of technology. market is a long-term effort, and much has beenFor true pan-EU harmonization to be achieved, achieved over the past few years through legis-it is important that individual member nations lation such as MiFiD. Complete harmonizationalso cooperate in aligning their local markets to will not come easily. In the post-trade process,remove any regional challenges that might hinder including corporate actions and tax processing,overall harmonization. Winning the commitment further harmonization is needed, in areas such asof member states to go the distance, therefore, securities and tax a task that needs to be achieved, and quickly,for the platform to meet its already extended T2S is an important step in fixing Europe’s frag-timelines. mented settlement system. It addresses six of the 15 barriers listed by the Giovannini report and isMoreover, T2S’s role goes beyond providing expected to act as a catalyst for pan-Europeana common settlement platform. T2S is seen as harmonization. At a time of economic turmoil,a key enabler for the move toward a pan- T2S could provide much-needed financial stabil-European harmonized T+2 settlement cycle, ity in the securities trading market by reducingwhich is a long-term goal adopted by the the risks and costs associated with cross-borderEuropean Commission.10 transactions.Footnotes1 The Giovannini Group produced two reports, in 2001 and 2003, on the main barriers related to the fragmentation of the European trading, clearing and settlement markets and the resulting inefficiencies.2 “Banking Heads Hugely Disappointed By T2S Delay,” Finextra, Sept. 21, 2011.3 CeBM, or Central Bank Money, is the liquidity of the participant or its designated settlement bank, with the respective National Central Bank directly debited/credited over the respective Real Time Gross Settlement System (RTGS). Note that even with CeBM, multiple models to reserve and operate the liquidity are possible. As compared with CeBM, settlement outside of NCSDs — say between the agent bank and its customers — takes place in commercial bank money (CoBM).4 NCB: National Central Bank.5 NCSD: National Central Securities Depository, e.g., Euroclear France for the French market, Clearstream Frankfurt for the German market or SIS for the Swiss market. Note that due to an earlier initiative to harmonize and consolidate the national securities infrastructure, most of the Eurozone countries already have a single NCSD.6 “Settling Without Borders,” European Central Bank, November 2011.7 In this context, the term “market participant” is used to refer to any global custodian (typically DECU/ RECU in ISO 15022 vocabulary), broker-dealer or agent bank that operates in multiple markets and acts on behalf of the investor to settle a trade. In terms of the settlement chain, this is the entity closest to the investor. Such global players are likely to both be impacted by the changes that the move to T2S will require and expected to get maximum benefit from this new pan-European clearing platform. Specific reference is made to local agents in the respective national markets that provide settlement and custody services in respective markets. The terms local custodian, regional custodian, local agent and sub-custodian are used interchangeably, depending on the context. In the current business model for cross-border settlement, such agent banks (DEAG/REAG in ISO 15022 vocabulary) are normally always deployed (required) and are closest to the place of settlement (PSET in ISO 15022 vocabulary). cognizant reports 9
  • 10. 8 Typically, NCSDs and NCBs are the key market infrastructure providers, along with the agents (securities) and settlement banks (money) at the next level.9 “Post-Trade Infrastructures: Defragging the Future,” Banking Technology, Oct. 21, 2011.10 Jeremy Grant, “Brussels Looks to Cut Settlement Times,” Financial Times, Oct. 24, 2010.References“Network Management: Tales of the Unexpected,”, Dialogue, Issue 28, Q2 2011.“Securities Settlement in 2020: T2S and Beyond,” speech by Vítor Constâncio, Vice-President of theECB, ECB conference, October 2011.Sophie Baker, “Collateral Chase Changes Settlement DNA,” Financial News, Oct. 17, 2011.Phil Davis, “A Question of Survival For Custodians,” Financial Times, Oct. 9, 2011.Jeremy Grant, “Europe Moves Closer To Streamlining Securities Settlement,” Financial Times,Sept. 11, 2011.Sophie Baker, “T2S Forces Custodians Back to the Drawing Board,”, Sept. 19, 2011.“ECB Calls on Recalcitrant CSDs to Take Efficient Approach to T2S Integration,”,Sept. 21, 2011.Chris Kentouris, “SIFMA Tech 2011: Why ISO 2022 Messages Make Business Sense,” SecuritiesTechnology Monitor, June 14, 2011.Andrew Tjaardstra and Melanie White, “Sibos 2011: TARGET2-Securities Delayed Until 2015;Doubts Emerge,” International Custody & Fund Administration, Oct. 26, 2011.“The Bank of England Could Kill T2S,” Thomas Murray, July 6, 2011.Joe Morgan, “T+2 Move Sweetens European Trade Settlement,” Financial News, March 28, 2011.“European Securities Settlement: Steps Toward Harmonization,” BNY Mellon Asset Servicing, May 2011.“T2S or TARGET2-Securities Platform,” NextFinance, 2011.Dominic Hobson, “Is it All Over for Custody?” Financial News, June 7, 2010.“Ask the Experts: How Will the ECB’s T2S Project Impact Data Management?” A-Team Group,Sept. 4, 2009.Pierre Francotte, “Competition and Challenges Ahead,” Financial Times, Feb. 1, 2009.Sanjay Bhanot, “Post Trade Infrastructure Harmonization in Europe,” Cognizant Reflections Journal ofBanking & Financial Services, 2008. cognizant reports 10
  • 11. CreditsAuthor and AnalystAkhil Tandulwadikar, Cognizant Research CenterSubject Matter ExpertsSathyanarayanan Palaniappan, Senior Manager, Cognizant Business Consulting, Banking and FinancialServices PracticeRajagopal Sethuraman, Manager, Cognizant Business Consulting Banking and Financial ServicesPracticeSanjay Bhanot, Assistant Vice President, Cognizant Business Consulting, Banking and FinancialServices PracticeDesignHarleen Bhatia, Design Team LeadSuresh Sambandhan, DesignerAbout CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services. Cognizant’s single-minded passion is to dedicate our global technology and innovation know-how,our industry expertise and worldwide resources to working together with clients to make their businesses stronger.With over 50 global delivery centers and more than 130,000 employees as of September 30, 2011, we combine a uniqueglobal delivery model infused with a distinct culture of customer satisfaction. A member of the NASDAQ-100 Index andS&P 500 Index, Cognizant is a Forbes Global 2000 company and a member of the Fortune 1000 and is ranked amongthe top information technology companies in BusinessWeek’s Hot Growth and Top 50 Performers listings.Visit us online at for more information. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. Haymarket House #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA 28-29 Haymarket Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London SW1Y 4SP UK Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7321 4888 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7321 4890 Fax: +91 (0) 44 4209 6060 Email: Email: Email:© Copyright 2012, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.