Northern Trust Corporation (NTRS) announced the implementation of Target2-Securities (T2S) strategy to provide better services to its clients in the form of improved liquidity as well as asset safety. The bank hired the services of Deutsche Bank AG (DB) and Euroclear SA/NV to help it accomplish the same.
What is T2S?
T2S is an initiative undertaken by the European Central Bank (ECB) in 2008 to automate and standardize the current uneven settlement process throughout Europe by providing the market participants a single shared platform and legal framework for the settlement of securities.
The T2S project, which will launch the single coordinated platform in 2015, is expected to result in reduction of risks and costs associated with cross-border settlements.
How will Northern Trust Benefit from T2S?
The implementation of the T2S strategy with the support of Deutsche Bank and Euroclear will help Northern Trust improve efficiency and asset protection through synchronized Delivery-versus-Payment settlement in the ECB across European securities markets.
The bank will be able to offer improved services to customers as this strategy will lead to a decline in the cost of liquidity and increased asset safety. Moreover, the transparency and risk reduction provided by the integrated single market infrastructure, as proposed by T2S initiative, will further prove beneficial in the long run.
As part of its T2S strategy, Northern Trust will set up direct market connectivity in several European markets through Euroclear’s Investor Central Securities Depository (CSD) solution. Also, the bank will take advantage of the asset servicing facilities of Deutsche Bank.
Our Take
Though ECB started the T2S initiative mainly for the betterment of European markets, the cost efficiencies and smoother post-trade processes realized by this strategy will have a favorable impact on the global markets as well.
Currently, Northern Trust carries a Zacks Rank #3 (Hold). Some better-ranked finance stocks include AllianceBernstein Holding L.P. (AB) and First NBC Bank Holding Co. (NBCB). Both these stocks hold a Zacks Rank #1 (Strong Buy).
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