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Mr Paolo Cittadini, on 19 January 2011 the London Stock Exchange Group announced that its central securities depository (CSD), Monte Titoli, has decided to participate in the first migration wave of T2S.
What made you decide to join T2S in the first migration wave?
We have proven to be a cost-effective, high-performing entity and we want to transfer our existing experience and skills into the new T2S environment.
Why are we migrating first, given that we have always been considered the cheapest CSD for settlement services in Europe?
We have many good reasons for doing so. First of all, T2S will usher in a very different scenario in the European post-trading arena and we want to be there from day one. We have always been leaders in “central bank money settlement” and T2S, the new system built and offered by the Eurosystem, will represent the most advanced and secure way to perform this activity. We have always been leaders in innovation and we intend to continue to be. We have proven to be a cost-effective, high-performing entity and we want to transfer our existing experience and skills into the new T2S environment.
Whatever the platform, we are convinced that we can deliver efficiency, quality and performance within the world of T2S.
Take a look at our organisation: compare us with our peers and you will note our high productivity levels; then look at the performance of our settlement system and you will realise how competent we are. We do not fear change, we intend to drive it. So far, our efficiency has only been tested for Italian securities, but with T2S we will be able to offer the same level of efficiency to all international players and for all European securities.
We do not fear change, we intend to drive it. So far, our efficiency has only been tested for Italian securities, but with T2S we will be able to offer the same level of efficiency to all international players and for all European securities.
Moreover, we are part of the LSE Group, an international group that can offer services across the securities value chain, from trading through to settlement. We are therefore very well equipped to make a comprehensive and overarching proposal to operators leveraging on the open structure of our Group. All clients of LSE Group will be able to appreciate this straight-through processing structure, which will allow them to save a lot of money on post-trade investment.
Another important point is the willingness of our participants to take on the challenge. When we shared our intentions to be in the first wave with them, our proposal met with great enthusiasm and received their full support.
What will be the greatest benefits of T2S for Monte Titoli/London Stock Exchange Group and for your customers?
I would begin by saying that what benefits us, is also of benefit to the participants to whom we provide our service. The better we work on T2S, the less our clients will have to change to access the new system.
As part of the post-trading structure of the LSE Group, we intend to become one of the major players in the world. T2S will help us reach this goal.
As previously mentioned, we have always been a benchmark for settlement services, but to date that has only been for domestic settlement. Developing a cross-border settlement service has always been an important focus for us, requiring investment in terms of building links and allocating staff to manage a first-class service.
As part of the post-trading structure of the LSE Group, we intend to become one of the major players in the world. T2S will help us reach this goal as it will allow us to reach some 30 CSDs and countries, widely extending our settlement network, but still using the same standard efficient processes and rules.
This leads me to the second major benefit for us and our participants: T2S is considered a catalyst for harmonisation, but this is not limited to the area of settlements.
It is quite obvious that also applying the same practices and procedures to asset servicing will allow us to strengthen our ability to provide value added services for foreign securities.
Basically, our future business model will lean on these two development guidelines: being global and comprehensive.
Some CSDs have invested a lot of time and money in pursuing the standardisation of practices and centralisation of settlement. T2S gives us the instrument to cover the gap.
What are the strategic objectives of Monte Titoli? What part does T2S play in this respect?
Perhaps our mission could be summarised as “continuing to provide the best services and solutions for our clients’ needs”. As I mentioned earlier, because T2S will extend our settlement network, it will play a fundamental role in allowing us to make major progress.
The T2S fee is just one component that will contribute to our overall pricing definition… We are working to ensure that our clients are not able to find a more competitive offering.
However, I imagine that behind this question there is a key issue for all CSDs: how will the business model of CSDs change in T2S? The general thinking is that CSDs should evolve their global custody business. Of course, this is an option, but we also have the added advantage of being part of the LSE Group: we can offer a comprehensive service from trading right through to settlement.
Basically, our future business model will lean on these two development guidelines: being global and comprehensive.
Recently, the Governing Council of the ECB decided on a T2S pricing proposal of 15 cent per instruction for a delivery versus payment transaction. How do you assess this proposal, and has clarity on this helped you to progress in your strategic planning?
For the time being it is not possible to evaluate the real impact of this proposal: the T2S fee is just one component that will contribute to our overall pricing definition. The impact of communication costs between T2S and CSDs has yet to be seen, and the same goes for the investment costs that we will have to recover, the cost of the information service that T2S will provide and the operational costs of our staff. So the 15 cent is just one factor in the total cost.
Nevertheless, we have promised our participants that we will continue to be the price leader in Europe. Sometimes in supermarkets you can find offers that promise to give you a refund on your purchase if you find the same item elsewhere at a lower cost. We are working to ensure that our clients are not able to find a more competitive offering. This will be feasible also owing to the fact that we are going to offer our systems to a wider range of international clients for a wider range of securities: we are really entering a new competitive Europe!
We are convinced that adoption of T2S is a challenge for each country’s financial system as a whole. That is why we deemed it indispensable to organise and coordinate works through the Italian National User Group.
How do you plan to organise the preparatory activities for testing and migration with your customers?
This is an important question, because we cannot migrate to T2S on our own. We are convinced that adoption of T2S is a challenge for each country’s financial system as a whole.
That is why we deemed it indispensable to organise and coordinate works through the Italian National User Group, where the Banca d’Italia (the national central bank), Monte Titoli (the CSD), Cassa di Compensazione e Garanzia (the central counterparty), the trading platform (Borsa Italiana) and all the other operators can work together to achieve an efficient, timely and successful integration in T2S.
Within the NUG we have also created two specific sub-groups that will be soon operative: one for planning and the other for migration, both of which are crucial.
Lastly, in agreement with our clients we are preparing a road map for the migration of the Italian system to T2S, which will include all the required activities (implementation and adaptation) that must be carried out between 2011 and 2014, when T2S will go live. There are plenty of things that need to be done, which are mainly referred to as harmonisation (not forgetting CCBM2), so it is therefore necessary to provide our clients with some clarity.
To conclude, I believe that T2S represents a fantastic opportunity for us to grow and enhance the value we offer to our clients, and we stand ready to reap the benefits.
