Clearstream Adds ICSD Securities to T2S

When Clearstream connects to T2S in 2016, it will go beyond the initial remit for settling European securities by including all the products of its ICSD, which will link non-T2S markets to the platform and clients will have the choice of settlement in either commercial bank money or central bank money.
By Jake Safane(2147484770)
When Clearstream connects to T2S in 2016, it will go beyond the initial remit for settling European securities by including all the products of its ICSD, which will link non-T2S markets to the platform and clients will have the choice of settlement in either commercial bank money or central bank money.

In particular, Clearstream will add the settlement of Eurobonds, which are international bonds issued in various currencies that Clearstream settles in its ICSD. “Until now, the settlement of those instruments was mainly taking place, when it was euro, was mainly taking place in commercial bank money through the Clearstream Branking Luxembourg ICSD franchise. What we will be doing obviously is to maintain this possibility for people to conduct settlement in commercial bank money, but we will provide the possibility for our clients to also conduct settlement on those securities in central bank money through T2S. So we will make all these ICSD securities eligible in our CSD franchise,” says Arnaud Delestienne, head of core product management at Clearstream.

By linking securities held in its ICSD coming from non-T2S markets such as the U.S. and Japan, Clearstream is adding approximately 25-30% of the total value of its securities to T2S. “That would certainly be welcomed by the ECB and the authorities because it would increase the volume on the platform,” says Delestienne.

In addition to the increased volume, the choice of settlement in either central bank or commercial bank money should have positive collateral effects. “By maximizing interoperability between our commercial bank money environment, which is the ICSD franchise, and our central bank money environment, which is the CSD franchise, we will actually provide the best of both worlds to our clients,” says Delestienne. “And they will be able, because of this maximized interoperability, to move from one to another within seconds. That actually supports this call for increased collateral velocity and importance in terms of collateral management.”

The interoperability also provides some market participants settlement options that they otherwise would not have.

“Typically not everyone has access to central bank money, and if you look at the financial activity globally only the upper tier of the participants would have the opportunity to settle in central bank money,” says Delestienne. “So commercial bank money remains a very vital component of the financial market infrastructure, and a lot of people will continue to take advantage of the flexibility of the services that are provided in that environment in terms of credit, collateral management, securities lending and so on. Our objective through this strategy is certainly to maintain a very attractive commercial bank money environment, but to also make sure that whenever people have a vested interest to use central bank money, then they can benefit from a similar attractive environment.”

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