FRANKFURT (Reuters) - The European Central Bank will increase fees for its flagship securities platform by more than half from next year as volumes are far below its expectations, it said on Monday, highlighting its struggles to integrate Europe’s patchwork capital markets.
Launched in 2015, Target 2 Securities, or T2S, was to link national stock and bond settlement houses, in the hope of eliminating barriers between domestic and cross-border settlement to reduce costs.
But volumes last year were 33 percent below initial expectations due in part a prevailing preference for well established national platforms, lower overall market volumes and lower migration to T2S due to fears over its costs.
To recoup costs, the ECB will raise the fee that depositories of securities will have to pay for each buy and sell order to 19.5 cents from 15 cents, plus implement a temporary surcharge of 4 cents, subject to trading volume growth.
The surcharge would be eliminated if actual volumes caught up to projections.
Volumes in ECB's T2S trading platform: reut.rs/2MVoqbJ
“Delays in the migration of certain T2S markets reduced the T2S income for the first two years of operation, causing timetable adjustments, higher operating costs and deferred revenues,” the ECB said.
“The financial equilibrium of T2S depends largely upon all incurred costs being covered by the revenues generated over a predetermined period,” the ECB said.
The recovery period on the project was also increased to 14.5 years from 8.75 years.
T2S averages over half a million securities transactions per day with volumes over 800 billion euros.
Reporting by Balazs Koranyi; Editing by Toby Chopra