Why reaching out to a competitor is not a far reach

by Berthold Kracke, CEO of Clearstream Banking Frankfurt

20.02.2017

"Build bridges, not walls," is a popular saying these days. Easier said than done in the competitive world we live in today, one might say. From the bakeries and flower shops in your hometown to the big players that dominate our industry: It is all about having the newer solutions, better products and a greater reach.

In order to lift barriers and develop more efficient markets, cooperation between competitors is key. Figuratively spoken, the best way to connect two rivalling camps and to cut a long or even impassable way short is to build a bridge. Clearstream Banking Luxembourg and Euroclear Bank, the two ICSDs, recognised this reality early on to the benefit of customers. Jointly, we have built a reciprocal electronic communications link for the fast and safe settlement of securities transactions between our respective customers – the Bridge.

Historically, the Bridge between Clearstream and Euroclear was a literal reality. Up until 1980, the Bridge was a reference to the Pont Adolphe in Luxembourg, which actually physically linked our depositories with Euroclear’s on the other side of the valley. There would be physical deliveries of securities every day to conduct settlement of trades between Euroclear and Cedel, as we were then known.

Since then, there has obviously been substantial development, with the Bridge becoming an electronic link catering to significant volumes of (digital) settlements. Its Eurobond-settlement capabilities have made it one of the largest liquidity bridges worldwide. Both ICSDs are committed to continuously improve the Bridge to address changing and increasing market needs and to optimise liquidity consumption and management. The aim is to enable customers to settle a wider range of securities transactions, thereby extending the market reach for all concerned parties. Major enhancements to the Bridge are scheduled to become effective in Q2/2017, when the frequency of communication between the CSD across the Bridge will be increased to near real-time, which will lead to a faster settlement turnaround throughout the whole day.

The Bridge between Clearstream and Euroclear is a prime example of a cooperation between two competitors resulting in an improved environment for the market. In times of fierce global competition, strategic collaboration may lead us all – in this case service providers as well as customers – to growth and achievement.