Nasdaq Merges Baltic CSDs for Final T2S Migration Wave

Indars Ascuks, head of the Nasdaq Baltic Market and CEO of Nasdaq CSD (central securities depository), tells WatersTechnology that the merger was designed as a result of the transformation that markets in Europe have undergone in the last 10 years. 

“This change was essential and was triggered by a number of drivers,” Ascuks says. “New technology demands for the CSDs in Europe and globally, the regulatory requirements such as CSD [Regulation] and the re-authorization of CSDs in Europe, as well as Nasdaq’s ambition to build a strong and unified market infrastructure in the region.”

With the merger, Nasdaq aspires to increase the competitiveness of the Baltics in the post-trade system.

“We want to ensure integrated securities trading and post-trading services for companies and investors in the Baltics and abroad,” says Ascuks. 

CSDs are entities that hold share certificates so that their ownership can be transferred efficiently after being traded, traditionally operating huge vaults to store physical certificates, but which today are almost completely digitized. They are typically focused on one nation, but companies such as Euroclear, Clearstream and now Nasdaq have increasingly formed so-called international CSDs, in response to both regulatory measures and initiatives such as Target2-Securities (T2S), a pan-European settlement platform designed and operated by the European Central Bank.

The platform has been designed to centralize the settlement of securities in central bank money, and is seen as a key pillar in the overarching scheme to create a capital markets union within the EU. T2S went live in 2015, and has seen five “waves” of migration since then, with various European CSDs joining the platform. With the migration of the Baltics and Spain’s Iberclear on September 18, the migration plan is now complete.

However, the platform’s launch has not been without controversy. Earlier migration waves were delayed amid complaints of problems with T2S, notably in the case of Monte Titoli. The Italian CSD was meant to join in the first wave of migration in June 2015 but ultimately joined the platform in August 2015, owing to technical issues.

The process has also been complicated from a regulatory perspective. In a statement highlighting the migration, Iberclear said that preparing for T2S had consumed “a significant amount of resources, work and coordination among all the agents involved,” and that it had entailed “major regulatory changes” completed in coordination between the CSD, the national securities exchange and the Spanish government.

As a result of effectively outsourcing the settlement function to the platform, CSDs are expected to either consolidate with other regional entities or focus on auxiliary offerings, such as asset servicing. Nasdaq believes that merging the three Baltic CSDs and migrating under a single entity will ultimately benefit both the Baltics settlement landscape and the rest of Europe. 

“Our markets are seen as one, and we need to behave like one in reality. T2S makes our markets understandable and in the same easily readable as the other markets,” Ascuks says. “We want to make the best use of T2S for our markets and customers, and we expect T2S to make it easier in investing in the Baltic region.”

He says that these changes will create synergies of value for the markets in the Baltics, whereas T2S will bring Baltic assets to a single European pool, which consequently leads to new business opportunities and the long-term optimization of market structure in Europe. 

“T2S is beneficial for our small region because T2S is not only about a single platform; it is also around market practice harmonization,” Ascuks says. “For our three small markets it is absolutely unavoidable for going forward.“

The legal entity of Nasdaq CSD will be based in Latvia, with local branches in Estonia and Lithuania. Client servicing and local business will continue in all three countries as before.