ECB's T2S settlement system may not launch in June - official

By Huw Jones

LONDON, May 6 (Reuters) - The European Central Bank's landmark project to unify settlement of securities across the euro zone won't be launched in June unless the platform is more stable, a senior official said on Wednesday.

The platform will settle euro-denominated securities, exchanging legal ownership for cash in the final part of a transaction.

Until now this has been done by a patchwork of national and international settlement houses, making cross-border trades expensive when compared with the United States.

The aim of the Target 2 Securities or T2S platform, which was originally due to launch in 2014, is to make Europe's capital market more efficient in oiling the economy.

Paul Bodart, a member of the ECB's T2S board, said there were still technical issues to be resolved ahead of the planned June 22 launch.

"The situation is still not at the level of stability that the board is expecting," Bodart told a conference held by AFME, the European banking trade body.

The board will meet on May 25 to decide if the launch will go ahead, he said. "We cannot launch a platform that is not stable enough."

T2S is being rolled out in phases, with Italy's Monte Titoli joining in the first wave due next month.

Bodart said a delay until September would still allow the second wave in March 2016 to go ahead, along with a final third wave.

But a postponement beyond September would lead to "dramatic change" and put the whole project's timing in doubt, Bodart said.

During the second and third waves, major settlement houses like Euroclear and Deutsche Boerse's Clearstream are set to join to boost volumes.

But the board is looking at how to bring in more business in order to reap greater economies of scale to drive down fees and help pay for the investment.

"We are trying to convince other markets and other central banks to bring their business and their currencies to the platform," Bodart said.

"We are looking actively at whether we could bring some funds settlement activity to the platform. We believe some euro bonds activity will come to the platform," Bodart added.

Using T2S to shuttle collateral used to back trades is also being looked at.

Alan Cameron, head of relationship management at BNP Paribas Securities Services, said trading and clearing costs have fallen and hoped T2S would do the same for cross-border settlement fees given the pressure on banks to cut costs. (Reporting by Huw Jones; Editing by Toby Chopra/Ruth Pitchford)

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