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International Securities Services Association. New Challenges for Market Infrastructures. Urs Stähli. Agenda. 1. A glimpse into the future – our landscape changes!. 2. Conclusions, predictions, implications. 3. Focus Europe. Today. Equity. Bonds. Funds. Deriv. Trading. Trading.

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New challenges for market infrastructures

International Securities Services Association

New Challenges for

Market Infrastructures

Urs Stähli


New challenges for market infrastructures

Agenda

1. A glimpse into the future – our landscape changes!

2. Conclusions, predictions, implications

3. Focus Europe


New challenges for market infrastructures

Today

Equity

Bonds

Funds

Deriv.

Trading

Trading

Trading

Trading

Clearing

Clearing

Clearing

Clearing

Settle-

ment

Settle-

ment

Settle-

ment

Settle-

ment

Product-specific streams

by function and market

1. A Glimpse into the Future

Tomorrow?

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


New challenges for market infrastructures

Today

Equity

Bonds

Funds

Deriv.

Trading

Trading

Trading

Trading

Clearing

Clearing

Clearing

Clearing

Settle-

ment

Settle-

ment

Settle-

ment

Settle-

ment

Product-specific streams

by function and market

Our Landscape Changes!

Tomorrow

Equity

Bonds

Funds

Deriv.

Transaction Processing

Trading, Clearing, Settlement, Custody

Risk Management

Data Management

Integrated processing and risk management, across products

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


2 conclusions predictions implications

2. Conclusions, Predictions, Implications

For post-trade infrastructures, this could mean…

Market demand

Optionsto respond

Reduced exposure to

- market risk

- counterparty risk

- operational risk

- Introduce CCP

- Improve valuation models

- Improve margin management

- Increase process automation

- Widen asset class coverage

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


New challenges for market infrastructures

Optionsto respond

Marketdemand

- Cross-product margin management

- Netting

More effective use of capital

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


New challenges for market infrastructures

Optionsto respond

Marketdemand

- Cross-product margin management

- Netting

More effective use of capital

- Contract standardization

- Prove "Value for Money"

More price transparency

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


New challenges for market infrastructures

Optionsto respond

Marketdemand

- Cross-product margin management

- Netting

More effective use of capital

- Contract standardization

- Prove "Value for Money"

More price transparency

- Process standardization

- Automation, STP

- Platform expansion (scope)

Intermediary consolidation

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


Obstacles to better post trade integration

Obstacles to Better Post Trade Integration

Legacy systems

Multiple processing platforms

Inefficient interfaces

Cost of upgrading technology

Paper and manual processes

Reconciliation challenges

Legal, regulatory issues

Source: Key note address Boston Consulting Group / ISSA Symposium 2006


Some predictions and implications

Some Predictions and Implications

  • Further consolidation - within markets and cross-border

  • Consolidation creates concentration of market power

  • Politicians and regulators become more alert to monopoly abuse,

    particularly where infrastructures are de-mutualized

  • Infrastructure governance assumes even higher importance

  • More areas of conflict between owners – users – public sector

Source: Key note address Ruben Lee / ISSA Symposium 2006


3 focus europe

3. Focus Europe

  • More consolidation is required: ECSDA has 36 members; the EU Commission wants one integrated market!

  • ECSDA, Euroclear Group, European Securities Forum are the key drivers of market practice harmonization

  • The end vision for the CSD business in Europe is not clear

  • Industry now committed to "Code of Conduct", rather than being subjected to EU Directive


New challenges for market infrastructures

  • "Fair & Clear" dispute still ongoing

  • TARGET 2 for Securities adds a new aspect

  • Possible mergers NYSE / Euronext and NASDAQ / LSE: >> Implications for the clearing and settlement level?

  • Horizontal or vertical? - While the giants are talking, the small players set the trend for a third way: diagonal!


New challenges for market infrastructures

Euronext

L S ELondon StockExchange

ISE XetraIrish Stock Exchange

v i r t - x

SWX

DeutscheBörse

Lux StockExchange

BorsaItaliana

N O R E XOsloReykjavik

CopenhagenHelsinkiStockholmTalinRigaVilnius

WienerBörse

ATHEXAthens Stock Exchange

Bolsa yMercados Españoles

O M X

EUREX

LIFFE

CH & D

XETRA

1

2

3

4

LCH - Clearnet

Planned?

Clearnet

L C HLondon ClearingHouse

x - clear

EUREX-Clearing

C C G

Planned?

C C P -Austria

VPS (Nor)

VP (Den)

APK (Fin)

VBSI (Ice)

Euroclear Group

Clearstream Group

Euroclear

CREST

S I SSegaInterSettle

CBFClearstreamFrankfurt

CBLClearstreamLuxemburg

MonteTitoli

OeKBOesterr. Kontrollbank

CSD

IBER-CLEAR

ECSD (Est)

VPC (Swe)

CSDL (Lit)

LCD (Lat)

CH

GB

IRE

D

I

A

GR

E

LUX

N

DAN

EC France

EC Netherland

EC Belgium

Interbolsa

SF

ICE

F

B

S

planned *

Free choice of clearing

EST

NL

P

Derivatives *

Free choice of settlement

LAT

LIT

*only partially displayed

Horizontal? Vertical? Diagonal!


New challenges for market infrastructures

International Securities Services Association ISSA

c/o UBS AG

FNND OZTH

P.O. Box

CH-8098 Zurich, Switzerland

Phone :+41-44-235 74 21

Fax:+41-44-236 14 74

[email protected]

www.issanet.org


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