Clearstream is a financial services company that specializes in the settlement of
securities transactions and is owned by
Deutsche Börse AG. It provides
settlement
Settlement may refer to:
*Human settlement, a community where people live
*Settlement (structural), the distortion or disruption of parts of a building
*Closing (real estate), the final step in executing a real estate transaction
*Settlement (fina ...
and custody as well as other related services for
securities across all
asset classes. It is one of two European International
central securities depositories (
Euroclear
Euroclear is a Belgium-based financial services company that specializes in the settlement of securities transactions, as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P. Morgan & Co. to settl ...
being the other).
Clearstream operates securities settlement systems based in both
Luxembourg
Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small lan ...
and
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
, which allow for the holding and transfer of securities.
Clearstream operates its International Central Securities Depository (ICSD) from Luxembourg. It is also a joint partner in the Luxembourgish Central Securities Depository (CSD), LuxCSD, together with the
Central Bank of Luxembourg
The Central Bank of Luxembourg (french: Banque centrale du Luxembourg, BCL) was founded in 1998, at the same time the European Central Bank was created, by laws dated 22 April and 23 December. It is part of the European System of Central Banks ( ...
. In Germany, Clearstream operates the German CSD, Clearstream Banking AG. Clearstream has links to over 50 domestic markets worldwide, and also issues and safekeeps
Eurobonds
Eurobond may refer to:
* Eurobond (external bond), a bond issued that is denominated in a currency not native to the country where it is issued
* Eurobond (eurozone)
Eurobonds or stability bonds were proposed government bonds to be issued in ...
.
In 2014, the value of assets under custody on behalf of customers averaged 12.2 trillion euros; furthermore, Clearstream processed 43.65 million ICSD and 82.68 million CSD settlement transactions.
Clearstream has around 2,500 customers in 110 countries. Clearstream accepts
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
s and
AML-regulated credit institutions (such as regulated banks) as customers. Clearstream does not accept
natural persons
In jurisprudence, a natural person (also physical person in some Commonwealth countries, or natural entity) is a person (in legal meaning, i.e., one who has its own legal personality) that is an individual human being, distinguished from the broad ...
as customers and no account is opened in the name of a natural person. Clearstream has therefore been described as a "bank for banks".
Clearstream has operational centres in Cork, Luxembourg, Prague and Singapore. It also maintains representative offices in London, Hong Kong, Tokyo, Dubai, New York, and Zurich.
History
Clearstream was founded as "Cedel" (Centrale de Livraison de Valeurs Mobilières) in September 1970 by 66 of the world's major financial institutions as a clearing organisation whose objective was to minimise risk in the settlement of cross-border securities trading, particularly in the growing Eurobond market.
In 1995, a new corporate structure was introduced, establishing a parent company — Cedel International — with a subsidiary company, Cedelbank; two years later, a new subsidiary — Cedel Global Services — was established.
Clearstream was formed in January 2000 through the merger of Cedel International and Deutsche Börse Clearing. The full integration of Clearstream was completed in July 2002.
Clearstream affair
Between 2001 and 2002, two books were published by co-authors
Denis Robert and Ernest Backes, entitled ''Révélation$'' and ''La Boîte Noire'', accusing Clearstream of being a
money laundering
Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...
organisation and the worldwide centre for international financial crime committed by major banks,
shell companies
A shell corporation is a company or corporation that exists only on paper and has no office and no employees, but may have a bank account or may hold passive investments or be the registered owner of assets, such as intellectual property, or s ...
, and organised crime all over the world.
An investigation opened by the Luxembourg authorities in 2001 found no evidence to support the authors' allegations, and the case was dismissed in 2004.
In 2004, a list leaked to a French judge indicated that Clearstream was a money laundering organisation covering illegal activities of French businessmen who were involved in the sale of warships by the French defence giant
Thales
Thales of Miletus ( ; grc-gre, Θαλῆς; ) was a Greek mathematician, astronomer, statesman, and pre-Socratic philosopher from Miletus in Ionia, Asia Minor. He was one of the Seven Sages of Greece. Many, most notably Aristotle, regarded him ...
(known as Thomson-CSF before 2000) to Taiwan, and related bribes paid to French officials and businessmen.
An investigation that included the search of Clearstream's premises and an examination of accounts in 2004 found no evidence supporting the accusations.
In the same year, additional anonymous letters and CD-Roms sent to French judges accused Clearstream of running secret accounts for criminals and senior French politicians. In late 2005, French investigating authorities officially declared the documents forgeries and dismissed the case.
The controversy inspired the film ''
The Clearstream Affair'' (2014).
Iranian funds controversy
In 2008, several groups of plaintiffs commenced enforcement proceedings in the US to satisfy judgments which they had obtained against Iran by restraining certain positions held in a Clearstream securities account with its intermediary bank in the US, and asking for handover of the assets. Clearstream challenged the restraints and the handover.
In 2011, the plaintiffs filed additional claims, this time directly against Clearstream, for damages of USD 250 million in connection with the purported wrongful conveyance of some of the restrained positions. Clearstream entered into a settlement agreement with the plaintiffs that became effective in 2013. The settlement provided for the dismissal of the direct claims against Clearstream, and that the plaintiffs will not further sue Clearstream for damages and in return, Clearstream agreed to not further appeal an order directing the turnover of the restrained customer's assets to the plaintiffs.
In 2013, a number of US plaintiffs from the 2011 case, as well as other US plaintiffs, filed a complaint targeting certain blocked assets that Clearstream holds as a custodian in Luxembourg. In 2015, the US court issued a decision dismissing the lawsuit.
Arising from the above, the U.S. Treasury Department Office of Foreign Assets Control (OFAC) investigated certain securities' transfers in 2008 within Clearstream's settlement systems regarding US Iran sanctions regulations. These 2008 transfers had been undertaken as part of the decision taken by Clearstream in 2007 to close its Iranian customers' accounts. In 2013 Clearstream entered into settlement talks with OFAC. The matter was resolved in 2014 through a settlement and payment of USD 151.9 million that does not constitute a final determination that a violation of Iran sanctions had occurred.
2022: Aftermath of Russian invasion of Ukraine
The Russian depository blocked all securities held in Clearstream's account at the Russian depository, on March 1, 2022.
The Russian depository also froze payments on securities of Russian issuers from being made to non-Russian individuals and entities.
After the
2022 Russian invasion of Ukraine
On 24 February 2022, in a major escalation of the Russo-Ukrainian War, which began in 2014. The invasion has resulted in tens of thousands of deaths on both sides. It has caused Europe's largest refugee crisis since World War II. An ...
, the Russian
National Settlement Depository
The National Settlement Depository (NSD), headquartered in Moscow, is a Russian non-bank financial institution and central securities depository (CSD). It provides depository, settlement (bank account), and related services to financial market enti ...
said on March 25, 2022, that Clearstream had blocked its account.
Also, the ruble bridge between Clearstream and Euroclear was closed.
Furthermore, Clearstream stopped settling trades in Russian securities.
Joint ventures
In July 2010, Clearstream founded LuxCSD together with the Luxembourg Central Bank, to act as a CSD for Luxembourg.
In December 2010, Clearstream co-founded REGIS-TR, a joint venture with the Spanish Central Securities Depository Iberclear, to act as a
trade repository A Trade Repository or Swap Data Repository is an entity that centrally collects and maintains the records of over-the-counter (OTC) derivatives. These electronic platforms, acting as authoritative registries of key information regarding open OTC de ...
for
derivative
In mathematics, the derivative of a function of a real variable measures the sensitivity to change of the function value (output value) with respect to a change in its argument (input value). Derivatives are a fundamental tool of calculus. F ...
s transactions, helping participants meet their regulatory reporting obligations brought about by the introduction of the
European Market Infrastructure Regulation
The European Market Infrastructure Regulation (EMIR) is an EU regulation aimed at reducing systemic counterparty and operational risk and thereby prevent future financial system collapses. Its focus is regulation of over-the-counter (OTC) deriv ...
(EMIR).
Supervision
Based in Luxembourg and Germany, Clearstream is subject to the supervision of the regulatory authorities of these two countries. In Luxembourg, the
Commission de Surveillance du Secteur Financier
The Commission de Surveillance du Secteur Financier (CSSF) is responsible for the financial regulation in Luxembourg
Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy o ...
(CSSF) is the prudential regulator with authority over all banks and financial service providers. In Germany, Clearstream is regulated as a bank according to the German Banking Act ("Kreditwesengesetz") and is therefore subject to the prudential supervision of the
German Federal Financial Supervisory Authority (German: "Bundesanstalt für Finanzdienstleistungsaufsicht" - BaFin). Moreover, Clearstream is regulated in each market where it has operational centres, for example by the
Monetary Authority of Singapore.
As the operator of securities settlement systems in both Luxembourg and Germany, Clearstream is additionally regulated by the central banks of these two countries, namely the Banque centrale du Luxembourg and the
Deutsche Bundesbank
The Deutsche Bundesbank (), literally "German Federal Bank", is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks (ESCB). Due to its strength and former size, the Bundesbank is the most ...
.
Business streams
Asset Services
Clearstream is responsible for the management, safekeeping/custody and administration of securities (assets) under custody. Services include income and redemption payments,
corporate actions
A corporate action is an event initiated by a public company that brings or could bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's board of directors ...
as well as tax and
proxy voting
Proxy voting is a form of voting whereby a member of a decision-making body may delegate their voting power to a representative, to enable a vote in absence. The representative may be another member of the same body, or external. A person so d ...
.
The majority of securities safekept by Clearstream are
immobilised. Securities are reflected in book-entry form in the accounts of customers at Clearstream regardless of whether they are held in physical or dematerialised form. This means that they are no longer represented by physical certificates, but instead by data entered into the Clearstream systems.
Global Securities Financing
Securities financing is the ability to borrow or
lend cash or securities against
collateral
Collateral may refer to:
Business and finance
* Collateral (finance), a borrower's pledge of specific property to a lender, to secure repayment of a loan
* Marketing collateral, in marketing and sales
Arts, entertainment, and media
* ''Collate ...
. In securities financing, collateral comprises assets given as a guarantee by a borrower to secure a securities loan and subject to seizure in the event of
default
Default may refer to:
Law
* Default (law), the failure to do something required by law
** Default (finance), failure to satisfy the terms of a loan obligation or failure to pay back a loan
** Default judgment, a binding judgment in favor of ei ...
.
Collateral management Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party in a trade. Collateral management began in the 1980s, with Bankers Trust and Salomon Brothers taking collateral again ...
refers to the handling of all tasks related to the monitoring of collateral posted by a borrower to meet a financial obligation (optimisation, substitution, top-up, withdrawal, settlement instruction, reporting, processing of
margin calls and returns, notification of corporate events, etc.).
Clearstream's collateral management, securities lending and borrowing services are gathered under the Global Liquidity Hub. It provides a pool of
liquidity through links to agent banks, trading platforms,
clearing houses and other market infrastructures.
Clearstream is a member of the Liquidity Alliance, which was established in January 2013 as a platform for CSDs to collaborate on collateral management. It was founded by
ASX
Australian Securities Exchange Ltd or ASX, is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange (sometimes referred to outside of Australia as, or confused within Australia as ...
, Cetip, Clearstream, Iberclear and Strate.
Investment Fund Services
Clearstream has developed the world's largest cross-border fund processing platform, called Vestima. It handles all types of funds, from
mutual fund
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...
s to
exchange-traded fund
An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...
s (ETFs) and
hedge fund
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...
s.
In addition to providing access to all fund types, Vestima supports their cross-border distribution. Services offered by Vestima include order routing, centralised
delivery versus payment Delivery versus payment or DvP is a common form of settlement for securities. The process involves the simultaneous delivery of all documents necessary to give effect to a transfer of securities in exchange for the receipt of the stipulated payment ...
(DVP) settlement, safekeeping, asset servicing and collateral management.
Issuance
ICSDs and CSDs are often used to
bring a security issue to the market, as they possess the necessary infrastructure for distributing the securities to the investors as well as for settlement and safekeeping. Clearstream's ICSD also provides custody services, which means that the security can be serviced throughout its entire lifecycle. Clearstream provides the infrastructure which enables issuers to reach investors worldwide.
Clearstream's services include eligibility assessments, issuance and distribution of domestic, foreign and international (i.e. Eurobonds) new issues of global and domestic instruments:
certificates of deposit,
depository receipts,
treasury bills,
commercial papers, short-term and medium-term notes,
bonds,
equities,
warrants
Warrant may refer to:
* Warrant (law), a form of specific authorization
** Arrest warrant, authorizing the arrest and detention of an individual
** Search warrant, a court order issued that authorizes law enforcement to conduct a search for eviden ...
, equity-linked notes and investment fund shares.
Settlement
Clearstream's ICSD settles trades in international securities and in domestic securities traded across borders. The CSDs settle domestic transactions in the German and Luxembourgish markets. Transactions between the two ICSDs Clearstream and Euroclear are settled via an electronic communications platform, called the Bridge.
Clearstream operates a delivery versus payment settlement system, ensuring simultaneous settlement of securities and cash transfers on a gross (trade-by-trade) basis. This helps to minimise the risk associated with the settlement of securities.
Notable people
*
Jeffrey Tessler Jeffrey Tessler was the Chief executive officer of Clearstream and a member of the Executive Board of Deutsche Börse. He was formerly an Executive Vice President of the Bank of New York.
Education
He received an MBA from Seton Hall University in N ...
Bibliography
*Peter Norman: ''Plumbers and Visionaries: Securities Settlement and Europe's Financial Market''. (Wiley, 2008, )
*Denis Robert, Ernest Backes: ''Révélation$'' (Edition des Arènes, 2001, )
*Denis Robert, Ernest Backes: ''La Boîte Noire'' (Edition des Arènes, 2002, )
References
{{Reflist
External links
Clearstream's website
Capital markets of Europe
Contemporary French history
Payment systems
Companies established in 2000
Central securities depositories
Securities clearing and depository institutions
2000 in Luxembourg
ar:قضية كليرستريم