Investors using Euroclear now have access to Korean securities through a new link established between Europe's central securities depositories (CSD) and the Korea Securities Depository (KSD).
Having gone live this week, the connection between the European and Korean CSDs is Euroclear's tenth in Asia. Under the agreement, the firm provides custody, settlement and related services to investors in Korean treasury bonds (KTBs) and monetary stabilisation bonds.
"The Korean government is planning to issue KTBs totalling more than W81 trillion [$66.8 billion] by the end of the year," says Hae-il Jang, head of the investment services division at KSD. "The Euroclear bank link with KSD will help foreign investors invest in these securities. Hence, it will promote liquidity, as well as efficiency, in the government bond market."
Euroclear chief executive Pierre Francotte agrees. "With Euroclear now servicing Korean domestic securities, this will facilitate non-Korean investors to trade and hold Korean securities outside Korea," he says. "The agreement broadens the pool of assets investors can access through Euroclear."
In Europe, the firm works with the largest collection of CSDs for cross-border securities trade and settlement in terms of European equities capitalisation. Euroclear handles securities in Belgium, Finland, France, Ireland, the Netherlands, Sweden and the UK.
With the addition of the KSD, investors using Euroclear in Asia can trade and settle securities in 10 markets, including Australia, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore and Thailand.
Earlier this year, the KSD expanded its agreement with Citi to include the US in its daily turnaround investment service.
Euroclear has worked with Europe's CSDs to create a single securities settlement framework in Europe. There, Euroclear worked with regulators and market participants to standardise market practices and build the technology and infrastructure needed.
"Despite the introduction of the single currency, investors in, say, French and Italian securities had to disaggregate their holdings and settle in each individual market," says Francotte. "By working with central banks, regulators and financial institutions, we are building a single-market, multi-currency solution that will deliver savings of €300 million to €350 million [$440 million to $510 million] per year."
Euroclear is now helping Asia work towards a similarly integrated settlement infrastructure. While Francotte is doubtful that the region can achieve a result comparable to Europe in the near term, he says standardisation and harmonisation achievements are possible.
"The drivers that pushed Europe towards CSD consolidation are not yet present in Asia," he explains. "In Europe, the launch of the single currency and pan-European regulator policies creating the foundation for a single market acted as drivers. Asia does not have a single currency, a programme of market practice harmonisation, nor [easy] access across markets; each market continues to act individually."
"Asia is just not ready yet," Francotte says. What Asia can do in the meantime is use the same message formats and harmonise market rules as a step towards a pan-Asian CSD.
Euroclear is not the only organisation working towards pan-Asian settlement. June's Asian Bond Clearing and Settlement conference in Hong Kong discussed various ideas, including creating a new Asian international central securities depository (ICSD) or linking existing CSDs, similar to the European model. Despite the talk, everyone agrees true central settlement is some way off in Asia.
At Sibos this week, Clearstream, Deutsche Borse's ICSD, announced the upgrade of its Singapore representative office to a full branch subject to regulatory approval.
"Asia-Pacific is the engine of growth for the world," says Jeffrey Tessler, chief executive of Clearstream. "Opening a full-fledged office in Singapore will allow Clearstream to present its Asia-Pacific customers with a world of opportunities by making their access to the financial markets easier, more efficient and more secure."
The office will be headed by Robert Tabet, relocating to Singapore from Dubai, where he ran Clearstream's Middle East and Africa business, and Viviane Coppens, previously head of Clearstream settlement and banking.
Last year, Euroclear opened an operations centre in Hong Kong and a representative office in Beijing and signed a memorandum of understanding (MoU) with two Indian central depositories. Francotte hopes the MoU will develop into a link between Euroclear and India.
Euroclear settled more than €560 trillion securities transactions in 2008 on €18 trillion in assets.