International Central Securities Depositaries (ICSDs) Clearstream Banking Luxembourg and Euroclear Bank announced on Thursday that they are combining forces with the newly created International Securities Market Advisory Group (ISMAG) to implement further standards for the issuance and asset servicing of international securities which include Eurobonds and structured products issued through the ICSDs.
The ISMAG comprises senior representatives from various institutions including issuers, lead managers, agent banks, ICSDs and investors, as well as various trade associations. The ISMAG will oversee the implementation of a three year-change programme aimed at increasing processing efficiency and straight-through processing (STP) by standardising issuance practices, information dissemination and the processing of corporate actions and income distributions. An industry-wide standard for market practices is targeted for 2010, the group says.
Clearstream Banking Luxembourg and Euroclear Bank say the total value of securities issued through and deposited with them reached EUR 7.3 trillion in June 2007 and is growing at more than 20% per year.
In 2006, over 200,000 new securities were issued, about 250,000 corporate actions took place and over 320,000 coupon and redemption payments were managed by the two ICSDs yet, according to them, for some parts of the process, there is little STP: less than 10% of corporate-action information is transmitted in STP format and the nature of the market is adding both diversity and complexity.
"There are still too many manual processes and a lack of standardised market practices in the international securities business," says John Gubert, chairman, ISMAG. "Back-office costs are too high, risks are growing in line with increasing volume and complexity, and critical information is too often misinterpreted," he continues.
"Automation and greater STP in asset servicing will save time and money for intermediaries, while providing more accurate and timely information to investors," says Yves Poullet, CEO, Euroclear Bank. "The definition and implementation of market standards will help to clarify roles, responsibilities, timelines and market procedures on a global basis. International securities are in real need of operational standardisation," he remarks.