By Sinead Cruise and Amanda Cooper
LONDON (Reuters) – The European Central Bank reported a communications glitch on Thursday in its securities settlement system, which handles $1.9 trillion a day in transactions, leaving traders and bank risk managers scrambling to figure out the potential impact.
The ECB said the outage had affected communication channels across its pan-European TARGET 2 Securities, or T2S, platform, but did not offer more specifics. Trading sources said communications had been disrupted and the status of trades since the outage was reported remained unclear.
According to the ECB’s website, any issues with the T2S system in the past couple of years have typically been resolved relatively quickly. Thursday’s outage was reported at 0730 GMT and was still continuing by 1350 GMT.
The T2S platform is used to reconcile and settle trades in cash and securities across the Eurosystem, which includes the ECB and central banks of the countries that use the euro.
The glitch affected critical communications between central securities depositories (CSDs), the basic plumbing of financial markets.
Market participants usually communicate with T2S via their CSD or central bank.
“The Eurosystem is taking all measures necessary to resolve the incident as soon as possible,” the ECB said, promising a further update at 1430 GMT.
Earlier, the ECB said the outage had not affected the matching and settlement of trades executed on its platform.
On T2S, money and securities change hands simultaneously on a “delivery versus payment” basis. The ECB said on Thursday the cut-off point for delivery against payment for euro trades had been delayed by three hours.
European stock, currency and bond markets appeared to be trading normally, according to LSEG data.
Settlement on trades takes two working days, which might mean disruption may not show up until early next week.
One London-based trader said their team had little precedent for such an outage, with the ECB under extreme pressure to restore operations before the 1600 GMT cut-off.
Central counterparties, or clearing houses, ensure that a stock, bond or derivatives transaction is completed. The final leg of a trade, known as settlement, is conducted by the CSDs.
One CSD, Clearstream, said on its website that it would update clients once it had further information.
Others including Euroclear did not immediately respond to a request for comment from Reuters.
A person familiar with the matter said some Euroclear clients might see delays in the processing of their transactions.
(Additional reporting by Lucy Raitano and Samuel Indyk in London and Francesco Canepa in Frankfurt; Editing by Harry Robertson, Peter Graff and Kevin Liffey)
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