How does Target2-Securities impact the business and operating models of Luxembourg securities actors ?

Abstract

This project-dissertation was established in collaboration with the securities committee of the Luxembourg Bankers’ Association – ABBL. The objective is to provide a first-hand experience of Target2-Securities (T2S) in Luxembourg by understanding the reaction and the potential impact on current business and operating models of selected Luxembourgish securities actors. Furthermore, to identify the main challenges and opportunities stemming from the introduction of T2S and highlight the expected benefits and major market trends in the T2S environment in Luxembourg.

T2S is one of the biggest infrastructure projects set-up by the Eurosystem. It is expected to overcome the current fragmented European landscape and bring major improvements and benefits to the European post-trading landscape by establishing a single pan-European security settlement platfrom in central bank money (ECB, 2016).

Target2-Securities started its operations in June 2015. How does it affect the different Luxembourgish securities actors? In order to answer this question, a questionnaire has been established with 3 main parts:

1. T2S in Luxembourg. How did the respondents react to T2S in Luxembourg? 2. T2S, what was the impact on current business and operating models? 3. T2S, what are opportunities and benefits?

A logical framework and step-by-step methodological approach is used to achieve the demanded objectives. A survey questionnaire was designed and face to face meetings were carried out with selected securities actors in Luxembourg.

The results are based both on a sеries of in-depth interviеws organised in Luxembourg between October 2015 and March 2016 and the survey questionnaire. The respondents of the study only included experts in the securities services. The interviews were conducted in complete anonymity. All the gathered data was consolidated and normalised.

The conclusion of our study will be that the impacts of T2S in Luxembourg are significant for the CSDs and ICSD while limited or even nonexistent for the (global) custodians and Banks due to their operating models and roles in the markets. However, some opportunistic impacts are discovered for those actors.