Euroclear

From Wikipedia, the free encyclopedia

Euroclear is an independent Brussels, Belgium-based financial services company that specializes in the clearing and settlement of securities. It was founded in 1971 as part of J.P. Morgan & Co. Euroclear is the world's premier settlement system for domestic and international securities transactions, covering bonds, equities, and investment funds.

Market-owned and market-governed, Euroclear provides securities services to major financial institutions located in more than 80 countries.

In addition to its role as a leading International Central Securities Depository (ICSD), Euroclear also acts as the Central Securities Depository (CSD) for Dutch, French, Irish, and UK securities. CIK, the CSD of Belgium, joined the group in January 2006 and was renamed Euroclear Belgium.

The Euroclear System is operated by Euroclear Bank SA, a Belgian credit institution with its registered office in Brussels, Belgium.

Euroclear is the largest international bonds central securities depository in the world.

1 Early History (1968-2000)
2 Acquisitions (2001-present)
3 Governance
4 Participants
5 Supervision

[edit] Early History (1968-2000)

From its creation in 1968 until the end of 2000, the Euroclear System was operated by the New York State bank Morgan Guaranty Trust Company of New York (MGT), via the Belgian branch of that establishment, which had a branch of activities (“Euroclear Operations Centre”) specially dedicated to the operation of the Euroclear System.

MGT transferred this branch of activities to Euroclear Bank, a new Belgian credit institution that was set up in 2000 to operate the Euroclear System.

[edit] Acquisitions (2001-present)

Euroclear has a non-exclusive partnership with Euronext(resulting from the merger of the stock exchanges of Paris, Amsterdam, and Brussels), which enabled Euroclear in 2001 to acquire 100% of the capital of Sicovam, the French CSD, and in 2002 100% of the capital of Necigef, the Dutch CSD. On this occasion, Euroclear also took a 20% stake in the capital of Clearnet, the French credit institution responsible for the clearing of Euronext transactions, and in 2004 Euroclear acquired most of the settlement and custody business of CIK, the Belgian CSD. Since December 2000, Euroclear has also assumed responsibility for the settlement of Irish government bonds (Gilts) following the decision of the Irish government and the Central Bank of Ireland to delegate this activity to Euroclear. In September 2002, Euroclear Bank acquired 100% of the capital of CRESTCo, the British CSD which settles UK, Irish, and international securities.

[edit] Governance

Euroclear is market-owned and market-governed. Euroclear Group reshaped its corporate structure in 2000 and 2001, transforming the Belgian company Euroclear Clearance System Société Coopérative into Euroclear Bank SA/NV, which now operates the Euroclear System and provides the services previously contracted to Morgan Guaranty Trust Company of New York, Brussels branch.

EuroclearBank is owned by Euroclear plc, a company organised under the laws of England and Wales (owned by market participants).

Both Euroclear plc and Euroclear Bank have independent Boards of Directors composed of representatives of Euroclear users (major securities market actors), and of former shareholders of merged companies (Euroclear France and CRESTCo).

The Euroclear plc Board makes the strategic decisions for the group. It decides in particular on the strategic investments and on joint ventures and alliances. Shareholders’ voting rights are limited to 5%. The Board is assisted by several committees comprising Non-Executive Directors. The Euroclear Bank Board is composed of 18 Directors, 12 of whom are Non-Executive Directors and are also members of the Euroclear plc Board. The six Executive Directors represent the Bank’s Management Committee. The Euroclear Bank Board sets the policies and objectives of the Bank, ensures their implementation by the Management Committee, and reviews its performance. These policies include, among others, pricing, risk management, and membership admission

[edit] Participants

The Euroclear System has about 2,000 participants from more than 80 different countries. Most are banks, broker-dealers, and other institutions professionally engaged in managing new issues of securities, market-making, trading, or holding the variety of securities accepted by the System. Applicants must meet four criteria to be admitted: – adequate financial resources; – technological ability to use the Euroclear System; – need to use the Euroclear System; – sound reputation in the market.

In addition, internal anti-money laundering measures of the applicant institution are considered prior to any admission.

[edit] Supervision

Incorporated in Belgium, Euroclear Bank is subject to the supervision of the Belgian Banking and Finance Commission (BFC). In accordance with Article 8 of its Organic Law, the National Bank of Belgium (NBB) is in charge of the oversight of the Euroclear System. Supervisors and overseers work in close cooperation in the implementation of their respective responsibilities at Euroclear Bank. Euroclear plc is also authorised as a service company by the Financial Services Authority in the United Kingdom.