Euroclear Interconnecting the CSD

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Euroclear Interconnecting the CSD

• Presentation at AMEDA
• Marrakech, 21 October 2009
• By Bernard Ferran

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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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Euroclear groupOwnership structure
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NCSD Holding
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Euroclear groupKey Figures
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Euroclear group In the world
Euroclear FinlandHelsinki, Finland
Euroclear SwedenStockholm, Sweden
Representative office Frankfurt, Germany
Representative office Tokyo, Japan
Euroclear NederlandAmsterdam, The Netherlands
Representative office Beijing, China
Euroclear Bank Euroclear Belgium Brussels, Belgium
Euroclear Bank Branch Hong Kong, China
Representative office Singapore, Singapore
Euroclear FranceParis, France
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• Euroclear serves clients in their own language
  across time zones

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Euroclear GroupReduces overall cost and risk for
the market
Risks mitigation through
Industry with large economies of scale

• Standardisation
• Central Counter-Party

- Harmonisation - Automation
Unit Costs
Scale
Euroclear is an infrastructure services provider
for commoditised post-trading services, aiming
proactively at facilitating trading and
post-trading in particular by way of risk and
cost reductions in the market, including through
cost efficiency measures and consolidation
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Euroclear Group Today

• More than 50 of foreign holdingsin European
  Government bonds

• 869 European Participants
• 576 non-European Participants

• More than 60 of total Germanbond settlement

• 22 European markets
• 18 non-European markets

• More than 400,000 bonds,equities and funds

• Approximately EUR 250 bn cross-market,
  cross-instrument triparty collateral

• Close to 85 turnover market
• share vis-à-vis Clearstream

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ST008
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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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Focus on Euroclear Bank Features

• User-governed
• Belgian incorporated bank
• Supervised by
• Belgian Banking and Finance Commission (CBFA)
• National Bank of Belgium

• EUR 2 billion of total shareholders equity
• 4 times the BIS regulatory capital requirement
• Strong financial ratios
• Superior credit rating AA (SP, Fitch)

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Focus on Euroclear Bank Total 1332 clients
North America
Japan
11.4
5.2
Latin America
4.8
Asia
13.6
Africa
0.9
Europe
Middle East
44.2
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UK
15.9
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Focus on Euroclear BankFull services offered
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Focus on Euroclear BankYour direct access to
markets

• 40 major debt markets
• Argentina, Australia, Austria, Belgium, Canada,
  Czech Republic, Denmark, Nasdaq Dubai, Finland,
  France, Germany, Greece, Hungary, Hong Kong,
  Indonesia, Ireland, Israel, Italy, Japan, Korea,
  Luxembourg, Malaysia, Mexico, The Netherlands,
  The Philippines, New Zealand, Norway, Portugal,
  Romania,Russia, Singapore, Slovakia, Slovenia,
  South Africa, Spain, Sweden, Switzerland,
  Thailand, U.K., U.S.
• 30 major equity markets
• Argentina, Austria, Belgium, Canada, Czech
  Republic, Denmark, Finland, France, Germany,
  Greece, Hungary, Hong Kong, Ireland, Israel,
  Italy, Japan, Luxembourg, Malaysia, Mexico,
  Nasdaq Dubai, The Netherlands, Norway, Portugal,
  Singapore, Slovakia, Spain, Sweden, Switzerland,
  U.K., U.S.
• 40,000 mutual and hedge funds

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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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Domestic Market for EuropeEuropean trading,
clearing and settlement still very fragmented
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Domestic Market for Europe The answer of
Euroclear Group
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Domestic Market for Europe The implementation of
the Single Platform is progressing well

• Single Settlement Engine with technical netting
• Common Communication Infrastructure providing a
  single entry point with ISO SMPG compliant
  messaging and harmonised user screens
• Common Custody Platform with timely and accurate
  information on corporate actions, real-time
  credit of income proceeds, and consolidated
  reporting
• Harmonised lifecycle management to allow
  internalisation of settlement across group
  markets
• Group collateral management with single pool
• Central bank money settlement with demand driven
  auto-collateralisation
• Further service enhancements and standardisation
  across custody and settlement services

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Domestic Market for Europe Delivering the
building blocks of single platform...
Communication Infrastructure
Collateral Management
Service Enhancements
Benefits of full Single Platform
Group account structure
Pooling of assets
Transaction management
ISO messages
Harmonised settlement instruction lifecycle
Interoperability between full/domestic
Harmonised user screens
Matching at party level
Dual network providers
Access to central bank liquidity
Internalisation of full domestic settlement
Improved interoperability with group markets
Synchronous validation
Group billing
Harmonised validation and matching
Partialling and splitting
Dedicated Liquidity Model
Dedicated liquidity
Demand-driven auto-collateralisation
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Domestic Market for Europe Timelines
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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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TARGET2 - SecuritiesScope of proposal

• In July 2006, ECB announced that it was
  evaluating opportunities to provide efficient
  settlement services for securities transactions
  in central bank money on a single platform
  (TARGET2-Securities or T2S)
• In July 2008, ECB Governing Council decided to
  launch T2S (after intense consultation period on
  business requirements)
• T2S deals with settlement in central bank money
  only, no custody or asset servicing, no issuer
  services, no settlement in commercial bank money
  (these services remain with the (I)CSDs)
• Open to euro and non-euro zone currencies
• Implementation around 2013/2014

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TARGET2 - SecuritiesWhat is it?

• A technical platform to support CSDs in
  providing core, borderless and central settlement
  services
• The objective is to achieve harmonised and
  commoditised DVP settlement in central bank money
  in euros (and possibly other currencies) in
  substantially all securities in Europe
• Users need only open a single account with a
  single CSD to settle any transactions in
  securities in T2S with any participant
• T2S will be operated on the Target2s cash
  platform to exploit synergies with T2 to the
  fullest extent possible
• ECB, December 2007

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TARGET2 - Securities Changes implied
T2S addresses settlement of Euro-zone securities
bringing the benefits of

• Harmonisation of settlement
• Further interoperability between markets
• Pooling of liquidity via T2

But will require appropriate asset servicing
solutions, coping with

• split between asset servicing and settlement,
• lack of harmonisation of CA and tax which require
  market proximity, links with local intermediaries
  
• remaining market specifics settlement features,
• credit and liquidity needs driven by an RTGS
  system

• CSDs can offer a single access to T2S for
  settlement but lack appropriate and cost/risk
  effective asset servicing capacity for foreign
  securities

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TARGET2 - Securities Clients requirements

• Clients will reassess the way to access European
  markets
• Choices will vary across client profiles, markets
  and product segments and will be driven by
• Settlement efficiency
• Liquidity
• Cost
• Deadlines
• Required service level
• Asset optimisation (credit, collateral and
  liquidity)

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TARGET2 - Securities Euroclear to address
different clients needs
CCI
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TARGET2 - Securities ... supported by Single
Platform developments
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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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Link Up Markets
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Link Up Markets Example
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Agenda

• Presentation of Euroclear Group
• Focus on Euroclear Bank
• To deliver a Domestic Market for Europe
• Target 2- Securities
• Link Up Markets
• Connecting the CSD to Euroclear Bank

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Connecting the CSD to Euroclear BankAccess to
local markets
Clients
Clients
Clients
Clients / Investors
Clients / Investors
Clients / Investors
Global
Global
Global
Global
Global
Global
custodians
custodians
custodians
Custodians
Custodians
Custodians
Local agent
Local agent
Local agent
Local agent
Local agent
Local agent
Partial or Full support
Partial or Full support
CSD
CSD
CSD
CSD
CSD
CSD
Flexibility per market
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Connecting the CSD to Euroclear Bank Access to
local markets
Clients
Clients / investors
Clients
Clients / investors
CSD
CSD
CSD
CSD
Euroclear Bank(single account) 40 markets
Issuing CSD
CSD
CSD
Flexibility per market
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Connecting the CSD to Euroclear Bank What can
Euroclear Bank offer you ?

• Full services
• Settlement (DvP or FoP), asset servicing, tax,
  collateral management, Lending Borrowing,
  Forex)
• Link to 40 markets
• Direct to CSD or via local agents
• Proven track records
• 19 CSD connected to us
• Midclear, Takasbank, MCDR, Nasdaq Dubai, SD
  Indeval, Caja de Valores, Monte Titoli, KPDW,
  Austraclear, NDC, LCSD, KSD, TDCC, Euroclear
  Belgium, Euroclear France, Euroclear UKIreland,
  Euroclear Sweden, Euroclear Finland, Euroclear
  Nederlands,
• More to join from Latin America, Middle
  East/Africa, CIS, South Europe and Asia

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Connecting the CSD to Euroclear Bank What can
Euroclear Bank offer you ?

• Example of full in-sourcing
• Euroclear Bank acts as the Irish CSD for bonds
• Attractive Pricing for a full services
• Strong in Eurobonds, D.R., European Equities and
  all Fixed-income markets, Mutual Funds
• Recognises the economy of scale
• Partners of Euroclear Bank
• Smaller/some local clients are rerouted to their
  CSD which offer a domestic international
  services
• Training/education, advisory on how to best
  operate outside of your home market
• Servicing the multi-listed purposes

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Connecting the CSD to Euroclear Bank Why you
should connect to Euroclear Bank ?

• Expand your area of expertise by offering, both
  Domestic and International
• Diversify your source of revenues, maximise your
  existing infrastructure
• Take advantage of the Euroclear Banks 40 years
  of experience
• Times are changing, you need to act now to seize
  the opportunities
• Thank you

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