Thursday, April 17, 2008

Real-time realities

Guest blogger, Brussels ICSD, Euroclear, responds to news of Clearstream's new processing environment.

If memory serves me well, in 1998 both Clearstream and Euroclear (Euroclear Bank now) planned to launch real-time settlement platforms. Euroclear launched its daylight real-time settlement platform in 1999 and Clearstream postponed theirs indefinitely, citing other higher priorities such as Y2K.

Later, Clearstream launched its ‘continuous-batch’ daylight settlement platform called Creation for Clearstream Banking Luxembourg clients only; the CASCADE platform used by Clearstream Banking Frankfurt clients continues to operate today separately from Creation.

From our 10 years of experience in operating a real-time platform at Euroclear Bank, and our understanding of how real-time settlement works at other Euroclear CSDs, we know that there are different ways to organise a real-time processing environment, for example, event driven or calendared. To the client, however, the end result is the same – real-time availability of cash and securities.

Because Europe’s capital markets do not yet operate with harmonised market rules and practices, each processing platform must accommodate the particularities of the market(s) served, so the right approach for one market may not be the best for another.

Therefore, assessing whether one system is lower in cost to run than another requires highly complex analysis, including factors such as market practices, system capacity, processing peaks, levels of data-protection and client business-continuity sophistication.

Obviously, upgrading an existing system and consolidating five separate platforms into a single platform are very different initiatives. It would be nonsensical to compare a system upgrade with an unprecedented programme of infrastructure redesign that will save clients more than EUR 300 million per year.

Euroclear’s new Single Platform will, of course, operate in real time. Of equal significance are the joint efforts by Euroclear and our clients in the group’s five European markets (Belgium, France, Ireland, the Netherlands and the UK) to profit from the efficiencies of harmonised market rules and practices within these markets, in accordance with the Giovannini Group recommendations.

We firmly believe that platform consolidation and market practice harmonisation - in parallel - will deliver the most meaningful operational efficiencies and savings to the market. In recognition of these benefits, Euroclear Bank is now working with Clearstream Banking Luxembourg to harmonise market rules and practices for the international securities market, through the International Securities Market Advisory Group.

The two ICSDs have an excellent track record in making regular improvements to the Bridge, which is often credited by market participants as a stellar example of interoperability. Discussions are ongoing between the two ICSDs to further enhance the Bridge; interoperability can be improved further now that both Euroclear Bank and Clearstream Banking Luxembourg are operating in real time.


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