December 3, 2012 / 2:11 PM / in 5 years

ECB may raise fees for settlement system due to weak trading

FRANKFURT (Reuters) - The European Central Bank said it may raise its fees for users of the currency bloc’s planned settlement system for stocks and bond trades owing to weak trading on financial markets during the euro zone debt crisis.

The new Target2Securities (T2S) platform is due to go live in 2015 and aimed initially to cut trading costs for investors to about 15 euro cents per transaction. But weak trading volumes might force the ECB to demand higher fees.

Settling trades, the final step in any deal where ownership of a bond or share is transferred to the buyer, relies on a multi-trillion euro system to swap legal title to a security in return for payment.

Jean-Michel Godeffroy, chairman of the ECB’s T2S Board said in a statement that volumes reported by the 23 settlement houses that signed up to platform were around 18 percent lower than expected in 2010 due to the crisis.

“This gives the T2S board cause for concern, as one of the underlying assumptions of the T2S pricing policy was that EU volumes would be no more than 10 percent lower than the projected volumes,” Godeffroy said.

He added that the board will look at ways to avoid increasing fees for its users.

Trading activity in shares has also been hit by the dearth of new companies coming to the market and lower levels of merger and acquisition activity than in the run up to the financial crisis.

Godeffroy told a conference last month that one option was to include other assets, such as international bonds, to achieve the economies of scale initially planned.

    “What we want to do is to find new markets. Bringing in international bonds settled in central bank money could help to fill the gap,” Godeffroy told a panel discussion at the Euro Finance Week conference in November.

    The first settlement houses to migrate to the new system will be the Bank of Greece securities settlement System, Italy’s Monte Titoli, Malta Stock Exchange, Romania’s Depozitarul Central and Switzerland’s SIX-SIS.

    Belgium’s securities settlement system NBB-SSS, Euroclear ESES, Spain’s Iberclear, Portugal’s Interbolsa and Slovakia’s CDCP will join from July 2016.

    From November 2016, Clearstream Banking (DB1Gn.DE), Austrian OeKB, Euroclear FIN, LuxCSD, Danish VP Securities and its subsidiary VPLux, Estonia’s AS Eesti Väärtpaberikeskus, CSD of Lithuania, KDD Slovenia and Keler Hungary will join.

    That way, the central securities depositories (CSD) of the Clearstream and Euroclear groups - which account for around two thirds of T2S volumes - will not migrate at same time, reducing the risk of disruption.

    Reporting by Eva Kuehnen; Writing by Louise Heavens

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