Seven European central securities depositories (CSDs) have teamed up to establish Link Up Markets, a joint venture settlement and custody initiative aimed at improving efficiency and reducing costs of post-trade processing of cross-border securities transactions in Europe. The new service is scheduled for launch in the first half of 2009.
The seven CSDs are Germany’s Clearstream Banking Frankfurt, Greece’s Hellenic Exchanges, Spain’s IBERCLEAR, Austria’s Oesterreichische Kontrollbank, Switzerland’s SIS SegaInterSettle, Denmark’s VP Securities Services and Norway’s VPS.
The initiative has been prompted by the changing European trading environment. The seven CSDs believe that the Link Up Markets solution will facilitate existing European initiatives such as MiFID, the European Code of Conduct on Clearing and Settlement and TARGET2-Securities. They further contend that that improved interoperability between CSDs with a single point of access for customers will result in large cost reductions.
“For many years, customers have been requesting a solution for easy access to other markets,” said Jeffrey Tessler, chairman of Clearstream Banking, in a statement. “The CSDs participating in the initiative have developed a unique solution geared at reducing the complexity and the costs of cross-border transactions. We establish an environment that creates the potential to reduce current cross-border settlement costs by up to 80 %.”
According to the founders, Link Up Markets will establish a common infrastructure allowing for easy implementation of links between CSD markets and introducing efficient cross-border processing capabilities. By connecting to the common infrastructure, each participating CSD has access to the services of the other participating CSD markets across all asset classes except derivatives. Link Up Markets will absorb any differences in communication standards across the markets, while using the existing infrastructures and processes of CSDs. As a result, the backers claim, the solution can be provided quickly and with minimal adaptations for the participating markets.
The CSDs say customers will benefit from a single access to almost 50% of the European securities market. This central access, based on an existing local CSD infrastructure which customers are already familiar with, will be translated into reduced cross-border transaction costs and savings from a harmonised set of processes, the firms claim.
Under the agreement, the CSDs will found Link-Up Capital Markets, a company based in Madrid, with Tomas Kindler as managing director. The creation of the company is subject to approval by competition authorities. Each participating CSD will take an equity stake in the company, whose role will be to develop, maintain and operate the technical solution and to explore how to further use the joint service portfolio. “In 2009, Link Up Markets will deliver its first results. In doing so, it will pave the way towards realising a single European Capital Market for securities”, said Kindler. “We welcome all other CSDs who share our ambitions to improve and harmonise post-trade securities processing to join our solution.”
The seven participating CSDs processed 156 million transactions in 2006, representing almost 50 % market share in European securities, and have EUR 12 trillion in assets under custody.