International central securities depository (ICSD) Euroclear has been spending a lot of time recently consulting with its user groups about market best practices and standards and how it can improve its servicing of the corporate actions space, according to Edwin de Pauw, director of product management at the ICSD and CSD. This is only natural in light of the changes going on across Europe’s clearing and settlement landscape, such as the European Central Bank’s (ECB) Target2-Securities (T2S) project, which are forcing all players in the market to re-evaluate their commercial offerings.
This year’s Sibos saw some debate about T2S’s future should CSDs such as Euroclear band together to provide a commercial model (rather than a central bank led one, see coverage of the ECB’s Jean Michel Goddeffroy’s comments), but regardless of whether this happens down the road, the project and the attention it is receiving are forcing an unprecedented degree of standardisation in the settlement of securities across Europe. If nothing else, T2S is raising the profile of the need for greater harmonisation of market practices in the asset servicing sector.
“T2S is providing momentum for more of the markets across Europe to align in terms of market practices,” notes de Pauw. “The corporate actions space will be impacted directly in terms of the increased automation of market claims processing and a potential reduction in claims overall due to the alignment of items such as ex and record dates across the region.”
Euroclear already has some experience of aligning standards across markets in this space with its launch of Euroclear Settlement of Euronext-zone Securities (ESES) at the start of last year and de Pauw is confident it will be able to adapt to the post-T2S landscape (should the project go forward as planned). The CSD is adapting its business model to focus more on functions such as issuer services and collateral management, rather than settlement, and corporate actions sits well within this space.
To this end, Euroclear has defined a roadmap for change and part of this is to make accessing the CSD’s services much easier via increased ISO-based standardisation and automation with its Common Communication Interface (CCI). “The CCI is an important component for us to provide a single access point to the markets we service, as it provides a single way of talking to Euroclear,” explains de Pauw. This is especially important if the CSD is offering services around collateral management to firms outside of its usual demographic: de Pauw indicates that custodians’ underlying clients such as large corporates are displaying an appetite for these services.
Euroclear’s acquisition of Xtrakter in 2008 (which was finalised last year) should also help to broaden its offering to the market. As indicated by the spate of management reshuffles over the last year, it is currently integrating the Xtrakter business into the wider Euroclear offering and the market can expect to hear much more around items such as data matching for transaction reporting over the months to come. The acquisition has allowed Euroclear traction further upstream in the securities servicing sector and the focus will most certainly be on increasing STP.
Euroclear is also keen on establishing more partnerships like the one it signed with Broadridge last month around proxy voting. “We decided to collaborate with Broadridge because it is strong in meeting requirements on the client side and we were keen to bring this together with the issuer side of the coin,” says de Pauw. The focus for further partnerships will be on broadening our coverage of the asset servicing space and expediting our time to market, he adds.
For now, the CSD is also keeping a close eye on all developments across the corporate actions and the wider asset servicing spectrum. On this note, de Pauw reckons that XBRL may well be a solution for the US market, but it is not necessarily the best option for Europe. Echoing comments made to Reference Data Review by other market practitioners, he explains that ISO 20022 is likely to gain much more traction in the European markets, although he indicates that the alignment of XBRL and 20022 is a wise move.