Download Global capital markets, local market opportunities

Global capital markets,
local market opportunities
Who we are
Euroclear is one of the world’s
largest providers of domestic
and cross-border settlement
and related services, holding close
on €27.5 trillion in assets across
44 different markets.
As an international infrastructure,
we offer a neutral and secure
means for our clients to connect
to local Central Securities
Depositaries (CSDs), providing key
support for international investors
in their search for diversification
and yield.
We serve more than 2,000
financial market participants
across the globe. They include
over 100 central banks and
supranationals, and 90% of
the world’s top 50 banks.
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We have a long history as a
provider of efficient post-trade
services, delivering automated
solutions. We act as a marketplace
enabler, applying our procedures
and structures to help open up
new markets for our clients.
We have been rated AA+ by Fitch
Ratings and AA by S&P for the past
ten years. We are a by-word for
strength, stability, safety and scale.
We open doors
We pave the way for global investors
to seek diversification and yield in local
markets globally.
We work with local markets to
help them provide certainty and easier
access.
Our aim is to deliver the same efficient
and robust service standards that apply
in the more established markets.
This means collaborating with
governments and market authorities
to support the development
of appropriate legal and regulatory
frameworks.
Consistency and stability
at the core
We open doors. We give investors
the confidence to invest in domestic
securities in local markets by ensuring
they can operate within the same
framework and in the same format as
in the well-established markets.
The result is consistency combined
with security. We make it easy.
“Through Euroclear’s i-link platform we will have access to an extremely
large number of financial institutions that make up Euroclear’s core client
base, the majority of which are also long-term investors. The development
of this i-link will allow us to increase domestic liquidity, lower price volatility
and reduce the financial cost of our sovereign bonds, ultimately boosting the
development of the Peruvian public debt market.”
“Euroclear’s i-link will permit local investors to diversify the counterparties
they deal with while also connecting to a greater number of international
investors. This platform will elevate the Peruvian capital market to the
recognised standards of other developed international markets. It will also
provide both local and international investors a unique and cost-efficient
channel through which to access the Peruvian capital market.”
Alonso Segura Vasi, Former Minister of Economy and Finance of Peru
“
“
Together, we work to ensure every
local market can offer the same
robust levels of connectivity, control
and post trade efficiency.
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Case studies
Mexican corporate bond market
Before
The solution
After
The market in Mexican corporate
bonds – ‘Cebures’ – had
historically been limited in size
with little foreign investor interest.
The high local borrowing costs
deterred local corporates from
raising money in the peso market.
Keen to break this circle and
stimulate the local corporate
bond market, Mexico’s Ministry of
Finance approached Euroclear in
2014 to discuss what was needed
to make Cebures ‘Euroclearable’.
Euroclear had supported Mexican
government bonds and equities
since 1995.
Within six weeks of the new service
opening, Pemex announced it
was to raise MXN17bn (USD850m)
in a Cebures issue, of which
MXN9bn would be allocated to
international investors.
This meant large entities, such as
Pemex, raised the bulk of their term
debt in the form of international
dollar issues. For international
investors, there was little incentive
to invest in Cebures as they did
not figure in international corporate
bond indices.
The move gives international
investors easy access to Cebures
through their Euroclear account
and makes it possible for the
Mexican peso to qualify for
inclusion in international indices.
While Mexican issuers can now
tap into international demand,
international investors can more easily
take advantage of the yield pick-up
offered in the Mexican market.
“
“
The solution was to change
and simplify the way Cebures
were treated for tax and align
Mexico’s corporate issuance
and asset servicing processes
with international standards. In
December 2014, the Ministry
of Finance and Euroclear jointly
announced that Euroclear would
begin servicing Cebures from the
start of 2015.
The Pemex Treasurer, Rodolfo
Campos, said: ‘Having Mexican
peso-denominated securities settle
through Euroclear will provide
international investors access to
the world’s leading post-trade
services provider, and we believe
it will help lay the foundations
for the future growth of Mexico’s
corporate debt market’.
“By making the Cebures denominated in our national currency
‘Euroclearable’, we have put our local market infrastructure
for corporate debt on an equal level with the highest, globally
recognised standards.”
Luis Videgaray, secretario de Hacienda, México
MXN 9,000,000,000
was allocated to international investors
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Bringing Euroclearability to Chile
Before
The solution
After
The Chilean market in local
currency government bonds was
not considered by international
investors, with only 5% of foreign
participation in the local bond
market.
Keen to change the situation
and open the bond market up to
foreign investment, the Chilean
Ministry of Finance worked with
Euroclear to investigate how the
situation could be improved.
With the necessary reforms in
place, Chilean government bonds
became fully Euroclearable in 2017.
This was most likely due to the
complex pro-rata based tax
on transactions and existing
regulations that did not fully
recognise the omnibus account
set-up.
Substantial efforts were made
to rationalise the local market
regulations and to undertake tax
reforms.
“
The Chilean Central Bank also
updated its regulation to fully
recognise the ICSD omnibus
account setup.
Following that example, legacy
government bonds were made
Euroclearable as from February
2017.
Bond index companies are currently
considering increasing the weight
for the Chilean government bond
in their indexes. In April 2017,
the weight in the JPM index had
already gone up to 1.34%.
“Our partnership with Euroclear has yielded this important milestone for our
capital markets. Being able to tap into the liquidity provided by international
investors is tremendously important for the continued development of our
local market. And, it should yield tangible benefits such as reducing the cost of
borrowing, increasing liquidity in our local markets and furthering investment
in our economy. By making our bonds Euroclearable, we have aligned our
capital market infrastructure with the globally recognised standards that are
synonymous with Euroclear’s robust, resilient and sound risk-management
principles.”
Rodrigo Valdés, Minister of Finance of Chile
“
This resulted in a very low weight
in the JP Morgen local currency
government bond index (0.1%).
Tax laws were changed in 2016,
implementing record date based
taxation.
The first government bond in
the new system was issued in
January 2017 and saw a record
participation of foreign investors
(> 20%).
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Case studies
Russia – before and after
Before
The solution
After
International investors faced a
number of difficulties. Liquidity in
Russia’s government debt (OFZ)
market was low, with no possibility
of trading OTC.
The Russian authorities were
keen to rationalise their local
infrastructure, simplify the legal
and regulatory framework and
align on-exchange trading to
international standards.
With the reform of corporate
actions, which took effect in
mid-2016, Russia became fully
‘Euroclearable’. International
investors can now choose between
dealing through an international
firm or direct through a segregated
brokerage account on MOEX
without complex account opening
requirements and with the comfort
of full asset protection through
their Euroclear account.
Trading in equities was fragmented
between two main exchanges.
Clearing and settlement were
complicated by the lack of any
functional central counterparty.
With hundreds of securities
depositaries and 48 different
registrars, settlement finality could
be a complex issue. To trade, foreign
investors had to open beneficiary
owner accounts. Corporate actions
were all paper-based.
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Starting in 2010, Euroclear
conducted workshops to identify
the key issues and advise on
reforms. A succession of tax,
legal and regulatory reforms
followed, including the important
clarification of the asset protection
and settlement finality offered by
foreign omnibus accounts.
Euroclear launched its OTC service
in OFZ in February 2013 and its
on-exchange service the following
month. Russian corporate and
municipal bonds, and then equities,
followed over the course of 2014.
With the removal of withholding
tax and the introduction of OTC
trading, foreign holdings of OFZ
have climbed from 3% to 25%
of total issuance.
For investors in corporate
bonds and equities, the ongoing
management of positions is
facilitated by the establishment
of a central information source at
the NSD and a unified approach to
corporate actions processing that
includes electronic voting.
Foreign holdings of OFZ have climbed
from 3% to 25% of total issuance
Anton Siluanov, Minister of Finance of the Russian Federation
“
“
“We have been working in cooperation with NSD and Euroclear to launch
the post-trading services for the Russian corporate and municipal bonds. We
endeavour to attract investors, to make our market more transparent and
to raise interest in Russian securities. I am confident that this is an important
step towards establishing an International Financial Centre in Moscow that
aims at providing better accessibility and lower cost of
long-term financing for Russian companies.”
Russia
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What we do
Our goal is to connect global investors
with local issuers in the most efficient
manner possible.
Euroclear expands the range of
investment opportunities on offer
by making local markets more easily
and securely accessible.
2,000
We serve more than
financial market
participants across the globe. They include
over 100 central banks and supranationals,
and 90% of the world’s top 50 banks.
We understand investors have
concerns over market accessibility,
liquidity, asset protection and
settlement finality.
We also understand local market
authorities have concerns about
the quality of investors, AML/KYC
practices of investors’ jurisdictions,
hot money flow and impact on
their currency.
This is why we partner with local
market authorities. Together we design
solutions that provide better standards
of accessibility, liquidity, asset protection
and settlement finality in line with
developed markets.
We call what we do ‘making a
market Euroclearable’.
“We are proud to say that Panama’s economy has the highest rate of growth
in Latin America. In order to continue to contribute to this stellar economic
performance, and to consolidate our position as a regional financial services
hub, we are very pleased to be part of this initiative, led by Euroclear and
Latin Clear, which will allow Panama to access a broader base of foreign
investors and diversify our funding sources. The international link with
Euroclear will be a defining moment in the way Panama’s issuers connect
with domestic and international investors.”
Darío A. Espinosa R, Former Deputy Minister of Finance of Panama
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“
“
This means global investors can make
your investment decisions without
having to make secondary judgments
about the efficiency of local markets.
How we do it
1.We listen to our clients’ needs,
their concerns and the difficulties
they have accessing various local
markets.
2. We also engage with local
markets based on the needs of
their stakeholders. At times, some
markets approach us directly
expressing their desire to make
their markets Euroclearable.
A sign of approval
What do we look for?
• Index companies have added
‘Euroclear eligibility’ as a criterion
for inclusion of a market in their
emerging market bond indices
To be ‘Euroclearable’, a market
must offer:
• Euroclear is designated as a critical
national infrastructure in seven
countries
• internal multi-currency settlement
• recognition of the omnibus structure
3. We collaborate with international
agencies such as the World Bank,
IFC and the EBRC, which look to
promote the development of less
well established capital markets.
4. We partner with local market
authorities to create the right
infrastructure and regulatory
framework that would encourage
sustainable foreign investment and
local capital market development.
• a robust legal framework that
guarantees asset protection and
settlement finality
• simple, standard tax processes
• comprehensive asset servicing
The focus is on making each market
feel and function like any other well
established market. In short, making
it Euroclearable.
“
“The Reserve Bank is working with the Finance Ministry on a new platform
for settlement of government bonds, on the lines of the world’s largest
securities settlement system.”
The RBI is working on a fresh Euroclear model with the government.
Trading and settlement under the new platform will be on the
RBI platform.”
Harun Rashid Khan, Former Deputy Governor of the Reserve Bank of India
“We have already seen growing confidence in the currency among some
large international investors, which means, in the near future, we should
be able to issue international bonds in rupees, which would minimise our
exposure to exchange rate movements .In this endeavour, we are working
to cooperate with the Euroclear System to facilitate us to trade our bonds in
their system in the future. Such an initiative will increase the efficiency and
effectiveness of settlement for investors, and increase the pool of savings
available for investment in domestic securities.”
“
Indrajit Coomaraswamy, Sri Lankan Central Bank Governor
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Euroclear’s global
capital markets
* Fixed income and equities
** Equities through link with Australia
Canada*
Czech Republic
United States*
Poland*
Romania
Hungary
Cyprus
Israel*
Mexico*
Panama
Brazil*
Chile
South Africa
Argentina*
2013
10
FEB 2013
APR 2014
FEB 2015
RUSSIA OFZ
SERVICE
LAUNCHED
TAIWAN OFFSHORE
RMB SERVICE
MEXICO PEMEX ISSUANCE
(First corporate bond issuance)
2014
PANAMA LINK
2015
PERU MoU
2016
2017
JAN 2014
SEPT 2014
JAN 2015
JAN 2017
RUSSIA CORPORATE
SAND MUNICIPAL
BOND SERVICE
RUSSIA
EQUITIES
MEXICO CORPORATES
(Announced Dec 2014)
(Launched Jan 2015)
CHILE
(First bond
government
issuance)
Euroclear Capital
Market Links
Russia*
Japan*
Hong Kong*
Dubai*
Thailand*
Malaysia
Taiwan
Philippines
Singapore*
Australia*
New Zealand**
Business timeline
Euroclear has a long track record working with growth
markets beyond Europe to help strengthen their capital
markets infrastructure and connect their issuers with
international investors.
Argentina
Australia
Austria
Belgium
Brazil
Canada
China
Czech Republic
Cyprus
Denmark
Dubai
Finland
France
Germany
Greece
Hong Kong
Hungary
Ireland
Israel
Italy
Japan
Luxembourg
Malaysia
Mexico
Netherlands
New Zealand
Norway
Panama
Philippines
Poland
Portugal
Romania
Russia
Singapore
Slovak Republic
Slovenia
South Africa
Spain
Sweden
Switzerland
Taiwan
Thailand
UK
USA
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Euroclear in numbers
Year end 2016
Scale provider of post-trade services
€27.7 trillion
assets held in custody for our clients
+60%
+50%
Eurobond holdings
European capital
196 million
€655 trillion
Netted transactions processed annually
in turnover
+40%
+3%
Offshore Renminbi
holdings
Year-on-year
growth
Access to >1.7 million securities worldwide
Asset safety and resilience
AA+
AA
Fitch Ratings
Standard &
Poor’s Ratings
Breadth of participation
90
44
50
16
Countries where our
clients are located
Links to
major markets
Settlement
currencies
Languages
in which
we support
our clients
Collateral Highway
The Place for Funds
€1 trillion
€1.8 trillion
11.1 million
Collateral mobilised daily
Funds under custody
Connecting with over 1200 fund
administrators
Fund orders routed annually
Global client franchise
100 central banks
90% of the World’s 50 largest banks
2000
clients
More information
145,000 investments funds processed
by Euroclear
Sudip Chatterjee
Tel. 32 2 326 9134 -
[email protected]
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