Clearing, Settlement & Depositories

Clearing and Settlement

Bourse Consult has specific expertise in post-trade services. We have senior executive experience of establishing clearing houses and CSDs, integrating bond and equity settlement systems and developing cross-border settlement services.
We have:

  • advised exchanges, central banks, clearing houses, CSDs and trade repositories on high-level strategic issues in the design of post-trade services in the context of their specific market structures;
  • helped develop business cases and pricing models;
  • made recommendations on technical and operational developments, including help with procuring new systems;
  • assisted organizations in preparing for compliance with regulatory requirements;
  • published highly-regarded research reports addressing public policy aspects of post-trade services.

We work worldwide and have carried out projects in Africa, Asia-Pacific, Europe, Eastern Europe and the Middle East.

Our consultants are all experts in their fields, having many years experience at the highest levels in the financial services industry:

Peter Cox was CEO of OM London Exchange and previously worked at the London Stock Exchange. He has advised exchanges, settlement organisations and clearing houses.

John Falk has twenty years’ experience with securities markets, working at SWIFT implementing systems for central banks and CSDs around the world.

Hugh Simpson was CEO of the UK’s CSD, CREST, and has advised many CSDs and CCPs, including advising the European Central Bank on its T2S settlement system.

Stuart Turner has managed and operated several clearing houses (both equity and derivative) and CSDs, including setting up such infrastructures from scratch.

Below are some case studies recently undertaken by Bourse Consult:

  • Redesigning post-trade services for a frontier market exchange
  • CPSS-IOSCO for an African CSD
  • CPSS-IOSCO compliance for an African CCP
  • Review of the post-trade infrastructure of the European carbon market

Case study 1: Redesigning post-trade services

A frontier market exchange was aware that it needed to modernise its post-trade services to make its domestic market more attractive to international investors. Although it had risk control mechanisms in place, they were no longer sufficient and it wanted to introduce a central counterparty (CCP), but this was in the context of a review of settlement arrangements simultaneously being undertaken by the central bank. The proposed model also had to respect certain key features of the local market. The exchange asked Bourse Consult to assist.

After analysing the existing market structure and specific features of local law and practice that had to be accommodated, we developed a CCP model, combining our knowledge of best practice in other markets with the specific requirements of the local market. We then prepared a Business Description document for discussions with the regulator, central bank and market participants. Finally, we drew up a detailed RFP, to be sent to software providers to procure a suitable system, and a spreadsheet-based Business Case, analysing the costs and benefits of introducing a CCP.

Case study 2: CPSS-IOSCO compliance for a CSD

As part of its internal review of its operations, the Nigerian CSD (CSCS) asked Bourse Consult to undertake an audit of its operations. The client agreed that the CPSS-ISOCO principles should be the basis of this exercise and a report was produced to show how these principles were being met and, if not fully met, what actions needed to be undertaken to become fully compliant

Case study 3: CPSS-IOSCO compliance for a clearing house

Basel III, the global regulatory standard on banking regulations including capital adequacy, imposes prohibitive capital penalties on banks that deal with clearing houses that are not CPSS-IOSCO compliant. As part of its preparation for Basel III, the Johannesburg Stock Exchange asked Bourse Consult to undertake an audit of its clearing house, Safcom, to determine its alignment with these CPSS-IOSCO principles.  As a result of this work, several detailed recommendations were made to the JSE on how Safcom could become fully compliant.

The JSE undertook the necessary work to achieve compliance during the latter part of 2012. Following these changes its regulator (the Financial Services Board, FSB) undertook a comprehensive review which resulted in Safcom now being certified as a “Qualifying Central Counterparty” (CCP).

Safcom was the first Clearing House in the world to obtain this status.

Case study 4: The Post-trade infrastructure for the carbon market

The development of a market for trading carbon emissions is an important policy objective of the EU. However, there were concerns that the market infrastructure for clearing and settling trading in the carbon market was inadequate and was holding back the development of the market. The City of London commissioned Bourse Consult to review the post-trade arrangements and make recommendations for improvements.

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