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Clearing and Settlement for Pan-European Securities Trading

What does the future hold?. Trading some securities on multiple electronic platforms24-hour trading of global securitiesBut local securities still existIncreasing volumesCentral counterparty netting, cross-margining, cross-collateralisationImportance of risk control measuresGlobal investors -

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Clearing and Settlement for Pan-European Securities Trading

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    1. Clearing and Settlement for Pan-European Securities Trading Iain Saville, CEO CRESTCo Ltd 22 June 2000

    2. What does the future hold? Trading some securities on multiple electronic platforms 24-hour trading of global securities But local securities still exist Increasing volumes Central counterparty netting, cross-margining, cross-collateralisation Importance of risk control measures Global investors - retail as well as wholesale

    3. The European landscape A single currency … not yet a single securities market Multiple interfaces Markets with different structures, law, regulation ...and taxes .. of all sorts Rapidly evolving trading environment Fragmented liquidity - in trading and settlement Duplication in clearing and settlement solutions Equity liquidity remains in domestic markets & domestic CSDs

    4. Are securities homogenous? Bonds Equities stable volumes very rapid growth little retail lots of retail simple benefits complex corporate actions little voting complex governance issues vanilla x-border big national differences tax is simple complex, includes txn taxes Pace of system consolidation may need to be different

    5. Risk Control Challenges… and one national response Capacity risk …. Move to 1 mn transactions per day next summer (4 mn easily possible) Payment risk …..Central bank money by end 2001 Title risk …… Change in law later this year Counterparty risk…. Central counterparty with LCH ……………… and move to T+3

    6. The Best and the Good economies of scale from single system … if one size can fit all how many sizes can Europe afford? retail versus wholesale .. or together? commodity versus global custodian standardisation versus innovation (internet impact) local ggods and the European “best”? Consolidation is the future … but to a competitive or monopoly industry?

    7. Approaches to integration Technology... and business model One single platform fits all and/or networked solutions? For profit, competitive and/or mutually owned? Business merger first or deliverables driven?

    8. What is on offer? Euroclear + Sicovam = Euroclear (two hubs) Cedel + DBC = Clearstream (one hub) Build on national CSDs: The Settlement Network

    9. The Settlement Network A partnership between CREST and SIS Open to other (I)CSDs Focus on deliverables, not ownership A single integrated process for holding and settling securities at low cost, regardless of the location or nationality of the securities or the counterparty

    10. Core principles of TSN

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