yves mersch : reaching for perfection – building the market infrastructure of tomorrow opinion piece by mr yves mersch, member of the executive board of the european central bank, published in eurofi magazine, 7 september 2016. * * * last year the eurosystem launched target2 - securities, or t2s, a pan - european platform for securities settlement in central bank money. this is a major advancement in europe ’ s securities infrastructure, allowing banks to carry out cross - border securities transactions in the same way as they make domestic transactions, and at lower cost. it also enables banks to manage their collateral more effectively by creating a single, centralised pool of liquidity. with t2s, banks can move collateral quickly and easily to where it is needed, rather than it getting blocked in local markets where it is not being used. t2s is just one part of the infrastructure that forms the backbone of europe ’ s financial market. the eurosystem has been working hard over the last decade to ensure this infrastructure is sound and efficient. what ’ s more, it forms the foundations of the capital markets union ( cmu ) by providing the technical network through which capital can move freely around the eu. the free movement of capital means greater access to financing for europe ’ s businesses and more diversified investment opportunities for investors. continuing with the example of t2s, this platform makes it much easier for a bank based in portugal, for example, to buy securities in latvia and to use them as collateral for transactions in france. t2s therefore makes it technically and physically possible to achieve the objectives of cmu : mobilising capital wherever it is found in the eu. moreover, the eurosystem ’ s work to build a strong financial market infrastructure has been the trigger for regulatory change in europe. for example, as t2s was being developed, it became clear that greater harmonisation across borders would amplify the benefits of the securities settlement platform. t2s has thus driven an extensive harmonisation agenda, bringing together the market to align rules and practices. the csd regulation laid down harmonised rules and requirements, which have created a more level playing field in the post - trade arena. despite all the work done so far, new challenges are constantly emerging that require the eurosystem to adjust and enhance the financial market infrastructure further. even a safe and efficient market infrastructure can be enhanced and complemented with additional functionalities and features. for example, as digitalisation changes

euro area goods trade balance ( eur billions ) sources : di nino, v., habib, m. m. and schmitz, m. ( forthcoming ) based on ecb and eurostat. notes : the blue area shows the net exports of the euro area as recorded in trade statistics. the yellow and orange areas depict the difference between b. o. p. and trade statistics in financial centres and other euro area economies, respectively. the group of financial centres includes belgium, cyprus, ireland, luxembourg, malta, netherlands. four - quarter moving sums. the latest observation is for the second quarter of 2019. this episode illustrates how b. o. p data and, by extension, also national accounts statistics can be affected by exports of goods that are not produced domestically and also do not cross the border of the domestic economy. in line with this, recent ecb research ( already presented in session 2 of this event ) finds that the trade surplus of euro area financial centres is mainly generated by foreign value added. notably, the pricing of the various transactions involved in cross - border production arrangements, in particular if these are intra - firm, substantially affects the amount and location of profits booked, reflecting the well - established concept of transfer pricing. over time, the location of corporate structures has become increasingly mobile. this is partly driven by the redomiciliation of headquarters and the increased relevance of intangible assets, such as patents and copyrights. these intellectual property products ( ipps ) are particularly important for digital companies, but are also relevant in other industries such as the pharmaceutical sector. ipps can easily be moved across borders, including to jurisdictions that offer favourable tax treatment for profits arising from such assets. typically, one entity of an mne group owns the ipp assets of the group, while other entities in the same group pay licence fees and royalties for their use. over the past few years, ipp - related transactions have had a marked effect on the services component of the euro area current account balance. in particular, there have been three large spikes in ipp - related imports ( chart 4 ). chart 4 euro area services trade balance ( eur billions ) source : ecb. notes : quarterly data. the latest observation is for the third quarter of 2019. these episodes – which reflect the transactions of a small number of large companies – are also visible in the euro area national accounts, where they show up as large imports of services and, commensurately