Euroclear to help China process government bonds

The European depository bank seals an agreement with its Chinese counterpart responsible for government bonds.
Euroclear has teamed up with the China Government Securities Depository Trust and Clearing Company (aka the unwieldy CGSDTC) to establish a closer working relationship between the two firms. The memorandum of understanding (MOU) between the two firms will establish a greater level of cooperation between the two organisations, and comes at a time when several international depositories are actively pursuing closer ties with their China counterparts.

Under the MOU, Euroclear and the CGSDTC have agreed to foster increased collaboration, which will include cross-entity training and other forms of knowledge training and to support the development of clearing and settlement practices for the Chinese fixed-income market.

Established in 1996, the CGSDTC provides custody, settlement and information services for government securities, policy financial bonds, corporate bonds and asset-backed securities. It also handles settlement for money-market instruments and OTC transactions.

The move is timely for the Chinese organisation, which is seeing its domestic bond market mature rapidly but has yet to bring its post-trade infrastructure up to international standards. According to the CGSDTC, the MOU with Euroclear will aid in making the organisationÆs infrastructure more integrated, safe, efficient and transparent for the growing number of investors in this space.

The announcement comes less than a month after another landmark MOU was signed in ChinaÆs settlement and clearing universe. In June, New York-based Depository Trust and Clearing Corporation (DTCC) and the China Securities Depository and Clearing Corporation Limited (SD&C) inked a deal to undertake an information exchange and cooperation arrangement. According to both parties, this MOU provides the legal and business framework for both organisations to work together and exchange information more freely.

In December 2006, the DTCC also signed a deal with the China Government Securities Depository and Clearing Corporation (CDC) signing a preliminary exchange agreement which will foster cross-border investment through cooperation in depository and clearing operations.

The MOU also marks another regional push by Euroclear. In January this year the Belgium-based depository signed at MOU with the Clearing Corporation of India (CCIL) regarding trade processing. The agreement was similar to the one signed between Euroclear and CGSDTC and in the future is expected to potentially include settlements between CCIL and Euroclear clients.
¬ Haymarket Media Limited. All rights reserved.