DTCC, Euroclear and Clearstream Partner to Bring New Efficiencies to European MTN Market
Standing (from left): Marc Robert-Nicoud, Clearstream; Dan Kuhnel, Euroclear; John Kiechle, DTCC. Seated (from left): Olivier Grimonpont, Euroclear; Javette Laremont, DTCC; Stephen Wasserman, DTCC
DTCC, Clearstream Banking and Euroclear Bank announced on March 11 that they are expanding the scope of the European Pre-Issuance Messaging (EPIM) system to support the growing euro Medium-Term Note (MTN) market. EPIM will now automate the pre-issuance communication and International Security Identification Number (ISIN) allocation process for euro MTNs.
The euro MTN market has grown 22% over the past two years, from US$6.4 trillion (€5.0 trillion) outstanding in early 2007 to US$7.8 trillion (€6.1 trillion) in early 2009. (Euro MTNs are Euronotes, usually with at least a one-year maturity, issued directly to the market and offered continuously rather than all at once, like a bond issue.)
EPIM is being used in a similar capacity within the European Commercial Paper (ECP) and Euro Certificates of Deposit (ECD) markets. Since 2002, it has served as a central messaging hub directly linking dealers, issuing and paying agents (IPAs), securities depositories and numbering agencies, allowing them to exchange standardized and secured issuance information in real time. By automating pre-issuance information processing and ISIN allocation for new ECP and ECD issues – and now euro MTNs – EPIM is enabling these markets to grow and to process these transactions for same-day settlement.
Lower costs
EPIM significantly reduces manual processing costs for the industry, eliminating the labor-intensive and error-prone phone, fax and email-based communications generated during the ISIN request and allocation processes. Through a streamlined, industry-standard messaging and automated workflow, EPIM increases accuracy and reduces processing errors, discrepancies and delays, while preserving the flexibility that characterizes the short-term debt money markets.
“Bringing automation to the ECP marketplace with EPIM has helped drive down costs for new issuances and enhance efficiencies for market participants,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement Group. “By leveraging the EPIM system to bring automation to the MTN market, we are taking another important step in evolving the infrastructure to meet the needs of financial firms and investors. EPIM will eliminate the time-consuming and outdated manual processes of the MTN market and help play a role in spurring long-term growth.”
Olivier Grimonpont, director, Fixed Income Product Management at Euroclear, said, “Taking a proven system like EPIM and leveraging its capabilities and benefits to other asset classes is an excellent way of adding value for clients. As an automated solution that reduces costs and increases efficiency, we believe EPIM will be a welcome improvement to the MTN market, particularly during these times of financial pressure.”
Mark Kieffer, head of Issuance and Distribution Services at Clearstream Banking, noted that EPIM has been critical to support the growth in the ECP market since May 2002. “Now we have the opportunity to bring a similar and much-needed degree of operational efficiency to the MTN market, which we believe is essential to foster greater growth in the years ahead. As an increasing number of investors turn to the MTN market, we are now fully prepared to manage pre-issuance communication and issue new ISINs quickly in an automated environment.”
Speed is ‘critical’
“EPIM has brought us closer to achieving full straight-through processing in the European commercial paper marketplace,” said Peter Eisenhardt, chairman of the International Capital Market Association’s ECP Committee. “Speed is absolutely critical, especially when there’s volatility in the money markets. With EPIM, ISINs are assigned in less than five minutes.”
“The ICMSA membership is delighted to see EPIM extend its coverage to MTNs,” said Graham Cox, chairman of the International Capital Market Services Association. “EPIM has proven to be a great response to the market’s need for a secure, efficient and reliable pre-issuance communication tool. Given its capabilities in terms of volume and speed, and contribution towards STP [straight-through processing], we encourage the issuing community to adopt the expanded functionality EPIM offers.”
More on EPIM
The EPIM system, officially launched in May 2002, was developed in close collaboration with various dealers, IPAs and trade associations that have in-depth knowledge about the market’s needs. It is based on the proven pre-issuance messaging architecture of a service developed and launched in the U.S. by DTCC in 1999.
On behalf of Clearstream Banking and Euroclear Bank, DTCC is the licensed service provider that operates and manages the actual messaging hub.
Clearstream and Euroclear
Clearstream is a leading European supplier of post-trading services and a wholly owned subsidiary of the Deutsche Börse Group, the world’s leading exchange operations company. Clearstream maintains relationships with approx-imately 2,500 customers in over 100 countries. For additional information, visit www.clearstream.com.
Euroclear Bank provides settlement and related securities services for cross-border transactions involving domestic and international bonds, equities, derivatives and investment funds. Serving major financial institutions located in more than 80 countries, Euroclear Bank, based in Brussels, is part of the Euroclear group. For additional information, visit www.euroclear.com. @