The boards of Sicovam and Euroclear, Europe’s largest settlement body, have announced they intend to merge, creating the world’s largest settlement organisation with annual transactions of E80trn. The merged entity, due to be operational by early next year, is likely to provide clearance and settlement for EURONEXT, the European stock exchange created by the merger of Paris bourse and the Amsterdam and Brussels exchanges.
The merger needs to be cleared by Belgium’s banking and finance commission, the UK’s SFA and the French competition authorities. “It is unlikely that the French authorities will have a problem with the merger,” says Conor Leeson, a spokesman at Euroclear, “but they will want to see it doesn’t infringe upon competition rules and that it doesn’t involve a dominant player in the market abusing its position,” Under European law, the merger must also be referred to the relevant trade unions in Brussels and Paris.
If the deal is successful, the newly created group is likely to run the settlement for EURONEXT. When the three exchanges announced their intention to merge, they said Euroclear was their first choice. According to Nicole Falcon, a spokeswoman at the Paris Bourse, the merged group is the natural choice since Sicovam runs settlement and clearance for the exchange.
“In the long term the objective is to have one settlement organisation but in the short term Euroclear will be the preferred but not exclusive settlement choice,” she says. Investors will still be able to use CIK in Belgium or Necigef in the Netherlands to settle transactions but eventually all cross-border trades executed on the EURONEXT exchange would be routed the Euroclear system for settlement.