European securities depositories to launch settlement venture

European securities depositories to launch settlement venture

A group of seven European central securities depositories (CSDs) are gearing up to launch a joint venture aimed at cutting settlement costs across the region in accordance with the European Commission's voluntary code of conduct.

The seven CDSs are expected to disclose details of the venture at an event in Madrid tomorrow.

The group includes Deutsche Börse's Clearstream unit, Greece's Hellenic Exchanges, Spain's Iberclear, Austria's Oesterreichische Kontrollbank, Switzerland's SIS SegalnterSettle, VP Securities Services of Denmark and Norway's VPS.

A Clearstream spokesperson says the venture will deal with settlement only.

The JV is thought to be in response to the voluntary code of conduct on clearing interoperability, ushered in under the threat of legislation from the European Commission which was concerned about the high costs of share trading across borders. However moves to test the new clearing code, notably by LCH.Clearnet, have had mixed results.

Earlier this year LCH.Clearnet refused to allow Swiss rival SIS x-clear free access to the LSE's equity business in protest at barriers it is facing itself in Europe, particularly Germany and Italy.

News of the settlement venture came as the LSE told reporters that it was examining "all options" for its clearing arrangements, which include a review of its existing agreement with LCH.Clearnet.

According to a Financial Times report, the LSE's review has been prompted by the possibility of rival upstarts such as Chi-X and Bats Trading using LCH.Clearnet services.

In a further move signalling an overhaul of post-trade processing Europe, last week Nyse Euronext unit Liffe said it would establish its own clearing house and says it will renegotiate contract terms with current clearer LCH.Clearnet.
The LSE says it is "taking stock of the possible strategic ramifications" of the Liffe development as well as moves by US market operator IntercontinentalExchange (ICE) to terminate a LCH.Clearnet deal and establish a clearing unit in London.

Earlier this week the Financial Services Authority (FSA) approved another new venture - The European Central Counterparty Limited (EuroCCP), which has been selected to provide post-trade services for Turquoise, the bank-backed equities trading platform.

German exchange Deutsche Bourse is also understood to be reviewing the status of its inhouse clearing unit Clearstream, with a view to creating a new holding company to seperate the exchange from the clearing arm. Such a move would give the exchange more flexibility in financing it business plans, but it is unlikely to lead to any immediate withdrawal from the vertical silo model.

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