Luxembourg’s central Bank, the Banque centrale du Luxembourg (BCL) and Clearstream, the Luxembourg-based International Central Securities Depository (ICSD) launched LuxCSD, a new central securities depository service for Luxembourg and beyond.
LuxCSD will allow for settlement of securities transactions in central bank money reducing risk for financial market participants. It will be operated by Clearstream and regulated in the category of non-bank Financial Sector Professionals (Professionnel du secteurfinancier or PSF).
LuxCSD will provide an issuing and central settlement and custody services for securities of all types, including investment funds. It will be incorporated in Luxembourg and will initially be owned jointly by Clearstream and the BCL.
LuxCSD will supply: primary deposit services for issuers of debt and other securities; distribution of investment fund units which LuxCSD will hold through the community of transfer agents in Luxembourg and elsewhere; secondary settlement of securities and funds deposited in LuxCSD and on a planned settlement link to Clearstream’s ICSD, Clearstream Banking Luxembourg; delivery versus payment (DvP) settlement against participant cash accounts held with the Eurosystem via an ancillary systems interface to the Target payments system to be provided by the BCL; custody and asset servicing with service levels modeled on those offered by Clearstream’s ICSD; and reporting and on line connectivity in ISO 15022 via Clearstream’s Creation On-Line suite of products.
According to Clearstream, with live operations planned to start in the first half of 2011, LuxCSD aims to prepare Luxembourg’s financial market infrastructure for the launch of Target2 Securities (T2S), the settlement system that the European Central Bank wants to introduce in 2014.
Yves Mersch, president of the BCL, said: “LuxCSD will permit Luxembourg market participants to benefit from securities transactions settlement in central bank money. This will permit a reduction of risk and is welcome.”
Jeffrey Tessler, CEO of Clearstream International, said: “LuxCSD is a CSD in the new mould. It will offer custodians and distributors across Europe excellent custody and added value services built on top of a highly efficient settlement process with access to a large range of counterparties.”