Euroclear
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Euroclear is a user-owned, user-governed Brussels, Belgium-based financial services company that specializes in the settlement of securities transactions.
It was founded in 1968 as part of J.P. Morgan & Co. Euroclear settles domestic and international securities transactions, covering bonds, equities, derivatives and investment funds. Euroclear provides securities services to financial institutions located in more than 80 countries.
In addition to its role as an International Central Securities Depository (ICSD), Euroclear also acts as the Central Securities Depository (CSD) for Belgian, Dutch, French, Irish, and UK securities. Euroclear also owns EMXCo, the UK's leading provider of investment-fund order routing.
Euroclear is the largest international central securities depository in the world.
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[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 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, Lisbon and Brussels), which enabled Euroclear in 2001 to acquire 100% of the capital of Sicovam, the French CSD, in 2002 100% of the capital of Necigef, the Dutch CSD, and in 2007, 100% of CIK, the Belgian CSD. Euroclear also took a 20% stake in the capital of LCH.Clearnet, the UK/French entity responsible for the clearing of Euronext, London Stock Exchange and other stock exchange transactions. 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 acquired 100% of the capital of CRESTCo, the CSD for UK securities and Irish equities, which now operates as Euroclear UK & Ireland.
[edit] Business Model
In 2002, Euroclear announced a new initiative to reduce the cost of settling cross-border securities transactions in Europe. It proposed to consolidate into one all five of the processing platforms used by the international and national CSDs within the Euroclear group. In addition, Euroclear proposed to harmonise market rules and practices within these markets, in line with the European Commission's Giovannini Group recommendations, the result of which would deliver to its users more than 300 million euros per year in back-office savings. The first milestone, the Single Settlement Engine, was completed in early 2007; the second phase called ESES (Euroclear Settlement of Euronext-zone Securities) is scheduled for completion at the end of 2008. The final phase, where all Euroclear group processing activity would take place on a Single Platform, is planned for completion in 2011. All Euroclear group clients would also use a Common Communications Interface to communicate with the Euroclear CSD of their choice.
[edit] Governance
The 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. In 2005, a new Belgian holding company, Euroclear SA/NV, was created as the owner of all the shared technology and services supplied to each of the Euroclear CSDs and the ICSD.
Euroclear SA/NV is owned by Euroclear plc, a company organised under the laws of England and Wales (owned by market participants).
Both Euroclear plc and Euroclear SA/NV have independent Boards of Directors composed of representatives of Euroclear users (major securities market participants), and of former shareholders of merged companies (Euroclear France and Euroclear UK & Ireland).
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 SA/NV Board has 24 Directors, all of whom are Non-Executive Directors and are also members of the Euroclear plc Board. The Euroclear Boards set the policies and objectives of the Euroclear group, ensure their implementation by the Management Committee, and review its performance. These policies include, among others, pricing, risk management, and membership admission.
[edit] Users
The Euroclear group serves clients 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 a wide variety of securities. Retail investors are able to have direct accounts in local CSDs, according to local laws, rules and procedures.
[edit] Supervision
Incorporated in Belgium, Euroclear SA/NV 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 Euroclear SA/NV. Euroclear plc is also authorised as a service company by the Financial Services Authority in the United Kingdom. Each of the Euroclear CSDs are regulated by the relevant authorities within their respective home countries.
[edit] External links
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