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Euroclear

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Euroclear Holding SA/NV[1]
IndustryFinance
Founded1968; 57 years ago (1968)
FounderMorgan Guaranty
Headquarters
Brussels
,
Belgium
ProductsCentral securities depository
AUM
  • €37.500 trillion (2024)
[2]
Members2,000+
Number of employees
6000 as of 2024
Divisions
Websitewww.euroclear.com

Euroclear is a Belgium-based financial market infrastructure company that specialises in the central securities depository (CSD) segment. It traces its origins to the Euroclear System developed in 1968 by Morgan Guaranty (a predecessor of JPMorgan Chase) in Brussels to settle trades on the then developing eurobond market.

One of the group's entities, Euroclear Bank, is one of the world's two leading international CSDs, the other being Clearstream Banking SA in nearby Luxembourg. Euroclear Bank has been under the spotlight since late February 2022 because it is where most of the reserves of the Bank of Russia are deposited, that were immobilized in the context of international sanctions during the Russo-Ukrainian War.

History

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Building at Rue de la Régence 4 in Brussels, former head office of Euroclear

The Euroclear System was initiated by the Belgian branch of Morgan Guaranty Trust Company in December 1968. Kidder Peabody had been the first major trading firm to tell the market that it would only deal with firms that cleared through Euroclear. Euroclear's creation provoked a reaction in Luxembourg among firms which competed with Morgan and feared that Morgan could use their settlement data to its trading advantage. This led to the launch of a competitor, Luxembourg-based Cedel, in September 1970.[3]

In 1972, Euroclear Clearance System plc was founded in London, with shareholders including over 120 major financial institutions.[4] Euroclear Clearance System plc purchase rights to the Euroclear System from Morgan, which however kept operating it. In 2000, Euroclear Bank was established in Belgium to take over the system's operation from Morgan, a transfer that was finalized in 2001.[5]

Euroclear took a 20% stake in the capital of LCH.Clearnet, by then an Anglo-French entity responsible for the clearing of stock trades on Euronext and the London Stock Exchange.

Euroclear then engaged in a series of acquisitions of national CSDs. It acquired France's Sicovam in 2001, then the Netherlands' Necigef and the UK's CRESTCo in 2002. These local CSDs were renamed respectively as Euroclear France, Euroclear Nederland, and Euroclear UK & Ireland. In 2005, a new Belgian intermediate holding company, Euroclear SA/NV, was created as the owner of all the shared technology and services supplied to each of the Euroclear national CSDs and to Euroclear Bank. In 2007 Euroclear completed the long-planned acquisition of Belgium's CIK, then in October 2008 purchased the Nordic Central Securities Depository comprising Finland's APK (Suomen Arvopaperikeskus Oy) and Sweden's VPC (Värdepapperscentralen AB), which had merged in 2004; the respective entities were renamed Euroclear Belgium, Euroclear Finland, and Euroclear Sweden. In 2007-2009, Euroclear also created a single technical platform known as ESES (for "Euroclear Settlement of Euronext-zone Securities") bringing together its three CSDs in Belgium, France and the Netherlands, all of which serve securities traded on Euronext.[6]: 4 

In May 2013, Euroclear and the US Depository Trust & Clearing Corporation (DTCC) offered access to each other’s vast inventory of collaterals. While the initial offering provided a two-way automatic transfer and retention of collaterals, it was intended to evolve as a single pool of depositories.[7] In April 2014, Euroclear linked its system to the Central Latinoamericana de Valores to open Panama to international investors, thus creating a single pool of liquidity.[8] In February 2015, Mexico opened up its corporate bonds to Euroclear's trading platform, hoping it will facilitate and increase raising funds for its development programs.[9] In 2016, the three ESES CSDs were connected with the Eurosystem's TARGET2-Securities (T2S) securities settlement system.[4]

In 2018 in anticipation of Brexit, the ownership of the Euroclear Group was transferred from Euroclear plc in London to the newly established Euroclear Holding SA/NV in Brussels, with the stated aim of remaining in the European Union.[10]

Euroclear entered the market of funds (including exchange-traded fund and private market assets launching FundsPlace [11] also thanks to the acquisition of MFEX [12] in 2021 and Goji in 2023.[13] In 2021 as another consequence of Brexit, the depository role for Irish securities was transferred from Euroclear UK & Ireland to Euroclear Bank, following which the former CSD was renamed Euroclear UK & International.[14]: 22 

Operations

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Euroclear Bank building in Kraków, Poland

Following the 2018 Brexit-related relocation, the Euroclear Group's parent entity is Euroclear Holding SA/NV in Brussels.

The Euroclear entities settle domestic and international securities transactions, covering bonds, equities, derivatives, and investment funds. Euroclear provides securities services to financial institutions located in more than 90 countries. In addition to Euroclear Bank's role as an international central securities depository (ICSD), Euroclear also operates the CSDs for Belgian, Dutch, Finnish, French, Irish, Swedish, and UK securities. Euroclear also owns EMXCo, the UK's leading provider of investment-fund order routing. Retail investors are able to have direct accounts in local CSDs according to local laws, rules, and procedures.

Ownership

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As of 31 January 2025, Euroclear Holding SA/NV's top 10 shareholders held a combined 80.67 percent of Euroclear's equity capital:

The Belgian consortium that held 9.17 percent of Euroclear was formed of seven institutions: AG Insurance, Belfius Insurance, Ethias [nl], Fédérale Assurance (Association d’assurances mutuelles sur la Vie), Participatiemaatschappij Vlaanderen, the Regional Investment Company of Wallonia, and SFPIM. The latter held 3.07 percent via the consortium, in addition to its 9.85 percent direct stake.[16]

Supervision

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Each of the Euroclear CSDs are supervised by the relevant authorities within their respective home countries. Incorporated in Belgium, Euroclear SA/NV is subject to the supervision of the Belgium Financial Services and Markets Authority (FSMA). The National Bank of Belgium (NBB) also has oversight.

Involvement in international sanctions during the Russo-Ukrainian War

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In October 2012, Euroclear granted access to Russia’s National Settlement Depository, making it easier for other countries hooked to Euroclear's system to trade with Russia, and making Russia’s capital market integrated into London's and New York's markets.[17] 3 years later, Russia mimicked the Euroclear system to create an exchange system with China.[18]

In an article in Foreign Affairs and in a subsequent interview, economist Benn Steil, a senior fellow and director of international economics at Council on Foreign Relations (CFR), and CFR analyst Benjamin Della Rocca argued that Russia may have - in transactions executed through the Central Bank of China and then likely through Chinese state-owned banks as intermediaries - deposited $80 billion in U.S. Treasury bonds at Euroclear in the buildup to the 2022 Russian invasion of Ukraine.[19][20]

The Russian depository blocked and froze all securities held in Euroclear's account at the Russian depository, on March 1, 2022.[21] The Russian depository also froze payments on securities of Russian issuers from being made to foreign individuals and entities.[21]

On March 18, 2022, Euroclear restricted operations on the account of the Russian National Settlement Depository; it stopped executing any instructions to carry out transactions with securities and money, including instructions to participate in corporate actions on foreign securities.[21]

Euroclear also disabled its ruble accounts with ING Bank in Russia and Russia's VTB Bank, the result of which was that its clients are no longer allowed to transfer any rubles, and the ruble bridge between Clearstream and Euroclear was closed.[21] Furthermore, Euroclear limited settling trades in Russian securities.[22][23]

Involvement in sovereign credit events

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Argentina

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On 25 March 2015, New York federal judge Thomas Griesa ordered Euroclear to stop processing payments of Argentina's debt bonds.[24][25] This court injunction follows Argentina's decade-long dispute with its creditors.[26] The next day, the trading bridge between Euroclear and Clearstream on those Argentine bonds were also shuttered until further notice.[27] The intent of this injunction was to force Argentina to fully pay their creditors in order to gain back access to its bond-selling program.[28]

Greece

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In April 2012, Euroclear participated in the restructuring of the Greek debt by swapping 41 billion euros of Greek bonds, which represented about a third of the foreigner-held Greek debt.[29]

Russia

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In June 2022, Euroclear participated in blocking Russian funds.[30]

Leadership

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See also

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References

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  1. ^ "Our Group structure". www.euroclear.com.
  2. ^ "37,5 trillions d'euros": à quoi correspond cette somme faramineuse gérée par Lieve Mostrey, la patronne de l'année?". www.rtl.be. 7 February 2024.
  3. ^ Norman, Peter (February 2008), Plumbers and Visionaries, Chichester: John Wiley & Sons, pp. 34–35, ISBN 978-0-470-72425-5
  4. ^ a b "Our history". Euroclear. Retrieved 14 February 2025.
  5. ^ "International payment arrangements" (PDF). CPSS Red Book. 2003. Retrieved 24 August 2015.
  6. ^ "Securities trading, clearing and settlement statistics: Compilation notes" (PDF). European Central Bank. June 2023.
  7. ^ Philip Stafford (13 May 2013). "DTCC and Euroclear to share collateral pool". Financial Times. Archived from the original on 2022-12-11. Retrieved 2016-05-08.
  8. ^ "Euroclear and Latin Clear launch international link for Panama". Automatedtrader.net. 2 April 2014. Archived from the original on 15 April 2019. Retrieved 2016-05-08.
  9. ^ Anthony Harrup (13 February 2015). "Mexican Corporate Bonds Gain Wider Audience With Euroclear Access". Wsj.com. Retrieved 2016-05-08.
  10. ^ "Update on Corporate Reorganisation". Euroclear. 21 November 2018.
  11. ^ "Euroclear FundsPlace". Euroclear. 20 January 2024. Retrieved 2024-01-27.
  12. ^ "Euroclear completes acquisition of MFEX". Euroclear. 16 September 2021. Retrieved 2024-01-27.
  13. ^ "Euroclear completes acquisition of MFEX". Euroclear. 17 July 2023. Retrieved 2024-01-27.
  14. ^ Euroclear Annual Review 2021 (PDF)
  15. ^ Philip Stafford (2 January 2020). "China emerges as fifth biggest Euroclear shareholder". Financial Times.
  16. ^ "Top 10 shareholders". Euroclear. Retrieved 14 February 2025.
  17. ^ Ben Aris (4 October 2012). "Russia joins Euroclear". Financial Times. Retrieved 2016-05-08.
  18. ^ Vladimir Kuznetsov (3 September 2015). "Russia Mimics Euroclear With China Market Link as Ties Grow". Bloomberg.com. Retrieved 2016-05-08.
  19. ^ "Evidence shows China helped Russia hide $80 billion in Treasury securities offshore". www.donga.com.
  20. ^ "Russia stashed away billions before invading Ukraine. China may have helped hide it". NPR.org.
  21. ^ a b c d "NSD fully open to dialogue with Euroclear, Clearstream, no blocks on its part - MOEX". interfax.com.
  22. ^ "Sanctions delay payments to Russian corporate Eurobond holders". Financial Post. March 23, 2022.
  23. ^ Lomax, Securities Finance Times reporter Jenna. "DTCC blocks Russian securities from Bank of Russia". www.securitiesfinancetimes.com.
  24. ^ "BRIEF-U.S. court orders Euroclear not to process Argentine debt payments". Reuters.com. 25 March 2015. Retrieved 2016-05-12.
  25. ^ "Griesa blocks Euroclear from processing any Argentina bonds payments". Mercopress.com. 26 March 2015. Retrieved 2016-05-12.
  26. ^ Davide Scigliuzzo (31 March 2015). "Euroclear will not make payments on some Argentine bonds". Reuters.com. Retrieved 2016-05-12.
  27. ^ David Scigliuzzo, Paul Kilby (26 March 2015). "Euroclear stops trading with Clearstream on some Argentine bonds". Reuters.com. Retrieved 2016-05-12.
  28. ^ Elaine Moore, Philip Stafford (30 March 2015). "Argentina in last-ditch manoeuvre to pay bondholders". Financial Times. Archived from the original on 2022-12-11. Retrieved 2016-05-12.
  29. ^ "Euroclear Bank Efficiently Swaps 30% Of Foreigner-Held Greek". Mondovisione.com. 2 April 2012. Retrieved 2016-05-12.
  30. ^ "Russia's Latest Eurobond Coupons Are Stuck at Euroclear". Bloomberg News. 7 June 2022. Archived from the original on 7 June 2022.
  31. ^ "Tim Howell to become Euroclear's Chief Executive Officer". Automatedtrader.net. 5 January 2010. Archived from the original on 15 April 2019. Retrieved 2016-05-08.
  32. ^ Philip Stafford (31 October 2016). "Tim Howell to step down as Euroclear CEO". Financial Times.
  33. ^ "Valerie Urbain to succeed Lieve Mostrey as CEO of Euroclear". Euroclear. 15 January 2024.
  34. ^ "Valérie Urbain to succeed Lieve Mostrey as CEO of Euroclear". PR Newswire. 15 January 2024. Retrieved 2024-01-27.
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