Crestco And Clearstream Announce Low-Cost Settlement Solution For iX-International Exchanges

Clearstream International and CRESTCo have published details of a low-cost settlement solution for the proposed iX. The solution will mean that customers will continue to be able to settle transactions in all iX securities and currencies through their existing interfaces to CREST or Clearstream. This means that the settlement cost of a cross-border iX trade is reduced to the same low-level as a domestic trade. Local settlements can cost 90% less than cross-border transactions. Customers therefore, will have access to a single integrated trading and settlement process at very low-cost.

Clearstream International and CRESTCo believe that the jointly-proposed solution meets the stated needs of iX and market participants. From a customer's perspective, it supports minimal change to systems and a reduction in the overall cost of cross-border settlement.

The settlement model supports iX trades with or without a central counterparty (CCP). The model with CCP provides very simple straight-through processing of iX trades. The model without CCP involvement uses a full delivery versus payment link between CREST and Clearstream to provide maximum efficiency to the benefit of all customers.

CRESTCo and Clearstream International anticipate working with two CCPs as part of the post-trade solution for iX - one for the UK market (London Clearing House) and one for the German market (Eurex). The solution is designed to be CCP neutral and can accommodate multiple CCPs.

This settlement solution will be refined through market consultation and detailed discussion with iX on the operation of their new markets and trading platform.

The publication was welcomed by the London Stock Exchange. Don Cruickshank, the Chairman of the LSE and Chairman-elect of iX said, "This solution is good news for our market users as they seek to drive down costs for their clients. By building on existing arrangements for clearing and settlement, it minimises the costs of central infrastructure and avoids the need for customers of iX-international exchanges to invest in further interfaces to clearing or settlement systems. For our part, we will ensure that CRESTCo's customers will, for the foreseeable future, be able to use their existing CREST interface to settle their transactions."

Iain Saville, the Chief Executive of CRESTCo said "This solution delivers international settlement at local tariffs; it benefits all customers of CREST and Clearstream, improving efficiency and lowering costs." Andre Lussi, the CEO and President of Clearstream International said "We offer a model for future collaboration across Europe. It holds out the prospect of large savings for all users of iX - from the largest pension funds to small private investors - whenever they trade cross-border within the iX market. This will be achieved without disruption to customer service and with minimal change to dealers' systems. I am confident that, by cutting the cost and complexity of dealing between London and Frankfurt, this will give a big boost to the volume of trading."