Euroclear

Euroclear: What it is and how it works

Euroclear is a Financial Market Infrastructure (FMI) provider and one of the principal securities settlement systems serving European markets. It functions as a central securities depository (CSD) and custodian for major financial institutions, facilitating the clearing and settlement of trades executed on European exchanges.

Key functions

• Settles and clears transactions in bonds, equities, derivatives, investment funds and other securities.
• Acts as a custodian/central securities depository, maintaining records of ownership and safekeeping securities.
• Facilitates cross‑border settlement and interoperability between market participants, reducing settlement risk and operational friction.
• Supports a wide range of instruments—over one million international securities are accepted into the system.

History and ownership

• Founded in 1968 to support settlement of the then‑emerging Eurobond market; initial operations were subsidized by Morgan Guaranty Trust Co. (part of J.P. Morgan).
• In 2000, Morgan Guaranty Trust transferred the settlement activities to Euroclear Bank.
• Between 2001 and 2007, Euroclear expanded by acquiring several national CSDs, growing into one of the world’s largest FMIs.
• Euroclear Holding owns Euroclear SA/NV, which in turn owns Euroclear Bank, the operating entity.

How Euroclear operates

Euroclear provides post‑trade infrastructure that connects banks, broker‑dealers and institutional investors. It does not simply pass records between two parties; it provides the systems and processes—custody, settlement, and related services—needed to finalize trades. By centralizing those processes, Euroclear helps reduce counterparty, operational and settlement risk for market participants.

Scope and capabilities

• Currencies: roughly 50 settlement currencies and about 100 denomination currencies are supported.
• Instruments: fixed‑ and floating‑rate debt, convertibles, warrants, equities, derivatives and investment funds.
• Scale: accepts a broad universe of internationally traded securities, enabling domestic and cross‑border transactions.

Euroclear vs. Clearstream

Euroclear and Clearstream (formerly CEDEL) are the two principal FMIs serving the Eurozone. Both offer clearing, settlement and custodial services globally and compete in the same market. While they provide similar core services, they are distinct organizations with separate infrastructures and client networks.

Recent developments: digital assets and DLT

In May 2024, Euroclear announced a collaboration with the Depository Trust & Clearing Corporation (DTCC) and Clearstream to build a framework for a global digital asset ecosystem. The initiative aims to:
* Standardize distributed ledger technology (DLT) and digital‑asset processes.
* Improve interoperability between traditional market systems and DLT platforms.
* Lower connectivity costs for existing participants and simplify market entry for new players.
* Align technical connectivity, funding arrangements and regulatory treatments for tokenized and digital assets.

Quick FAQs

• What does Euroclear do? It provides settlement, custody and related post‑trade services for a wide range of securities, serving banks, broker‑dealers and institutional investors.
• What currencies can settle in Euroclear? About 50 settlement currencies and roughly 100 denomination currencies.
• Who owns Euroclear? Euroclear Holding owns Euroclear SA/NV, which owns Euroclear Bank, the operating entity.

Bottom line

Euroclear is a core element of Europe’s post‑trade infrastructure. As a central securities depository and settlement platform, it plays a critical role in finalizing trades, safeguarding assets and enabling cross‑border capital flows. Its recent push toward standardizing digital‑asset infrastructure signals a broader industry move to integrate traditional market plumbing with emerging DLT‑based solutions.