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( products and services Bernard Galdin, Head of Settlement ; Beatrice Peregort, Head of local Clearing ; Jérôme Klode, Head of Clearing. Broker dealers clients with CACEIS have access to a post trading activity range of products, including clearing of listed derivatives, processing of OTC derivatives, cash management, securities lending and Foreign Exchange. no. 13 - march 2008 cacEIS optimises post trade for broker dealers CACEIS adds its Global Clearing member (GCm) services of LCH.Clearnet SA for the cash equity business to its recognized settlement and custody skills. This clearing service strengthens CACEIS’ comprehensive range of post trade services for broker dealers. Clients benefit from CACEIS’ rating (S&P AA-) and financial guarantee. They can avoid carrying out their own large-scale technological development by relying on a solid partner that is one of the world’s top-10 custodians. Clients can benefit from CACEIS’ active involvement in market infrastructure and regulatory developments, and from its heavy investment in staff and technology. The quality of CACEIS’ custody service is rewarded by the annual Global Custodian magazine agent banks surveys, which regularly gives it ‘‘top rated’’ status. An EVoLVInG GEoGrApHICAL CoVEr The service is provided by CACEIS Bank and forms part of its settlement and custody services for securities eligible for trading on Euronext Paris. CACEIS is a direct affiliate of the Euroclear Settlement of Euronext zone Securities (ESES) platform in France. On November 28th, 2008, it will extend this clearing service to the Brussels and Amsterdam markets when ESES is launched in the Belgian and Dutch markets. As a result, CACEIS will offer to broker dealers a single entry participants and flows point for clearing and settling their transactions in the Euronext markets. The integrated offering will take on a pan-European dimension through the access provided by CACEIS Bank Deutschland to other European markets (the UK, Germany, Austria and Switzerland). A moDuLAr offEr CACEIS sets up tools allowing customized services to meet the client different needs. Around the GCM offer a flexible range of services are ensured. Thus Trading Member Firms (TMF) are supported for matching of trades executed on NYSE-Euronext and forwarded to LCH.Clearnet’s Clearing 21 platform. Settlement through the CACEIS’ ESES affiliate number and linked corporate action processing can be also provided for the trades netted by the clearing house. Transactions are confirmed by Swift, files and may be consulted on OLIS website. CACEIS also helps to cover risks by a specific follow up and compliance controls. Dedicated and skilled teams calculate margin calls on open positions (SPAN method). They also carry out outstanding trades and buy-in warnings. CACEIS makes post trade processing simpler and more flexible. CACEIS streamlines the post trade processing and allows clients to avoid connection to clearing and settlement platforms and technological developments. They also benefit from CACEIS‘ dealing capacity with the post-market infrastructures and are exempted of the contribution to the Clearing Fund @ client (t m f) e u r o n e x t lch.clearnet e u r o c l e a r caceiS 6.
7 Towards a new post-market environment? The markets in financial Instruments Directive (mifID) is transforming the trading and post-market infrastructure environment and creating sources of fragmentation. Changes and developments in trading platforms – whether through mergers (NYSE-Euronext, LSE- Borsa Italiana, Nasdaq-OMX) or the appearance of new players (CHI-X, Turquoise, etc) have often been in the news recently. THE EnD of THE nATIonAL “SILo” SySTEmS Although attracting less media attention, the postmarket industry is also undergoing a revolution, with the end in sight for national “silos” (tradingclearing-settlement/delivery and central securities custody). This is being encouraged by European Union initiatives – either in the form of regulations (MiFID) or recommendations (the Code of Conduct) – that aim to foster competition between financial infrastructures. The old national model, which often is no longer adapted to the reality of the economic ownership of infrastructures – either because they are listed companies (Deutsche Börse and NYSE-Euronext) or because of their trans-national nature (Euroclear and LCH.Clearnet Group) – is doomed to disappear with the creation of the European single market and the increasingly international nature of financial transactions. We will therefore soon have to cope with a larger number of possible combinations between organisations, with each combination being intended to meet a specific pricing and service model. a c t ua l p l at f o r m S t r a d i n g clearing Settlement Euronext, LSE, Xetra, Virt-X, Borse italiana, etc. mifid LCH.Clearnet, Eurex, X-Clear, CCG, etc. t r a d i n g clearing Settlement T2S, Smartpool, Euromillennium, Chi-X, Turquoise, Equiduct, EMCF, EuroCCP (DTCC), etc. competition between CSD ? Liquidnet, ITG POSIT, etc. Tradegate, etc. n e w p l at f o r m S c o d e o f c o n d u c t Euroclear, Clearstream, Monte Titoli, etc. t2S no. 13 - march 2008 THE CHALLEnGE of InTEropErABILITy All parties involved in post-market activities are facing a major challenge: being able to manage the multiple links that will exist in the future, while maintaining the same processing effectiveness (speed) and reliability (security and correct execution). It is with this in mind that CACEIS is participating and contributing to the discussions held in the Paris financial market. This is of course both a matter of connection and communication, but is also of managing the multiple operating rules, as each organisation will be able to define its own rules and constraints (working times, limits, collateral, etc.) for its own market segment. Today, it is hard to tell what the future holds. It is likely that, after a transition period, most transactions will be concentrated in the hands of a few operators, working on a European scale, if not global. This will be a positive change if it actually results in lower prices charged by the organisations and in a harmonisation of processes - in particular for cross-border trades. At the same time, we can envisage that common foundations will gradually be laid down, on which the development and innovation of financial markets may be built. The necessary control and management of systemic financial risk and the continual search for economies of scale in noncompetitive sector functions will certainly justify initiatives such as Target 2 Securities (T2S), proposed by the ECB and the main central banks in the Euro Zone. T2S could be a common European platform for secure settlement (in central bank money) in 2013, and is therefore attracting widespread support from financial institutions operating in the Euro Zone, including CACEIS @ ? outlook) Eric Derobert, Head of Market Infrastructures
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