Euroclear
Encyclopedia
Euroclear is a user owned and governed Brussels
, Belgium
based financial services company that specializes in the settlement of securities transactions as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P. Morgan & Co.
Euroclear settles domestic and international securities transactions, covering bonds, equities, derivatives and investment funds. Euroclear provides securities services to financial institutions located in more than 90 countries.
In addition to its role as an International Central Securities Depository
(ICSD), Euroclear also acts as the Central Securities Depository
(CSD) for Belgian, Dutch, Finnish, French, Irish, Swedish and UK securities. Euroclear also owns EMXCo, the UK's leading provider of investment-fund order routing, and Xtrakter, owner of the TRAX trading matching and reporting system.
Euroclear is the largest international central securities depository in the world.
(part of J.P. Morgan & Co), via the Belgian branch of that establishment, which had a team specially dedicated to the operation of the Euroclear System.
MGT transferred these activities to Euroclear Bank in 2001.
(resulting from the merger of the stock exchanges of Amsterdam, Brussels, Lisbon and Paris), which enabled Euroclear in 2001 to acquire 100% of the capital of Sicovam
, the French CSD
, in 2002 100% of the capital of Necigef (Nederlands Centraal Instituut voor Giraal Effectenverkeer), the Dutch CSD, and in 2007, 100% of Caisse Interprofessionnelle de Dépôts et de Virements de Titres (CIK), the Belgian CSD. These local CSDs have accordingly been renamed as Euroclear France, Euroclear Netherlands and Euroclear Belgium, respectively.
Euroclear also took a 20% stake in the capital of LCH.Clearnet
, the UK/French entity responsible for the clearing of Euronext, London Stock Exchange and other stock exchange transactions. Since December 2000, Euroclear has also assumed responsibility for the settlement of Irish
government bonds (Gilts
) following the decision of the Irish government and the Central Bank of Ireland to delegate this activity to Euroclear. In September 2002, Euroclear acquired 100% of the capital of CREST
Co, the CSD for UK securities and Irish equities, which now operates as Euroclear UK & Ireland. The CSDs of Finland (Suomen Arvopaperikeskus Oy (APK)) and Sweden (VPC AB), now operating as Euroclear Finland and Euroclear Sweden, respectively, were acquired by Euroclear in October 2008. In November 2011, Euroclear announced the opening of a Poland entity (Krakow) , employment in Belgium will be externalised to this site.
The 2006 announcement of the probable development of Target2-Securities (T2S), a cross-border settlement platform being built by the European Central Bank, will commoditise securities settlement and force the Euroclear CSDs to offer more value-added services in the custody, asset servicing, new issues and collateral management domains.
Euroclear SA/NV is owned by Euroclear plc, a company organised under the laws of England
and Wales
, which is owned by market participants using Euroclear services as members.
Both Euroclear plc and Euroclear SA/NV have independent Boards of Directors composed of representatives of Euroclear users (major securities market participants), and of former user shareholders of merged companies (Euroclear France and Euroclear UK & Ireland).
The Euroclear plc Board makes the strategic decisions for the group. It decides in particular on the strategic investments and on joint ventures and alliances. Shareholder voting rights are limited to 5%. The Board is assisted by several committees comprising Non-Executive Directors. The Euroclear SA/NV Board has 24 Directors, all of whom are also members of the Euroclear plc Board. The Euroclear Boards set the policies and objectives of the Euroclear group, ensure their implementation by the Management Committee, and review its performance. These policies include, among others, pricing, risk management and membership admission..
(NBB) also has oversight of Euroclear SA/NV. Euroclear plc is authorised as a service company by the Financial Services Authority
in the United Kingdom
. Each of the Euroclear CSDs are regulated by the relevant authorities within their respective home countries.
Brussels
Brussels , officially the Brussels Region or Brussels-Capital Region , is the capital of Belgium and the de facto capital of the European Union...
, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
based financial services company that specializes in the settlement of securities transactions as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P. Morgan & Co.
J.P. Morgan & Co.
J.P. Morgan & Co. was a commercial and investment banking institution based in the United States founded by J. Pierpont Morgan and commonly known as the House of Morgan or simply Morgan. Today, J.P...
Euroclear settles domestic and international securities transactions, covering bonds, equities, derivatives and investment funds. Euroclear provides securities services to financial institutions located in more than 90 countries.
In addition to its role as an International Central Securities Depository
Central Securities Depository
A Central Securities Depository is an organization holding securities either in certificated or uncertificated form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of...
(ICSD), Euroclear also acts as the Central Securities Depository
Central Securities Depository
A Central Securities Depository is an organization holding securities either in certificated or uncertificated form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of...
(CSD) for Belgian, Dutch, Finnish, French, Irish, Swedish and UK securities. Euroclear also owns EMXCo, the UK's leading provider of investment-fund order routing, and Xtrakter, owner of the TRAX trading matching and reporting system.
Euroclear is the largest international central securities depository in the world.
Early history (1968-2000)
From its creation in 1968 until the end of 2000, the Euroclear System was operated by Morgan Guaranty Trust Company of New YorkNew York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
(part of J.P. Morgan & Co), via the Belgian branch of that establishment, which had a team specially dedicated to the operation of the Euroclear System.
MGT transferred these activities to Euroclear Bank in 2001.
Acquisitions (2001-present)
Euroclear has a non-exclusive partnership with EuronextEuronext
Euronext N.V. is a pan-European stock exchange based in Amsterdam and with subsidiaries in Belgium, France, Netherlands, Portugal and the United Kingdom. In addition to equities and derivatives markets, the Euronext group provides clearing and information services...
(resulting from the merger of the stock exchanges of Amsterdam, Brussels, Lisbon and Paris), which enabled Euroclear in 2001 to acquire 100% of the capital of Sicovam
Sicovam
Sicovam, an acronym for Société Interprofessionnelle pour la Compensation des Valeurs Mobilières, is both a security identifier system used to identify French securities listed on French stock exchanges, as well as the company set up to assign them...
, the French CSD
Central Securities Depository
A Central Securities Depository is an organization holding securities either in certificated or uncertificated form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of...
, in 2002 100% of the capital of Necigef (Nederlands Centraal Instituut voor Giraal Effectenverkeer), the Dutch CSD, and in 2007, 100% of Caisse Interprofessionnelle de Dépôts et de Virements de Titres (CIK), the Belgian CSD. These local CSDs have accordingly been renamed as Euroclear France, Euroclear Netherlands and Euroclear Belgium, respectively.
Euroclear also took a 20% stake in the capital of LCH.Clearnet
LCH.Clearnet
LCH.Clearnet is an independent clearing house based in Europe that serves major international exchanges and platforms, as well as a range of OTC markets...
, the UK/French entity responsible for the clearing of Euronext, London Stock Exchange and other stock exchange transactions. Since December 2000, Euroclear has also assumed responsibility for the settlement of Irish
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
government bonds (Gilts
Gilts
Gilts are bonds issued by certain national governments. The term is of British origin, and originally referred to the debt securities issued by the Bank of England, which had a gilt edge. Hence, they are called gilt-edged securities, or gilts for short. The term is also sometimes used in Ireland...
) following the decision of the Irish government and the Central Bank of Ireland to delegate this activity to Euroclear. In September 2002, Euroclear acquired 100% of the capital of CREST
CREST
CREST is the Central Securities Depository for the U.K., Republic of Ireland, Isle of Man and Jersey equities and UK gilts, named after its securities settlement system, CREST. The project was launched in 1993, following the Taurus fiasco, and the company was founded in 1996. CREST allows...
Co, the CSD for UK securities and Irish equities, which now operates as Euroclear UK & Ireland. The CSDs of Finland (Suomen Arvopaperikeskus Oy (APK)) and Sweden (VPC AB), now operating as Euroclear Finland and Euroclear Sweden, respectively, were acquired by Euroclear in October 2008. In November 2011, Euroclear announced the opening of a Poland entity (Krakow) , employment in Belgium will be externalised to this site.
Business model
In 2002, Euroclear announced a new initiative to reduce the cost of settling cross-border securities transactions in Europe. It proposed to consolidate all of the processing platforms used by the international and national CSDs within the Euroclear group. In addition, Euroclear proposed to harmonise market rules and practices within these markets, in line with the European Commission's Giovannini Group recommendations, the result of which would deliver substantial back-office savings. The first milestone, the Single Settlement Engine, was completed in early 2007; the second phase called ESES (Euroclear Settlement of Euronext-zone Securities) was completed in early 2009. The final phase, where all Euroclear group processing activity will be harmonised, will be rolled out in 2011, 2012 and 2013. All Euroclear group clients will also use a Common Communications Interface to communicate with the Euroclear CSD of their choice.The 2006 announcement of the probable development of Target2-Securities (T2S), a cross-border settlement platform being built by the European Central Bank, will commoditise securities settlement and force the Euroclear CSDs to offer more value-added services in the custody, asset servicing, new issues and collateral management domains.
Governance
The Euroclear group reshaped its corporate structure in 2000 and 2001, transforming the Belgian company Euroclear Clearance System (Société Coopérative) into Euroclear Bank SA/NV, which now operates the Euroclear System and provides the services previously contracted to Morgan Guaranty Trust Company of New York, Brussels branch. In 2005, a new Belgian holding company, Euroclear SA/NV, was created as the owner of all the shared technology and services supplied to each of the Euroclear CSDs and the ICSD.Euroclear SA/NV is owned by Euroclear plc, a company organised under the laws of England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
and Wales
Wales
Wales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...
, which is owned by market participants using Euroclear services as members.
Both Euroclear plc and Euroclear SA/NV have independent Boards of Directors composed of representatives of Euroclear users (major securities market participants), and of former user shareholders of merged companies (Euroclear France and Euroclear UK & Ireland).
The Euroclear plc Board makes the strategic decisions for the group. It decides in particular on the strategic investments and on joint ventures and alliances. Shareholder voting rights are limited to 5%. The Board is assisted by several committees comprising Non-Executive Directors. The Euroclear SA/NV Board has 24 Directors, all of whom are also members of the Euroclear plc Board. The Euroclear Boards set the policies and objectives of the Euroclear group, ensure their implementation by the Management Committee, and review its performance. These policies include, among others, pricing, risk management and membership admission..
Users
The Euroclear group serves clients from more than 90 countries. Most are banks, broker-dealers, and other institutions professionally engaged in managing new issues of securities, market-making, trading or holding a wide variety of securities. Retail investors are able to have direct accounts in local CSDs, according to local laws, rules and procedures.Supervision
Incorporated in Belgium, Euroclear SA/NV is subject to the supervision of the Belgium Banking, Finance and Insurance Commission (CBFA). In accordance with Article 8 of its Organic Law, the National Bank of BelgiumNational Bank of Belgium
The National Bank of Belgium has been the central bank of Belgium since 1850...
(NBB) also has oversight of Euroclear SA/NV. Euroclear plc is authorised as a service company by the Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. Each of the Euroclear CSDs are regulated by the relevant authorities within their respective home countries.
External links
- Euroclear portal
- T2S Project of the Eurosystem
- RIA on clearing and settlement marketClearing house (finance)A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...