News Analysis: Clearstream unveils Xact online customer interface for T2S and new regulatory environment

12 September 2013

Clearstream has launched ClearstreamXact, a new customer connectivity channel that will eventually help it integrate with the TARGET2Securities (T2S) single securities settlement engine in Europe, which is due to start in 2015. ClearstreamXact will initially cater for the collateral management needs of clients, offering a unified access portal and easy access to Clearstream’s processing platforms and services.

The online ClearstreamXact portal is accessible from anywhere in the world via the web and will act as a landing page for the existing Cascade German central securities depository (CSD) platform that Clearstream currently operates and the CreationConnect platform that it operates for its Luxembourg CSD and international central securities depository (ICSD) clients. These older platforms will eventually be switched off once the harmonisation moves engendered by the T2S single securities settlement engine in Europe begin in 2015, with a scheduled end date of 2016. For now, however, the platforms will continue to operate alongside each other and Clearstream customers will be able to choose when to make use of the services provided by the new ClearstreamXact system.

The new ClearstreamXact connectivity solution is based upon proven, up-to-date portal technology, says Clearstream, the post-trade services provider of Deutsche Börse Group which, alongside Euroclear, accounts for the majority of securities settlement volume in Europe. Their agreement to co-operate on the move towards the Eurosystem T2S solution envisaged by the European Central Bank (ECB) is crucial to the success of the new arrangement.

ClearstreamXact will initially offer Clearstream end users a new intuitive and user-friendly, web-based connectivity solution, allowing banks, traders and others end users to more easily access its collateral management services. Future investment is already planned to expand the range of the platform to other core product areas such as settlement and asset servicing next year, as part of the move towards T2S and also to comply with the new post-crash regulations affecting the financial markets.

Early Stage in Move Towards Complying with New Market, Collateral & Regulatory Environment

According to Clearstream the launch of ClearstreamXact marks the first of many steps on a long journey towards a fully integrated and harmonised customer-facing, web-based connectivity framework. Customers’ priorities and the pace of industry transformation will define the roadmap for further developing this new connectivity portal into one entity which will seamlessly bring together Clearstream’s offering as the central securities depository (CSD) for Germany and Luxembourg and as an international central securities depository (ICSD) via a single interactive dashboard landing page. Customers will eventually be able to see and manage all their assets through this single window, no matter in which part of the multiple Clearstream networks they are held.

As the post-trade industry is undergoing significant change driven by an extensive regulatory agenda, this “journey” towards integration and harmonised connectivity is evidence says Clearstream of its commitment to help its customer base adapt to the future regulatory and market environment.

In Europe, for example, the 2015 introduction of T2S as a new pan-European centralised settlement platform, with 2016 as the completion date, will mean replacing 23 domestic settlement systems. On a more global scale, the increasing customer demand to access and invest in multiple asset classes across multiple regions, and via multiple processing systems, calls for more dynamic and streamlined connectivity solutions. This is the environment for which ClearstreamXact has been created.

Commenting on the new launch, Yves Baguet, managing director of Clearstream IT and the chief information officer (CIO) at the Deutsche Börse Group subsidiary, said: “The launch of our user-friendly, screen-based connectivity solution, starting with collateral management services, is the first milestone on our journey towards an integrated and harmonised customer connectivity solution for all our services. The features of ClearstreamXact will enable us to adapt to our customers’ changing needs over the coming years with the ultimate goal to streamline user access to our full range of services – no matter where our customers are in the world.”

News Analysis

Many new connectivity options for T2S are being unveiled at the moment with BNP Paribas recently electing to use SWIFT’s Value Added Network (VAN) solution and SIA and Colt rolling out the 4-CentralBank-Network (4CBNet) connectivity solution.

The whole CSD arena and collateral management field is changing, not just under the impact of T2S but also due to the changes emanating from the desire for more transparency, centralisation and control over financial markets following the 2008 financial crash. For instance, the European Market Infrastructure Regulation (EMIR) dictates that the majority of over-the-counter (OTC) derivatives trades, excepting corporate hedging transactions, be cleared through a central counterparty (CCP) in future. The CCP is required to hold collateral assets as an insurance policy against any defaults at a securities settlement system, such as a CSD, causing the proliferation of such establishments. The London Stock Exchange (LSE) Group plans to open a new CSD for the Eurozone next year, for example, operating from Luxembourg, while in the US the Dodd-Frank Act is also forcing change upon the markets, in accordance with the post-crash wishes of the Pittsburgh G20 meeting.

Everyone is having to respond to this new regulatory and market environment, with the Basel III capital adequacy regime for instance, prompting Euroclear’s collateral highway offering and many other similar options. The rival organisation to Clearstream also recently partnered with the Depository Trust and Clearing Corporation (DTCC) to create a joint collateral processing service to cut risk, improve market-wide efficiency, and comply with the expanding collateral needs of financial market participants under the weight of new regulation.

The market-changing seeds planted at the Pittsburgh G20 meeting way back in 2009 are now coming home to roost it seems, and the new global financial system wished for after the collapse of Lehman Brothers on 15 September 2008, a date almost exactly five years ago now, is finally coming into full effect.

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