Euroclear and Euronext announced today that they had launched a book-entry settlement service in Euroclear Bank for trades on Euronext Paris, in parallel with the service already offered by Euroclear France, the French central securities depository (CSD).
Many will see the move as confirmation that Euroclear-Euronext is just as much a vertical silo as Deutsche Borse, but the Gallic duo describe the news differently. “This means that, for the first time anywhere in Europe, users of a major stock exchange will have a choice of settlement location for their trades,” they explain. But is a choice of Euroclear Brussels or Euroclear Paris really a choice at all?
Euroclear and Euronext admit that the move represents the first step in a process that will eventually enable Euroclear clients to process all of their equity trades in a single settlement location. “The development is also a significant milestone in the evolution of Euronext’s integrated market model, which aims to offer its clients seamless access to trading, clearing and settlement, thereby empowering them to generate additional savings by rationalising their own processing structures,” they explain. Indeed, since similar arrangements will be extended to Euronext Amsterdam and Euronext Brussels in 2003 – in line with Euroclear’s commitment to offer an integrated settlement solution in support of the Euronext Single Order Book concept- it is hard to read the news as anything other than a plan to offer multiple points of entry into a single settlement engine.
This is how it will work from 19 July this year: all transactions in securities listed on Euronext Paris will be cleared and netted by Clearnet, which will transmit instructions on a straight-through basis to the settlement platform – in the first instance, Euroclear Brussels or Euroclear Paris – chosen by the trading counterparties or their clearing members. Book-entry DVP settlement will be offered in commercial bank money at Euroclear Bank and in central bank money at Euroclear France. “By availing of the option to consolidate their Euronext Paris business in Euroclear Bank, international trading counterparties that are not direct members of Euroclear France will be able to benefit from a significant reduction in settlement costs,” explain the two organisations. “Their trades will now be treated on the same basis as domestic transactions, making them up to 10 times cheaper than before.”