Most Read Contributor in Luxembourg, February 2017
Europe's infrastructures for securities settlement have
always been fragmented. As a remedy for this, the
Target2-Securities project (T2S) was launched in 2007 with the aim
of reducing the barriers to cross-border security settlement in
Europe. Almost ten years later, T2S went live: since June 2015,
five Central Securities Depositories (CSDs) have been on the
platform, including the domestic Italian CSD Monte Titoli. The
platform currently settles around two million transactions per
month and seems to show more and more resilience. A Monte Titoli
executive stated, at the Clearing and Settlement conference in
March this year, that there have been "no major issues"
since the first weeks of operation and that the ECB was a
"fair and responsive" service provider. This is
promising, looking ahead at the remaining 80% of the settlement
volume still to be migrated to the platform.
T2S Wave 2 went live at the end of March, and no issues have
been reported so far. There are no questions anymore regarding
whether T2S will happen or not—it's here and it works.
The next step is now to understand how it will transform the
ecosystem in the coming years and how
new technologies such as blockchain may be incorporated to
The ECB is also already looking ahead at integrating T2S and
Target2 (T2), a platform for payment in Euros. On the agenda are,
among other things, a collateral management module for Eurosystem
operations, merging the T2 Single Shared Platform with T2S, and
providing an instant payment component. In other words, another big
How could T2S affect the fund industry?
There have been discussions in the past about investment funds
and whether, on the new T2S platform, some or part of the volume
settled by Transfer Agents (TA) will be done instead by CSDs in
Euros / central bank money. Because TA and CSD models respond to
different needs, they will coexist for a while as long as there are
multi-currency, multi-jurisdiction requirements. The CSD model has
been used for years in France and Germany for domestic distribution
and these local models will also be ported on to T2S. Thus, whether
or not there will be a single model is no longer a
question—there will be multiple ones. The TA model is
flexible and portable, which has many advantages, whereas the CSD
model is industrialised and scalable, which is the better choice if
reducing cost is a main driver.
The following chart characterises the different models in the
What T2S brings ultimately is not a change to the way CSDs
distribute domestically, but a change to the way cross-border
distribution can be envisaged across Europe, since the ecosystem
will be deeply modified once true competition kicks in. The loss of
settlement revenues, the newly introduced competition, and the
technical facilitation brought by "CSD linkages" will
attract CSDs to an area where custodians and global custodians were
previously masters of the game. Leveraging on their international
CSD ("ICSD") experiences, the big European CSDs will
evolve towards being investor CSDs and service not only domestic
assets but foreign ones, extending their inbound and outbound
networks to aggregate assets and counterparties. Thus, the lines
between traditional asset servicers and infrastructure players will
be increasingly blurred. Today's distributors might not be the
ones of tomorrow. TAs will face increased competition for the
processing of subscriptions and redemptions, as well as for
Down the road
Subscribe today, get your units in three to five days. At a time
where settlement cycles have been brought to T+2 thanks to CSDR,
fund units settlement still lags behind due to NAV and cash
frictions. With instantpayment and blockchain being
the buzzwords of the year, it's easy to picture the disruption
potential in Luxembourg's investment fund business if you look
at the transformations that have already begun in the clearing and
settlement industry. Will T2S be part of this equation? One step at
a time, Luxembourg's fund industry needs to face the changes,
but more importantly to assess what's coming and to reflect on
how it needs to evolve to remain competitive.
The Association Luxembourgeoise des Fonds
d'Investissement (ALFI) has launched working groups to
examine T2S's impact on the fund industry by looking at
different aspects (cash, issuance, and others). It is currently
preparing a paper, which KPMG Luxembourg has contributed to, with a
publication date set for September 2016. Watch this page for
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As the banking industry continues to be shaped by technological and regulatory forces, we’ve gathered our European Central Bank (ECB) experts to hold a conference about this changing landscape. KPMG’s ECB desk from Frankfurt will join our Luxembourg banking partners to unpack the latest news from the ECB, including regulations that will affect the future of banking.
We would be very pleased if you could attend this event, which will be held at our Luxembourg headquarters in Kirchberg on 30 March. The talk will begin at 5:00pm and last until 6:00pm, at which point the evening will be turned over to a networking session with drinks.
Please let us know if you are able to attend by using the registration button above (by 27 March, if possible).
We look forward to seeing you there!
Here in Luxembourg, LPEA are holding an event which will offer new initiatives by bringing General Partners (GPs) and Limited Partners (LPs) together to examine and speak on the industry from the “360” perspective, leaving no stone unturned. We are a sponsor of the event, as well as having a speaker present. David Capocci, Partner and Head of Alternative Investments will be offering his own insight on the industry nowadays.
ICT Spring is a global technology conference that welcomes various international professionals from the technology space. It is a two-day yearly event which is held in Luxembourg City, “at the heart of Europe, and offers the participants a unique opportunity to deepen their digital knowledge, capture the value of the fast-growing FinTech industry, and explore the impact of space technologies on terrestrial businesses, through exhibitions and demonstrations of the latest tech trends and innovations.”
Over the last 40 years, the Cayman Islands has matured into one of the world's most sophisticated and successful international financial centres, providing a competitive, effective, transparent, cost-efficient and tax-neutral platform for international capital flows underpinned by an environment of legal, political and economic stability.
UCITS are permitted to invest up to 100% of their assets in other open-ended collective investment schemes ("CIS") where those CIS are:
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