The merger of Brussels-based settlement house Euroclear and its UK counterpart CRESTCo announced today will create Europe’s largest settlement operation, one that will handle over 60% of European equity trades.
CRESTCo settles for the London Stock Exchange while Euroclear settles and acts as a central securities depository for Euronext- the Paris, Amsterdam and Brussels exchanges.
Chris Tupker, chairman and chief executive at Euroclear will head the new entity while CRESTCo chairman Nigel Wicks will act as his deputy.
Euroclear entered negotiations with CRESTCo earlier this year after its attempted merger with Clearstream, the other major pan-European central securities depository, broke down. Clearstream, which acts for the Frankfurt exchange, was eventually bought in December by Deutsche Börse.
Commenting on the deal, Tupker said: “while the new group will service the major trading and clearing platforms of Europe, our conviction that the settlement function must remained user-governed and not controlled by stock exchanges remains as strong as ever”.
Nigel Wicks said: “the merger creates a radical new model for the development of settlement services in Europe. This is a giant step towards the delivery of an integrated European capital market”.
The two parties maintain the merger will produce significant savings from lower cross-border settlement rates and from less expenditure on back office IT systems. Cross-border tariffs for trades in Belgian, Dutch, French, Irish and UK securities are expected to fall 90%.
Clara Furse, chief executive of the London Stock Exchange, welcomed news of the merger. “In bringing together two user-owned, user-governed ‘horizontal’ settlement organisations to create Europe’s largest settlement organisation, Euroclear and CRESTCo will be able to further reduce the cost of settlement and, by extension, the cost of capital.”