A WORRYING VISION of the European securities market is taking shape in some minds. It shows a rapacious monopoly processing all trades from the Atlantic to the Urals, reshaping settlement in its own interests and winning custodian business away from the traditional players. But because it is owned by its users, this monster is hard to attack. Unlike your typical dystopian fantasies set decades or centuries in the future, though, this one is imminent. It is happening now.
Euroclear, owner of five of Europe's central security depositaries (CSDs) and an international central security depositary (ICSD), is the supposed villain of the piece. The key to the debate is Euroclear's ICSD, Euroclear Bank. As well as having aspects of the CSD function for Eurobonds, Euroclear Bank is an intermediary providing custody and banking services in non-Eurobond securities. As such, it competes with other commercial banks that act as custodians.
Euroclear Bank is an important intermediary. For example, over six weeks beginning in mid-January, it processed more than 23,000 instructions involving $27 billion of the nominal value of Argentina's debt-swap programme – more than any other settlement system involved in what Euroclear describes as "the largest single custody event that has ever challenged the securities markets".