BNY Mellon promises post-trade savings via Belgian CSD
BNY Mellon is planning to open a new issuer central securities depository that it claims will offer market participants more efficient post-trade services.
The new Belgium-based facility will offer issuer, settlement and safekeeping services for market participants across Europe and other global markets. Incorporated as a non-bank subsidiary of BNY Mellon, the CSD will be regulated by the National Bank of Belgium and will be headed by Chris Prior-Willeard as chief executive.
BNY Mellon says that the new CSD will seek to offer clients the advantages of interoperability by linking with other CSDs around the world. The firm says that clients will benefit from faster settlement by maintaining both seller and buyer accounts within BNY Mellon CSD.
In addition, Prior-Willeard told Banking Technology that the CSD aimed to make new issues more efficient as well as improve the efficiency of collateral for clients.
“We already provide key elements of the CSD offering to the market, it is just that historically we have done so on a separate basis,” said Prior-Willeard. “This new entity enhances our role in the post-trade space and facilitates an internalisation of the securities value chain, which means our clients will benefit from greater efficiency and reduced risk.”
The use of CSDs is being driven in part by regulations such as EMIR in Europe and Dodd-Frank in the US, which mandate the central clearing and reporting of the bulk of OTC derivatives to CSDs, while Basel III makes the remaining OTC products much more expensive to use by increasing the collateral requirements. The aim of the legislation is to reduce systemic risk in OTC derivatives markets, which were blamed by the G20 nations in 2009 as a contributor to the recent financial crisis.
However, European market participants expecting cost savings from T2S, the European Central Bank’s T2S project to improve Europe’s post-trade infrastructure, will have to wait until migration takes place in 2015, with final implementation complete by 2016, T2S Board chairman Jean-Michel Godeffroy confirmed late last year.
BNY Mellon expects to have client business live on the new BNY Mellon CSD platform by Q2 2013.