Clearstream launches project to improve clearing and settlement in emerging and frontier markets 

The project aims to analyse current post-trade mechanisms in EMDCs and come up with a set of best practices for local market regulators. 

By Joe Parsons

Clearstream has launched a new project to explore how it can improve clearing and settlement in emerging and frontier markets (EMDCs) in Africa, Asia and Latin America.  

Through a new collaboration with Frontclear, a financial markets development organisation, the two companies have launched a project to analyse current post-trade mechanisms in EMDCs and come up with a set of best practices for local market regulators. 

“Clearstream has a long and globally recognised experience in connecting emerging and frontier markets to its post-trade settlement and custody platform. We are excited about our collaboration with Frontclear and are looking forward to join teams to share our knowledge to further assist incumbent capital markets in their internationalisation curve,” said Jan Willems, head of global markets, Clearstream. 

EMDCs are largely cut-off from global settlement platforms, with their lack of access being attributable to a combination of macro-economic volatility, insufficient regulatory frameworks, illiquid local current securities and platform challenges, among others.  

However, interbank markets in these frontier and emerging countries are changing and authorities are prioritising development of clearing and settlement market infrastructures, as well as operational policies and rules at a national level.  

Money markets are evolving as regulators improve legal frameworks and seek interbank activity, and as a result, there are visible efforts to improve national settlement infrastructures and investigate central clearing options.  

“We welcome working with a global leader in settlement services and look forward to developing useful input for our regulatory counterparties across EMDC markets,” added Ingrid Hagen, vice president of strategic projects, Frontclear. 

The joint partnership will also be joined in this effort by the European Bank for Reconstruction and Development (EBRD) and ABN AMRO Clearing Bank.  

The likes of Clearstream and its international central securities depository (ICSD) rival, Euroclear, have carried out work to improve cross-border clearing and settlement mechanisms for international investors.   

Last year, Euroclear and PwC found that setting up international clearing and settlement links with ICSDs can help save emerging markets $13 billion over 10 years, while increasing their foreign investor base.  

Clearstream has also increased its links with local custodians in emerging and frontier markets after it signed two key sub-custodian deals last year, one in Romania with Societe Generale Securities Services and the other in Colombia with BNP Paribas Securities Services. It also said it is working with government departments in emerging markets to bring them into their international network.   

In December last year, Clearstream also established a direct link between its German CSD and Nasdaq CSD in the Baltics to facilitate cross-border settlement in TARGET2 Securities (T2S) market, giving foreign investors easier and efficient access to the Baltics securities markets.