TARGET2-Securities: settlement of securities transactions

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Securities settlement: what is TARGET2-Securities (T2S)?

The Eurosystem, after having developed the technical infrastructure and put in place the appropriate regulatory framework, launched TARGET2-Securities (T2S), the single platform for settling securities transactions in central bank money[1] simultaneously,[2] for the same cost and following the same procedures regardless of the investor's country of origin. The various national financial marketplaces migrated in waves to T2S over the space of two years, between June 2015 and September 2017, when the platform was completed.

T2S has revolutionized securities settlement in Europe because it has brought an end to complex cross-border settlement procedures and the problems caused by different settlement practices among countries. With the launch of T2S, it has become possible to remove, not just technical barriers, but also a number of the operational practices that the market itself has been unable to overcome and that have hindered the full integration of securities settlement services in Europe.[3] T2S therefore has made it possible to settle financial assets under the same conditions safely and efficiently across the euro area.

How does T2S work?

When an investor buys stocks, bonds and government securities, they are credited to the securities account held with a central securities depository (CSD)[4] connected to T2S, while a simultaneous debit is made to a dedicated euro cash account, held by the investor's bank with their respective national central bank connected to the platform (i.e. the integrated model). In the event the securities are sold, the entire process is conducted in reverse.

Every transaction in T2S is settled individually (without netting) in a fast, low-risk and efficient manner. T2S also offers a set of sophisticated technical features, including settlement optimization, harmonization and auto-collateralization mechanisms, with net benefits in terms of cost saving and liquidity management.

Why T2S?  Five main objectives:

  • To make it easier for investors to buy securities in other euro-area countries;
  • To reduce the cost of cross-border securities settlement;
  • To increase market competition and efficiency by harmonizing technical and operational practices connected with post-trade services;
  • To reduce the need for liquidity by settling securities transactions made on European markets using a single settlement account held with a national central bank;
  • To reduce settlement risk and increase financial stability by using central bank money for transactions on the platform.

Participation in T2S by central depositories is voluntary and governed by the Framework Agreement, the contract setting out the mutual rights and obligations of the Eurosystem and the participating CSDs. Currently, 21 CSDs of 20 European countries use T2S.

By participating in T2S, the CSDs have entrusted the Eurosystem with the technical management of the functions relating to securities settlement, although they remain legally responsible and continue to provide basic services such as issuance and custody services and corporate event management. The CSDs also continue to offer value-added services that they decide upon autonomously, such as tax services, securities lending and triparty collateral management).

The development and operation of T2S was assigned to the central banks of France, Germany, Italy and Spain (4CB), operating under a Level2/Level3 Agreement[5] with the Eurosystem, which sets out their reciprocal rights and obligations and the expected service levels.

Just as it does for TARGET2, Banca d'Italia - together with Deutsche Bundesbank - handles the operational management of T2S, monitoring compliance with the expected service levels, and is the point of contact for all participating national central banks and CSDs. The two central banks maintain and develop the system as well as manage the administrative, legal and security aspects. Banca d'Italia also runs both the IT infrastructures that make the system function and those necessary for upgrading it.

Finally, Banca d'Italia is the only point of contact at technical and administrative level for Italian financial intermediaries. It monitors the transactions carried out and intervenes in the event of malfunctions affecting the system or individual participants.

Connecting to T2S

In order to allow depositories and large custodian banks (which hold and manage securities for smaller banks) to connect and communicate with T2S, the technical solution agreed with users offers connectivity services within a competitive system provided by two connectivity service operators, SWIFT and SIA-COLT, which were selected following a tender conducted by Banca d'Italia on behalf of the Eurosystem. As of June 2022, T2S connectivity will be integrated in the technical and legal framework for T2-T2S Consolidation.

T2S: a multi-currency platform

T2S was designed to operate as a multi-currency platform: the platform can be accessed by central banks outside the euro area that have signed the Currency Participation Agreement (CPA) with the Eurosystem to settle the cash 'leg' of securities transactions denominated in their respective national currencies. Danmarks Nationalbank, the central bank of Denmark, was the first to sign the CPA and it has made settlement in Danish kroner available on T2S since October 2018.

[1] Securities transactions are settled in 'central bank money' when the cash leg is settled in accounts held by counterparties with their respective central banks.

[2] This settlement mechanism, called delivery-versus-payment (DVP), ensures that the security is transferred only if the corresponding payment occurs.

[3] Removing the barriers to the free flow of capital will contribute to the creation of the Capital Markets Union (CMU), promoted by the European Commission, because it extends the diversification and expansion of investment sources, helps to simplify access to credit for firms and makes the financial system more stable and resilient to future banking crises, to the benefit of credit institutions, investors and EU citizens.

[4] A central securities depository (CSD) is a legal entity that holds securities accounts in the name and on behalf of their customers (mostly financial institutions); offers settlement and custody services for financial instruments; registers new securities issuances in their accounting books. Monte Titoli SpA is the central securities depository for Italy.

[5] The agreement's name derives from that fact that it regulates the relationship between two levels of governance, namely the Eurosystem (Level 2) and the 4CB (Level 3).


Markets and Payment Systems Directorate General
Payment Systems Directorate
Wholesale Payment Systems Division

Via Pastrengo 14 - 00185 Roma

Tel: +39 06 4792 5700

Markets and Payment Systems Directorate General
Payment Systems Directorate
Eurosystem Market Infrastructures Division
Largo Guido Carli, 1 - 00044 Frascati

Tel: +39 06 4792 6000