A BRIDGE TOO FAR FOR CLEARING-HOUSE RIVALS
It was a vintage year for Luxembourg's clearing house, Cedel. Riding high on the back of the Euromarket boom, net profits rose by 40.5% in 1985, turnover was up by 47% to $762 billion and securities deposited in the system grew by a face value of 50%.
But Cedel is not celebrating. It is deeply worried about the competition it is facing from arch-rival Euroclear, which has a 66% market share. Cedel is particularly concerned about Euroclear's reluctance to improve the electronic bridge that allows the two houses to clear trades between each other.
The bridge has become outdated. The existing agreement was struck in 1980, when most transactions were for delivery to or from end-investor portfolios. Now the nature of deals has changed. Many more trades are connected with arbitrage operations in which market-makers buy and sell on the same day.
"The bridge is completely unfair," said Georges Muller, managing director of Cedel. Although Euroclear has agreed in principle to build a new bridge, it is, not surprisingly, dragging its heels. "They say they are willing," said Pierre Font, Cedel's head of research and development.