At a recent BT breakfast seminar a number of software vendors presented their own perspectives on the
Euroclear harmonisation project and how it could benefit the UK securities market. The potential consolidation of messages was best illustrated by the
Progress Software presentation that clearly outlined the huge inefficiencies existing within the UK market and how the Euroclear harmonisation could bring forward consolidation. This is undoubtedly good news
if it could happen but getting financial services to see the point remains the biggest barrier.
It is interesting that hardly any software vendor involved with Euroclear harmonisation (In the UK financial services firms still think of this as CREST) have been pushing the business benefits of harmonisation. Rather there is an almost stand back and wait
policy, for financial services firms to be forced into change. This strategy will eventually be fruitful but an early harvest would ensue if the business benefits were articulated.
In the UK, BT shares with
SWIFT, the network supply to Euroclear and I know that this set up has been regretted by a number of the founding fathers of CREST where there was once a real opportunity to make connections to CREST available to an open market. Unfortunately the duopoly
created in the design of CREST persists today and is a real problem when wider harmonisation of clearing and settlement across the EU is the objective.
The UK has a highly efficient settlement market way beyond the capability of any other EU state and it is this superiority as well as its total coverage of UK financial products that makes it almost impossible for EU harmonisation. The UK design model only
materialised from the adversity of TAURUS (The failed attempt to automate the UK market in the early nineties) and this environment for radical change of clearing and settlement structure is not prevalent across the EU. Change in the EU only seems to happen
through political objective and the inevitable Directive and even then it can take an eternity to implement, as each state and each interested party protects their own patch. Something has to give and it should not be the UK set up, as the UK is by far and
away the largest capital market in Europe and the largest international market. Will the other EU states accept this fact and fold into the UK model by supporting the Euroclear harmonisation? Hopefully it will not need more directives to achieve this!
The duopoly of networks for Euroclear UK has to be opened up to more commercial competition and SWIFT has to be opened up to become just another commercial supplier. The standardisation of messages will be going through more change in the future as ISO20022
takes a firmer hold and XML generally is developed to integrate the capital markets supply chain with the Issuers. This is clearly in the minds of SWIFT but should be open to choice by the markets and Issuers.