At a press briefing this morning in London, Clearstream International CEO, Jeffrey Tessler, quashed ongoing rumours that Deutsche Börse may "spin off" its ICSD.
Back in 2007, at the time that much of the transatlantic consolidation between national exchanges was kicking off and Deutsche Börse had made numerous failed bids for the London Stock Exchange, FinancialTech Insider reported rumours suggesting that the German exchange could sell off parts of its business, including the ICSD Clearstream.
According to newspaper reports at the time, Atticus Capital, which held an 11.68% stake in Deutsche Börse,was keen to see it separate Luxembourg-based Clearstream International from the exchange and return cash to shareholders.
Today in London, Tessler said the board of Deutsche Börse remained committed to the existing business model and that there were no current plans to spin off the ICSD, although it was open to any future debate and discussion regarding this.
Despite ongoing challenges in the credit markets, Tessler said Clearstream was in relatively good shape (it is one of the few custodian banks that is still AA rated, he said) and that, unlike its competitors, it had not been directly exposed to the failure of major sell-side firms such as Bear Stearns and Lehman Brothers as it never had broker dealers as client.
Tessler said Clearstream had witnessed an "explosion" in cash balances, which had tripled as investors perceived the ICSD as a "safe haven". Despite declines in mutual fund settlement as German retail investors shied away from equities, Tessler said Clearstream's main business, Eurobonds, remained promising as debt issuance from both governments and corporates is expected to rise substantially outstripping the capacity of domestic markets, thereby benefiting the international market that the ICSD services.
Despite the difficult economic climate, Tessler reiterated the benefits of Clearstream's strategy of pursuing "interoperability" rather than a single settlement engine, which its competitor, Euroclear is building.
Clearstream Banking Frankfurt is spearheading the Link Up Markets initiative, which will build a format converter to facilitate interoperability between the seven participating securities depositories. Tessler said Link Up Markets would be able to "plug into" any system around the world and would allow CSDs to feel comfortable in a post-TARGET2-Securities world.
Clearstream also appears to be advantaging from the increased uptake of securities financing, which saw its Global Securities Financing business grow by 24%. Clearstream is looking to increase its basket of eligible securities that can be used as collateral by opening it up not just to bonds, but also equities. It has also developed a central bank pledging facility allowing collateral within Clearstream to be used to access central bank money. It is also exploring the use of investment funds for collateral purposes.
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