A radical move towards increased financial market infrastructure consolidation in the EU was recently proposed. At the Optic conference in London, the ca 150–200-delegate audience of a session on the future of FMIs proved sceptical.
Banks will not have to throw everything out – but they will need to deeply review their operating models. JP Morgan’s Alex Dockx, Executive Director, Industry Development, J.P. Morgan, shared his view, in the panel also featuring
Marcus Austin, Head of Relationship Management – UK, Ireland & the Americas, Clearstream, and
Pablo Portugal, Senior Director, Public Affairs, Euroclear,
under moderation by Michael Hughes, Head of Capital Markets, UK & EMEA, Capgemini.
With the EU area hosting 29 CSDs, one question to the panel was why the large infrastructure groups themselves don’t do more for consolidation by acquiring smaller players.
“There is questionable business value in buying a national CSD,” answered Marcus Austin, pointing to the harmonisation challenge that the acquiring group then makes its own. Instead, he suggested, “you can achieve the intended outcome with collaboration and connectivity.”
Pablo Portugal pointed out that most of the larger CSDs are already part of large groups.
“Also, the pie is not growing, that works against us as well”, he said, echoing views shared earlier in the conference that many of the main problems in Europe’s financial market cannot be solved at the post-trade level.
Rather than one unified CCP and one CSD, Alex Dockx suggested developing a network of interoperating entities, “where we all work with each other”. In any case, the exposure to cyberattacks in case the full market would depend on single actors would be a risk to consider before going for one.
The audience in the room was asked whether they agree with Mario Draghi’s recent proposal that there should be a single CCP and a single CSD in Europe. The majority said no (58%), 26% yes, and 6% “not sure”.
A corresponding poll forecasting the breakthrough for settlement on public DLT infrastructures found the audience similarly sceptical. A clear majority does not foresee it within the coming 10 years.
The yearly Optic conference, in London on 2–3 October 2024, is hosted by the Association for Financial Markets in Europe (AFME). Optic stands for the “Operations, post trade, technology and innovation conference”. PostTrade 360° is there, with our coverage collected here.
