Euroclear has launched its long-awaited Single Settlement Engine (SSE) in the first of the five markets where it controls settlement. France went live yesterday. CREST in London is expected to follow in late summer; and Euroclear Bank before the end of the year. Each launch will be preceded by several weeks of client testing in each market.
The Belgian and Dutch markets have chosen to skip the interim stage and move directly to the next stage: the so-called Euroclear Settlement for Euronext-zone Securities (ESES) service, by which the ICSD will start to settle both fixed income and equity trades in the Belgian, Dutch and French markets as if they were a single market. It will go live next year.
SSE is the foundation for the proposed single settlement platform for the five domestic settlement systems the Brussels-based ICSD has acquired – Belgium, France, Ireland, the Netherlands, and the United Kingdom – and Euroclear Bank itself. It has proved more troublesome and more expensive to implement than expected at the time Euroclear acquired the domestic CSDs, but remains on course to give Euroclear control of settlement in many of the major securities markets of western Europe.
The next phase of the platform consolidation, ESES, will be built using the SSE as its foundation, but will incorporate the payment, custody and communications features of the Single Platform and Common Communications Interface that Euroclear sees as essential to the realization of its plans. RGV, the real-time settlement platform of Euroclear France, will be adapted temporarily to the purposes of payment and communications until the new features are in place.
“We are delivering on our promise to create a ‘domestic market for Europe’ where cross-border settlement and custody will be as low in cost and risk as in domestic markets,” says Euroclear CEO Pierre Francotte. “Close Euroclear Market Advisory Committee involvement and active market consultation ensure that we are delivering an efficient settlement environment that is in line with market needs. This milestone, and the progress we and others are making to harmonise market rules and practices, clearly evidence that market-led initiatives are responding to the European Commission’s call for a more low-cost and efficient cross-border settlement infrastructure.”
Euroclear claims that merging its multiple settlement platforms into one, and harmonizing settlement practices across the five markets, will result in “more than Euros 300 million” a year in savings to “the market.”
To reach the launch pad, Euroclear has trimmed its grander ambitions of an immediate transition on to a single platform, and will make use of the existing interfaces into the CSDs in order to minimize the costs and risks to market participants. Once it is fully implemented in France, the United Kingdom and Euroclear Bank by the end of this year, the SSE will handle settlement of trades submitted by the Euroclear France, CREST and Euroclear Bank legacy systems, each of which will continue to serve as the means of access for clients of the three former national CSDs. Importantly, users will be given the choice of settling in central bank money (in the national CSDs owned by Euroclear) or commercial bank money (in Euroclear Bank).
“The launch and operation of the SSE will be largely invisible to clients, and will not impact client interaction with existing systems,” says Euroclear in a statement. However, the larger goal of the ICSD is now within reach. In fact, the SSE is only the latest phase in a long term strategy Euroclear has pursued for over a decade to consolidate the settlement infrastructure of Europe, and put multiple markets on to a single platform it controls. When ESES is launched late next year, the Euroclear Group will for the first time taste the fruits of its long term ambition, by settling trades in the Belgian, Dutch and French markets as if they were a single market. Custody-related processing will be integrated into the single platform in 2008. All parts of the single platform are scheduled for completion by 2009.