status – POST-TRADING SERVICES
Issuers on a single platform: the Global Issuer Hub
Investors use Deutsche Börse Group’s products and services to buy bonds and other securities. Once the purchase as such has been cleared and settled, Clearstream – Deutsche Börse Group’s post-trade services provider – assumes custody and management of the securities. Further innovative offers are linked along the value chain, such as efficient collateral and liquidity management, as well as securities lending.
Offers for issuers
Approaching the issuers of securities directly is a more recent concept. The following example of a specific request clearly shows the great support Deutsche Börse Group’s teams can offer issuers. Some three years ago, a large European issuer was looking for an alternative to its domestic central securities depository (CSD). It was apparent even then that the significance and power of the national CSDs would decline under TARGET2-Securities (T2S). The issuer wanted to distribute its offer widely in different markets, without having to increase the expense and number of contacts if possible.
The client and post-trading experts at Clearstream discussed this in depth. The issuer finally placed a large tranche of mortgage bonds with Clearstream’s central securities depository in Luxembourg, LuxCSD. With the services of Clearstream’s so-called Global Issuer Hub, this request was in the right hands. It allows issuers to conduct settlements across the entire issuing cycle via a single point of access: admission, distribution and administration. The hub is designed for debt instruments, warrants, equities and investment funds. Furthermore, Clearstream’s presence on more than 50 markets supports the distribution from a single source – in practical terms, therefore, issuers can tap into all markets from a central location. Although they are only in contact with one CSD, their issue has a global presence via the link between LuxCSD and Clearstream’s international central securities depository (ICSD).
How the Global Issuer Hub works
Central access to currency zones
CSDs as access points to domestic markets face increased competition with the new European settlement system T2S. At the same time, a growing number of issues are being placed using central bank money. Central bank money refers to money or balances which a central bank credits in return for bills of exchange or securities. Balances held with the central bank are traded mainly between banks. Issuers can achieve wide distribution of their issues via the Global Issuer Hub, with minimised effort and reduced risk.
Clearstream settles the securities for all euro markets centrally. It is no longer necessary to split across different CSDs, which used to be standard practice for the issuers: Clearstream can carry out the settlement in euro central bank money for different legal and regulatory systems within its own CSDs.
The Global Issuer Hub significantly reduces the effort for issuers to place bonds efficiently and internationally. The ICSD in Luxembourg additionally provides the opportunity to reach currency zones outside the euro area with their bonds, using central bank money. For instance, there is a connection in place through which securities can be issued in the Chinese offshore renminbi. This is all available more cheaply than before – the European Central Bank’s T2S initiative is taking effect.
Efficiency gains under T2S
The new kind of cooperation encourages issuers to integrate the services offered by Deutsche Börse Group in their processes (more information about this in the article “Integrated thinking”). Now is the right time for issuers to review their placement strategies, as the national CSDs may no longer have sufficient liquidity to guarantee efficient placement in the markets on a medium-term horizon. The central services available via the Global Issuer Hub are the ideal solution to this challenge.
Completely new solutions will evolve next year, developed both within the teams and in cooperation with clients. It was ultimately a client request that prompted us to address the new requirements of issuers.