1. Cross-Border Harmonisation in Western Europe
Pointers for the AECSD
Tim Reucroft
Thomas Murray
Moscow
5 October 2005

2. Harmonisation initiatives Consolidation initiatives
Thomas Murray
Agenda
Agenda
Harmonisation initiatives
Consolidation initiatives
The Euroclear approach
The Scandinavian approach
The Austrian approach
Issues with CSD to CSD links
Pointers for AECSD harmonisation

3. Harmonisation initiatives
Thomas Murray
Harmonisation initiatives
Industry Groups
Giovannini
CESAME
G30
ISSA
SWIFT
ECSDA
Exchange level
Euronext
Norex
CCP Level
LCH.Clearnet – Settlement Connect
CSD level
Euroclear
NCSD
Regulators
CPSS/IOSCO
CESR
CEBS

4. The Euroclear approach
Thomas Murray
Consolidation Initiatives
The Euroclear approach
Euroclear is being driven by the need to harmonise and consolidate. It is not based on inter-operability. It is being driven internally by the CSDs and opposed by some of the major institutions.
Countries:
Domestic CSDs in France, Belgium, Holland and the UK
Euroclear Bank (the ICSD)
?? Portugal ??
Functions being harmonised:
Settlement
Custody
Central banking
Corporate actions (not all)
Communications
It is essentially a wholesale model with an institutional focus.
It incorporates a CCP

5. The Scandinavian approach
Thomas Murray
Consolidation Initiatives
The Scandinavian approach
CSD consolidation is customer driven with a major institution being the prime driver. One objective is to service the 4 major countries for the cost of 1.
Countries:
Sweden, Finland, Denmark, Norway
?? Iceland, Estonia, Latvia, Lithuania ??
Functions being harmonised:
Issuer services
Clearing & settlement
Account and asset servicing
It is essentially a retail model, focused on issuers and investors rather than institutions.
It does not (at this stage) incorporate a CCP.
A standard non-competitive service means that NCSD can while label services through to end investors.
One advantage is that all Nordic securities are dematerialised.

6. Consolidation Initiatives
Thomas Murray
Consolidation Initiatives
The Austrian approach
At this stage it is purely acquisition. Value driven with a major institution being the prime driver.
There appear to be no moves to harmonise
There appear to be no moves to consolidate.
Beware of Greek’s bearing gifts.

7. Difficulty of Consolidation
Thomas Murray
Consolidation Initiatives
Difficulty of Consolidation

8. Issues with CSD to CSD links
Thomas Murray
Issues with CSD to CSD links
CSD to CSD links
Types of links
Direct/Indirect
DVP or FOP
One way/two way
What drives the links
Cross border listing
Competition with agent banks
Inter-operability
Issues with CSD to CSD links
Legal issues
Counterparty risk across links
Nominee accounts

9. Pointers for AECSD harmonisation
Thomas Murray
Pointers for AECSD harmonisation
Pointers for AECSD harmonisation
What are the drivers for consolidation?
Do you have any cross border trading? (Regionalisation)
Do you have a single currency? (Highest liquidity in currency of choice)
Do you have an expensive domestic infrastructure? (Cost reduction via cost sharing)
If the answer to all of the above is No – then harmonise rather than consolidate.
UES
Political
Legal harmonisation
Accounting harmonisation