Euroclear Bank and Clearstream have developed a new industry framework to increase transparency and efficiency for the issuance and asset servicing of international securities in collaboration with the International Securities Market Advisory Group (ISMAG).
The framework sets standards for these securities, issued in and primarily deposited with the ICSDs, with outstanding levels close to €9 trillion. Major issuers and industry participants like BNP Paribas Securities Services, Citibank N.A. Issuer Services, European Investment Bank and KfW are supporting the initiative and the associated best practice implementation process.
International securities issuance is becoming more complex, with increasing challenges to reconcile legal and operational requirements. The new international securities standards are the result of a three-year programme led under the auspices of ISMAG to identify and encourage best practices in issuance and asset servicing operations throughout the entire value chain. ISMAG’s recommendations aim to reduce the inefficiencies, costs and risks in issuing and servicing securities while increasing transparency on the use of the new standards for the benefit of the issuer and investor communities.
The ICSDs, following a detailed consultation process with market experts, have documented the best practices of some “best in class” parties for operational processes related to new issues, corporate actions and income, and made them available in the form of recommendations in the International Securities Operational “Market Practice Book” (MPB) to promote wider implementation in a cooperative dialogue with the market.
John Gubert, chairman of ISMAG, said: “The regulatory developments since the financial crisis call for more transparency and accountability in the market. Likewise, investors have growing expectations in terms of service quality levels. Greater operational clarity, improved end-to-end communication between parties in the value chain, and higher operational efficiency, driven by ISMAG, will translate into increased performance levels and reduced processing risks for the industry. The recommendations for best market practices are now final. The focus is on increasing awareness and implementation of the new standards as well as changes in behaviour by all relevant parties, including issuers, their agents and the legal community.”
Issuers and agents can adhere voluntarily to the relevant recommendations in connection with all, or some, categories of securities by signing letters of representation that are part of the MPB. Compliant securities will be awarded the ISMAG Adherence Label. Accordingly, securities and institutions that earn the label will be published by Clearstream and Euroclear Bank, whose customers will benefit from increased transparency and visibility of the issuers and agents adhering to the framework.
ISMAG, composed of representatives from many institutions and trade associations, will continue to meet on a regular basis to oversee the implementation of the standards and to consider any future enhancements to the new framework.
