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The move represents the first step in a process that will eventually enable Euroclear clients to process all of their equity trades in a single settlement location. Similar arrangements will be extended to Euronext Amsterdam and Euronext Brussels in 2003, in line with Euroclear's commitment to offer an integrated settlement solution in support of the Euronext Single Order Book concept.
The development is also a significant milestone in the evolution of Euronext's integrated market model, which aims to offer its clients seamless access to trading, clearing and settlement, thereby empowering them to generate additional savings by rationalising their own processing structures.
From 19 July 2002, all transactions in securities listed on Euronext Paris, netted and guaranteed by Clearnet, will be eligible for the new Euroclear Bank stock exchange settlement service. Once Euronext Paris trades are netted, Clearnet will transmit instructions on a straight-through basis to the settlement platform chosen by the trading counterparties or their clearing members. Book-entry DVP settlement will be offered in commercial bank money at Euroclear Bank and in central bank money at Euroclear France.
By availing of the option to consolidate their Euronext Paris business in Euroclear Bank, international trading counterparties that are not direct members of Euroclear France will be able to benefit from a significant reduction in settlement costs. Their trades will now be treated on the same basis as domestic transactions, making them up to 10 times cheaper than before, at EUR 0.55.
Stressing the significance of today's announcement, Pierre Francotte, Chief Executive Officer of Euroclear Bank, said: "This development is a powerful illustration of the strength of our consolidation strategy. Beyond all the talk of 'vertical versus horizontal', we are moving to reduce costs and inefficiencies for our customers in a very tangible way, in partnership with Euronext and Clearnet. We plan to extend these services to other markets shortly, starting with the remaining Euronext markets, and to progressively deliver centralized access for our clients to all European equity markets."
Jean-François Théodore, Chairman and Chief Executive Officer of Euronext commented: "In line with our ambition to create a united pan-European exchange with the lowest possible access costs, we are actively pursuing an integration strategy that offers our clearing members the possibility of simply and cost effectively settling their trades via a global provider. After the successful integration of cash trading for the Paris, Amsterdam and Brussels markets in 2001, and in parallel with the clearing integration planned for completion later this year, this development signals a new phase in our efforts to consolidate the settlement process."
The full range of Euroclear Bank services, including comprehensive custody and tax services, settlement-integrated lending and borrowing, and collateral management, will be made available for Euronext Paris-listed securities. Bank Degroof, an active Euronext member headquartered in Brussels, has worked closely with all parties to pilot the new service. This solution will give Degroof the opportunity to act as a broker on all segments of Euronext and to offer a full STP solution to professionals, with its own segregated custody account directly with Euroclear.
The extension of parallel services to Euronext Amsterdam and Euronext Brussels is on target for delivery in 2003. In the case of Euronext Amsterdam, the service will be provided in partnership with the Dutch CSD, Euroclear Netherlands (formerly Necigef/NIEC). For Euronext Brussels, the service will be made available in collaboration with CIK, the CSD of Belgium.
