LuxCSD, the new central securities depository for Luxembourg, is now fully operational. The 50/50 joint venture between Clearstream and the Luxembourg central bank will provide Luxembourgs financial community with central bank money settlement as well as issuance and custody services for a range of securities including investment funds.
The LuxCSD is the culmination of several years of work in Luxembourg including the incorporation of the CSD in July 2010 and completion of technical implementation in September 2010. The final step was the recent designation of securities settlement system by the Luxembourg central bank. Before LuxCSD, Luxembourg could not enter into the T2S project because the eligibility criteria as part of T2S is to perform settlement in central bank moneycash at the central bank. Given that Clearstream Luxembourg uses a cash account at Clearstream, this structural difference necessitated the need for Luxembourg to set up such an entity.
Mark Gem, chairman of the Board of Directors of LuxCSD and head of Business Management at Clearstream, said: LuxCSD allows seamless interoperability with Clearstreams international market and will provide the Luxembourg financial community at a later stage with a gateway to T2S, said Gem. LuxCSD will be the hub for issuing securities in Luxembourg, covering all types of instruments, including investment funds.
Pierre Thissen, member of the Board of Directors of LuxCSD and head of Market Infrastructure of the Banque centrale du Luxembourg, said: The goal of LuxCSD is to provide securities settlement in central bank money in Luxembourg and across the Eurozone. Delivery versus payment (DVP) settlement in central bank money is widely recognized as the safest way to achieve securities settlement. LuxCSD will therefore contribute to lowering settlement risk. While domestically rooted in Luxembourg, LuxCSD will be oriented towards the entire Eurozone and beyond and will naturally link to TARGET2-Securities when it is implemented.
In an interview with GlobalCustodian.com in August, Patrick Georg, general manager of LuxCSD also commented on LuxCSDs orientation: On one side, the investment fund side, the issuance of securities needs to take place to ensure the investment funds issued in Luxembourg can be distributed to investors who would expect to receive such fund shares in an account within T2S. Similarly, large custodian banks in Luxembourg need to ensure themselves and their customers retain the best possible access to European securities, which in the future will be processed through T2S. So both the investor and the issuer side need to be facilitated, and LuxCSD will facilitate them.
LuxCSD will be a for-profit entity, with those commercial interests being represented by Clearstream, while the central bank will ensure the public interest is brought in the right balance with the commercial interest of Clearstream, said Georg.
In addition to the provision of DVP services in EUR central bank money and a centralized facility for the issuance and settlement of investment funds domiciled in Luxembourg or in other countries, LuxCSDs services will also include: free of payment (FOP) settlement between LuxCSD counterparties and against Clearstream Banking Luxembourg counterparties; issuance, settlement, asset servicing, and safekeeping of Luxembourg-issued securities; standard custody services including the handling of exchanges and corporate action events; and comprehensive custody services including the collection of coupon and dividend payments and tax and proxy voting services. Reporting and online connectivity in ISO 15022 will be available via the CreationConnect suite of products.
(JDC)