The Euroclear strategy of establishing direct links with market utilities took another step forward today with the news that investors in Hong Kong will in future be able to hold and settle securities in Euroclear via a real-time link the Brussels-based ICSD is establishing with the debt depository of the central bank: the Central Money Markets Unit (CMU) of the Hong Kong Monetary Authority (HKMA). Euroclear already has direct links to the CSDs in Austria, Belgium, Denmark, France, Italy, the Netherlands and the United Kingdom. Only in France, where it uses Societe Generale despite having actually merged with the local CSD, does Euroclear still employ an agent bank.
The CMU-Euroclear link, scheduled to go live by the end of 2002, will allow Asian investors to access their international
securities
and
counterparties
in Euroclear via theier CMU accounts. For Euroclear, this is a case of reciprocity at last, but with an important difference: directness. In 1994, an indirect one-way link was established from Euroclear to the CMU, enabling Euroclear clients to clear and settle debt securities lodged with the CMU. This link, provided through HSBC, continues to operate very successfully. The total value of overseas holdings in the CMU is currently HK$23.4 billion (EUR3.4 billion).
Commenting on the agreement, Joseph Yam, Chief Executive of the HKMA, said: “Although the CMU is already one of the most advanced CSDs in Asia, we cannot afford to stand still. Investors and issuers in the bond markets increasingly require a global reach. And they have come to expect continual improvements in clearing and settlement arrangements so as to increase efficiency, reduce costs and contain risk. This enhancement of the excellent relationship we already have with Euroclear is a significant step in the development of efficient and safe debt trading in the region, and should be especially convenient to those managing global portfolios from or through Hong Kong.”
Pierre Francotte, Chief Executive Officer, Euroclear Bank, added: “We warmly welcome the HKMA’s decision to establish a direct link with Euroclear. As well as underscoring Euroclear’s commitment to providing high-quality and cost-effective custody and settlement services to the Asian market, the link will also provide direct and immediate benefits to clients of both organisations. Asian investors will be able to settle Euroclear-eligible securities in their own time-zones, while clients in non-Asian markets will be able to access an even broader range of trading counterparties.”