The Luxembourg Stock Exchange on Tuesday launched a new, simplified post-trade settlement model that no longer requires a clearing membership. The exchange has partnered with Italy’s BFF Bank to provide the new service.
The new model simplifies the post-trade process of Luxembourg’s bourse, also known as LuxSE. The change “allows for a more streamlined and efficient settlement of securities transactions made on a channel encompassing 21,500 tradable instruments”, it said.
Trading members can now select between Euroclear Bank and Clearstream Banking Luxembourg as their international central securities depository. Previously, they only had the option of using Euroclear for trades made via the pass-through channel.
BFF Bank
The new settlement process was made possible thanks to a partnership with BFF Bank, the exchange said. BFF Bank is an independent specialty finance firm, specialised in securities services, banking and corporate payments and in the management of trade receivables.
“Through this collaboration, we are now able to offer a new electronic channel to send settlement instructions in a fast, integrated and secure way, without making any changes to the order transmission and trade confirmation process we have established with our trading members,” said Pierre Schoonbroodt (photo), member of the executive committee at the Luxembourg Stock Exchange, in a statement.
“We are proud of starting this partnership with LuxSE, making one of our post-trade models available to the market, and being a reference partner for our customers in providing innovative and tailored solutions,” said Enrico Tadiotto of BFF Bank.
Straight-through processing
The Luxembourg stock exchange operates its markets on Euronext’s Optiq trading platform. It offers the possibility of bilateral, non-guaranteed and guaranteed settlement channels. In the new set-up, the non-guaranteed settlement model, also known as pass-through, has been replaced by straight-through processing, known as STP.
The new post-trade model brings multiple benefits to the exchange’s trading members. In the STP set-up, the mandatory clearing membership required under the previous pass-through model no longer applies. The existing central counterparty process with LCH.Clearnet SA remains in place for the guaranteed settlement channel.
In this new model, LuxSE will provide its trading members with a daily trade reconciliation file including the indication of the counterparties. BFF Bank will generate and dispatch settlement instructions to depositaries based on the trading information provided by the Optiq trading system.